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pdfTitle 48—Federal
Acquisition Regulations
System
(This book contains chapter 1, parts 1 to 51)
Part
CHAPTER 1—Federal
Acquisition Regulation .........................
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CHAPTER 1—FEDERAL ACQUISITION
REGULATION
SUBCHAPTER A—GENERAL
Part
Page
1
2
3
Federal Acquisition Regulations System ................
Definitions of words and terms ...............................
Improper business practices and personal conflicts
of interest .............................................................
Administrative matters ..........................................
4
5
20
39
63
SUBCHAPTER B—ACQUISITION PLANNING
5
6
7
8
9
10
11
12
Publicizing contract actions ...................................
Competition requirements ......................................
Acquisition planning ...............................................
Required sources of supplies and services ...............
Contractor qualifications ........................................
Market research ......................................................
Describing agency needs .........................................
Acquisition of commercial items ............................
81
93
104
119
136
168
171
184
SUBCHAPTER C—CONTRACTING METHODS AND CONTRACT TYPES
13
14
15
16
17
18
Simplified acquisition procedures ...........................
Sealed bidding .........................................................
Contracting by negotiation .....................................
Types of contracts ...................................................
Special contracting methods ...................................
[Reserved]
197
214
242
291
318
SUBCHAPTER D—SOCIOECONOMIC PROGRAMS
19
20–21
22
23
24
Small business programs .........................................
[Reserved]
Application of labor laws to Government acquisitions .....................................................................
Environment, energy and water efficiency, renewable energy technologies, occupational safety,
and drug-free workplace .......................................
Protection of privacy and freedom of information
3
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332
390
449
461
48 CFR Ch. 1 (10–1–03 Edition)
Part
25
26
Page
Foreign acquisition .................................................
Other socioeconomic programs ...............................
463
486
SUBCHAPTER E—GENERAL CONTRACTING REQUIREMENTS
27
28
29
30
31
32
33
Patents, data, and copyrights .................................
Bonds and insurance ................................................
Taxes .......................................................................
Cost accounting standards administration .............
Contract cost principles and procedures .................
Contract financing ..................................................
Protests, disputes, and appeals ...............................
489
529
549
555
563
618
684
SUBCHAPTER F—SPECIAL CATEGORIES OF CONTRACTING
34
35
36
37
38
39
40
41
Major system acquisition ........................................
Research and development contracting ..................
Construction and architect-engineer contracts ......
Service contracting .................................................
Federal supply schedule contracting ......................
Acquisition of information technology ...................
[Reserved]
Acquisition of utility services .................................
698
701
711
731
743
744
748
SUBCHAPTER G—CONTRACT MANAGEMENT
42
43
44
45
46
47
48
49
50
51
Contract administration and audit services ...........
Contract modifications ...........................................
Subcontracting policies and procedures ..................
Government property ..............................................
Quality assurance ....................................................
Transportation ........................................................
Value engineering ...................................................
Termination of contracts ........................................
Extraordinary contractual actions .........................
Use of Government sources by contractors .............
FAR Index ...............................................................
4
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792
797
804
844
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905
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956
961
SUBCHAPTER A—GENERAL
Subpart 1.6—Career Development,
Contracting Authority, and Responsibilities
PART 1—FEDERAL ACQUISITION
REGULATIONS SYSTEM
Sec.
1.000
1.601 General.
1.602 Contracting officers.
1.602–1 Authority.
1.602–2 Responsibilities.
1.602–3 Ratification of unauthorized commitments.
1.603 Selection, appointment, and termination of appointment.
1.603–1 General.
1.603–2 Selection.
1.603–3 Appointment.
1.603–4 Termination.
Scope of part.
Subpart 1.1—Purpose, Authority, Issuance
1.101 Purpose.
1.102 Statement of guiding principles for
the Federal Acquisition System.
1.102–1 Discussion.
1.102–2 Performance standards.
1.102–3 Acquisition team.
1.102–4 Role of the acquisition team.
1.103 Authority.
1.104 Applicability.
1.105 Issuance.
1.105–1 Publication and code arrangement.
1.105–2 Arrangement of regulations.
1.105–3 Copies.
1.106 OMB approval under the Paperwork
Reduction Act.
1.107 Certifications.
1.108 FAR conventions.
Subpart 1.7—Determinations and Findings
1.700 Scope of subpart.
1.701 Definition.
1.702 General.
1.703 Class determinations and findings.
1.704 Content.
1.705 Supersession and modification.
1.706 Expiration.
1.707 Signatory authority.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
Subpart 1.2—Administration
SOURCE: 48 FR 42103, Sept. 19, 1983, unless
otherwise noted.
1.201 Maintenance of the FAR.
1.201–1 The two councils.
1.201–2 FAR Secretariat.
1.202 Agency compliance with the FAR.
1.000 Scope of part.
This part sets forth basic policies and
general information about the Federal
Acquisition Regulations System including purpose, authority, applicability, issuance, arrangement, numbering, dissemination, implementation,
supplementation, maintenance, administration, and deviation. Subparts 1.2,
1.3, and 1.4 prescribe administrative
procedures for maintaining the FAR
System.
Subpart 1.3—Agency Acquisition
Regulations
1.301 Policy.
1.302 Limitations.
1.303 Publication and codification.
1.304 Agency control and compliance procedures.
Subpart 1.4—Deviations from the FAR
1.400 Scope of subpart.
1.401 Definition.
1.402 Policy.
1.403 Individual deviations.
1.404 Class deviations.
1.405 Deviations pertaining to treaties and
executive agreements.
Subpart 1.1—Purpose, Authority,
Issuance
1.101 Purpose.
The Federal Acquisition Regulations
System is established for the codification and publication of uniform policies and procedures for acquisition by
all executive agencies. The Federal Acquisition Regulations System consists
of the Federal Acquisition Regulation
(FAR), which is the primary document,
and agency acquisition regulations
that implement or supplement the
Subpart 1.5—Agency and Public
Participation
1.501 Solicitation of agency and public
views.
1.501–1 Definition.
1.501–2 Opportunity for public comments.
1.501–3 Exceptions.
1.502 Unsolicited proposed revisions.
1.503 Public meetings.
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1.102
48 CFR Ch. 1 (10–1–03 Edition)
FAR. The FAR System does not include internal agency guidance of the
type described in 1.301(a)(2).
or procedure is a permissible exercise
of authority.
[60 FR 34733, July 3, 1995]
[48 FR 42103, Sept. 19, 1983, as amended at 51
FR 27116, July 29, 1986]
1.102–1
Discussion.
(a) Introduction. The statement of
Guiding Principles for the Federal Acquisition System (System) represents a
concise statement designed to be userfriendly for all participants in Government acquisition. The following discussion of the principles is provided in
order to illuminate the meaning of the
terms and phrases used. The framework for the System includes the Guiding Principles for the System and the
supporting policies and procedures in
the FAR.
(b) Vision. All participants in the
System are responsible for making acquisition decisions that deliver the
best value product or service to the
customer. Best value must be viewed
from a broad perspective and is
achieved by balancing the many competing interests in the System. The result is a system which works better
and costs less.
1.102 Statement of guiding principles
for the Federal Acquisition System.
(a) The vision for the Federal Acquisition System is to deliver on a timely
basis the best value product or service
to the customer, while maintaining the
public’s trust and fulfilling public policy objectives. Participants in the acquisition process should work together
as a team and should be empowered to
make decisions within their area of responsibility.
(b) The Federal Acquisition System
will—
(1) Satisfy the customer in terms of
cost, quality, and timeliness of the delivered product or service by, for example—
(i) Maximizing the use of commercial
products and services;
(ii) Using contractors who have a
track record of successful past performance or who demonstrate a current superior ability to perform; and
(iii) Promoting competition;
(2) Minimize administrative operating costs;
(3) Conduct business with integrity,
fairness, and openness; and
(4) Fulfill public policy objectives.
(c) The Acquisition Team consists of
all participants in Government acquisition including not only representatives
of the technical, supply, and procurement communities but also the customers they serve, and the contractors
who provide the products and services.
(d) The role of each member of the
Acquisition Team is to exercise personal initiative and sound business
judgment in providing the best value
product or service to meet the customer’s needs. In exercising initiative,
Government members of the Acquisition Team may assume if a specific
strategy, practice, policy or procedure
is in the best interests of the Government and is not addressed in the FAR
nor prohibited by law (statute or case
law), Executive order or other regulation, that the strategy, practice, policy
[60 FR 34733, July 3, 1995]
1.102–2
Performance standards.
(a) Satisfy the customer in terms of cost,
quality, and timeliness of the delivered
product or service. (1) The principal customers for the product or service provided by the System are the users and
line managers, acting on behalf of the
American taxpayer.
(2) The System must be responsive
and adaptive to customer needs, concerns, and feedback. Implementation of
acquisition policies and procedures, as
well as consideration of timeliness,
quality and cost throughout the process, must take into account the perspective of the user of the product or
service.
(3) When selecting contractors to provide products or perform services the
Government will use contractors who
have a track record of successful past
performance or who demonstrate a current superior ability to perform.
(4) The Government must not hesitate to communicate with the commercial sector as early as possible in the
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Federal Acquisition Regulation
1.102–4
acquisition cycle to help the Government determine the capabilities available in the commercial marketplace.
The Government will maximize its use
of commercial products and services in
meeting Government requirements.
(5) It is the policy of the System to
promote competition in the acquisition
process.
(6) The System must perform in a
timely, high quality, and cost-effective
manner.
(7) All members of the Team are required to employ planning as an integral part of the overall process of acquiring products or services. Although
advance planning is required, each
member of the Team must be flexible
in order to accommodate changing or
unforeseen mission needs. Planning is a
tool for the accomplishment of tasks,
and application of its discipline should
be commensurate with the size and nature of a given task.
(b) Minimize administrative operating
costs. (1) In order to ensure that maximum efficiency is obtained, rules, regulations, and policies should be promulgated only when their benefits
clearly exceed the costs of their development, implementation, administration, and enforcement. This applies to
internal administrative processes, including reviews, and to rules and procedures applied to the contractor community.
(2) The System must provide uniformity where it contributes to efficiency or where fairness or predictability is essential. The System should
also, however, encourage innovation,
and local adaptation where uniformity
is not essential.
(c) Conduct business with integrity,
fairness, and openness. (1) An essential
consideration in every aspect of the
System is maintaining the public’s
trust. Not only must the System have
integrity, but the actions of each member of the Team must reflect integrity,
fairness, and openness. The foundation
of integrity within the System is a
competent, experienced, and welltrained, professional workforce. Accordingly each member of the Team is
responsible and accountable for the
wise use of public resources as well as
acting in a manner which maintains
the public’s trust. Fairness and open-
ness require open communication
among team members, internal and external customers, and the public.
(2) To achieve efficient operations,
the System must shift its focus from
‘‘risk avoidance’’ to one of ‘‘risk management.’’ The cost to the taxpayer of
attempting to eliminate all risk is prohibitive. The Executive Branch will accept and manage the risk associated
with empowering local procurement officials to take independent action
based on their professional judgment.
(3) The Government shall exercise
discretion, use sound business judgment, and comply with applicable laws
and regulations in dealing with contractors and prospective contractors.
All contractors and prospective contractors shall be treated fairly and impartially but need not be treated the
same.
(d) Fulfill public policy objectives. The
System must support the attainment
of public policy goals adopted by the
Congress and the President. In attaining these goals, and in its overalll operations, the process shall ensure the efficient use of public resources.
[60 FR 34734, July 3, 1995, as amended at 62
FR 51229, Sept. 30, 1997]
1.102–3
Acquisition team.
The purpose of defining the Federal
Acquisition Team (Team) in the Guiding Principles is to ensure that participants in the System are identified—beginning with the customer and ending
with the contractor of the product or
service. By identifying the team members in this manner, teamwork, unity
of purpose, and open communication
among the members of the Team in
sharing the vision and achieving the
goal of the System are encouraged. Individual team members will participate
in the acquisition process at the appropriate time.
[60 FR 34734, July 3, 1995]
1.102–4
Role of the acquisition team.
(a) Government members of the
Team must be empowered to make acquisition decisions within their areas
of responsibility, including selection,
negotiation, and administration of contracts consistent with the Guiding
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1.103
48 CFR Ch. 1 (10–1–03 Edition)
Principles. In particular, the contracting officer must have the authority to the maximum extent practicable
and consistent with law, to determine
the application of rules, regulations,
and policies, on a specific contract.
(b) The authority to make decisions
and the accountability for the decision
made will be delegated to the lowest
level within the System, consistent
with law.
(c) The Team must be prepared to
perform the functions and duties assigned. The Government is committed
to provide training, professional development, and other resources necessary
for maintaining and improving the
knowledge, skills, and abilities for all
Government participants on the Team,
both with regard to their particular
area of responsibility within the System, and their respective role as a
team member. The contractor community is encouraged to do likewise.
(d) The System will foster cooperative relationships between the Government and its contractors consistent
with its overriding responsibility to
the taxpayers.
(e) The FAR outlines procurement
policies and procedures that are used
by members of the Acquisition Team.
If a policy or procedure, or a particular
strategy or practice, is in the best interest of the Government and is not
specifically addressed in the FAR, nor
prohibited by law (statute or case law),
Executive order or other regulation,
Government members of the Team
should not assume it is prohibited.
Rather, absence of direction should be
interpreted as permitting the Team to
innovative and use sound business
judgment that is otherwise consistent
with law and within the limits of their
authority. Contracting officers should
take the lead in encouraging business
process innovations and ensuring that
business decisions are sound.
(b) The FAR is prepared, issued, and
maintained, and the FAR System is
prescribed, jointly by the Secretary of
Defense, the Administrator of General
Services, and the Administrator, National Aeronautics and Space Administration, under their several statutory
authorities.
[48 FR 42103, Sept. 19, 1983, as amended at 51
FR 27116, July 29, 1986. Redesignated at 60 FR
34733, July 3, 1995, as amended at 65 FR 36014,
June 6, 2000]
1.104
[48 FR 42103, Sept. 19, 1983. Redesignated at
60 FR 34733, July 3, 1995]
1.105
Issuance.
1.105–1 Publication and code arrangement.
(a) The FAR is published in (1) the
daily issue of the Federal Register, (2)
cumulated form in the Code of Federal
Regulations (CFR), and (3) a separate
loose-leaf edition.
(b) The FAR is issued as Chapter 1 of
Title 48, CFR. Subsequent chapters are
reserved for agency acquisition regulations that implement or supplement
the FAR (see subpart 1.3). The CFR
Staff will assign chapter numbers to
requesting agencies.
(c) Each numbered unit or segment
(e.g., part, subpart, section, etc.) of an
agency acquisition regulation that is
codified in the CFR shall begin with
the chapter number. However, the
chapter number assigned to the FAR
will not be included in the numbered
units or segments of the FAR.
[48 FR 42103, Sept. 19, 1983. Redesignated at
60 FR 34733, July 3, 1995]
1.105–2
Arrangement of regulations.
(a) General. The FAR is divided into
subchapters, parts (each of which covers a separate aspect of acquisition),
subparts, sections, and subsections.
(b) Numbering. (1) The numbering system permits the discrete identification
of every FAR paragraph. The digits to
the left of the decimal point represent
the part number. The numbers to the
right of the decimal point and to the
[60 FR 34734, July 3, 1995, as amended at 62
FR 44804, Aug. 22, 1997]
1.103
Applicability.
The FAR applies to all acquisitions
as defined in part 2 of the FAR, except
where expressly excluded.
Authority.
(a) The development of the FAR System is in accordance with the requirements of the Office of Federal Procurement Policy Act of 1974 (Pub. L. 93–
400), as amended by Pub. L. 96–83.
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Federal Acquisition Regulation
1.106
left of the dash, represent, in order, the
subpart (one or two digits), and the
section (two digits). The number to the
right of the dash represents the subsection. Subdivisons may be used at
the section and subsection level to
identify individual paragraphs. The following example illustrates the makeup of a FAR number citation (note that
subchapters are not used with citations):
1.105–3 Copies.
Copies of the FAR in Federal Register, loose-leaf, CD–ROM and CFR
form may be purchased from the Superintendent of Documents, Government
Printing Office (GPO), Washington, DC
20402.
[48 FR 42103, Sept. 19, 1983. Redesignated at
60 FR 34733, July 3, 1995, as amended at 62 FR
40236, July 25, 1997]
1.106 OMB approval under the Paperwork Reduction Act.
The Paperwork Reduction Act of 1980
(Pub. L. 96–511) imposes a requirement
on Federal agencies to obtain approval
from the Office of Management and
Budget (OMB) before collecting information from 10 or more members of the
public. The information collection and
recordkeeping requirements contained
in this regulation have been approved
by the OMB. The following OMB control numbers apply:
(2) Subdivisions below the section or
subsection level consist of parenthetical alpha numerics using the following
sequence: (a)(1)(i)(A)(1)(i).
(c) References and citations. (1) Unless
otherwise stated, cross-references indicate parts, subparts, sections, subsections, paragraphs, subparagraphs, or
subdivisions of this regulation.
(2) This regulation may be referred to
as the Federal Acquisition Regulation
or the FAR.
(3) Using the FAR coverage at 9.106–
4(d) as a typical illustration, reference
to the—
(i) Part would be ‘‘FAR Part 9’’ outside the FAR and ‘‘Part 9’’ within the
FAR.
(ii) Subpart would be ‘‘FAR Subpart
9.1’’ outside the FAR and ‘‘Subpart 9.1’’
within the FAR.
(iii) Section would be ‘‘FAR 9.106’’
outside the FAR and ‘‘9.106’’ within the
FAR.
(iv) Subsection would be ‘‘FAR 9.106–
4’’ outside the FAR and ‘‘9.106–4’’ within the FAR.
(v) Paragraph would be ‘‘FAR 9.106–
4(d)’’ outside the FAR and ‘‘9.106–4(d)’’
within the FAR.
(4) Citations of authority (e.g., statutes or executive orders) in the FAR
shall follow the Federal Register form
guides.
OMB control
No.
FAR segment
3.103 ..................................................................
3.4 ......................................................................
4.102 ..................................................................
4.7 ......................................................................
4.9 ......................................................................
4.602 ..................................................................
4.603 ..................................................................
5.405 ..................................................................
7.2 ......................................................................
8.5 ......................................................................
9.1 ......................................................................
9.2 ......................................................................
14.201 ................................................................
14.202–4 ............................................................
14.202–5 ............................................................
14.205 ................................................................
14.214 ................................................................
14.407 ................................................................
14.5 ....................................................................
15.2 ....................................................................
15.209 ................................................................
15.4 ....................................................................
15.404–1(f) ........................................................
15.407–2 ............................................................
15.408 ................................................................
19.7 ....................................................................
19.12 ..................................................................
22.103 ................................................................
22.8 ....................................................................
22.11 ..................................................................
22.13 ..................................................................
22.14 ..................................................................
23.9 ....................................................................
23.602 ................................................................
27.3 ....................................................................
27.4 ....................................................................
28.1 ....................................................................
28.2 ....................................................................
29.304 ................................................................
30.6 ....................................................................
31.205–46 ..........................................................
[48 FR 42103, Sept. 19, 1983. Redesignated at
60 FR 34733, July 3, 1995, as amended at 65 FR
36015, June 6, 2000]
9000–0018
9000–0003
9000–0033
9000–0034
9000–0097
9000–0145
9000–0145
9000–0036
9000–0082
9000–0113
9000–0011
9000–0020
9000–0034
9000–0040
9000–0039
9000–0037
9000–0105
9000–0038
9000–0041
9000–0037
9000–0034
9000–0013
9000–0080
9000–0078
9000–0115
9000–0006
9000–0150
9000–0065
1215–0072
9000–0066
1215–0072
1215–0072
9000–0139
9000–0107
9000–0095
9000–0090
9000–0045
9000–0045
9000–0059
9000–0129
9000–0079
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EC03AP91.000
9
1.106
48 CFR Ch. 1 (10–1–03 Edition)
OMB control
No.
FAR segment
31.205–46(a)(3) .................................................
32 .......................................................................
32.000 ................................................................
32.1 ....................................................................
32.2 ....................................................................
32.4 ....................................................................
32.5 ....................................................................
32.7 ....................................................................
32.9 ....................................................................
32.10 ..................................................................
33 .......................................................................
34.1 ....................................................................
36.213–2 ............................................................
36.603 ................................................................
36.701 ................................................................
41.202(c) ............................................................
42.7 ....................................................................
42.12 ..................................................................
42.13 ..................................................................
42.14 ..................................................................
43.205(f) ............................................................
45 .......................................................................
46 .......................................................................
47 .......................................................................
48 .......................................................................
49 .......................................................................
50 .......................................................................
51.1 ....................................................................
51.2 ....................................................................
52.203–2 ............................................................
52.203–7 ............................................................
52.204–3 ............................................................
52.204–6 ............................................................
52.204–7 ............................................................
52.207–3 ............................................................
52.212–1(k) ........................................................
52.212–3 ............................................................
52.212–4(t) ........................................................
52.214–14 ..........................................................
52.214–15 ..........................................................
52.214–16 ..........................................................
52.214–21 ..........................................................
52.214–26 ..........................................................
52.214–28 ..........................................................
52.215–1(c)(2)(iv) ..............................................
52.215–1(d) .......................................................
52.215–2 ............................................................
52.215–6 ............................................................
52.215–9 ............................................................
52.215–12 ..........................................................
52.215–13 ..........................................................
52.215–14 ..........................................................
52.215–19 ..........................................................
52.215–20 ..........................................................
52.215–21 ..........................................................
52.216–2 ............................................................
52.216–3 ............................................................
52.216–4 ............................................................
52.216–5 ............................................................
52.216–6 ............................................................
52.216–7 ............................................................
52.216–10 ..........................................................
52.216–13 ..........................................................
52.216–15 ..........................................................
52.216–16 ..........................................................
52.216–17 ..........................................................
52.219–9 ............................................................
OMB control
No.
FAR segment
9000–0088
9000–0035
9000–0138
9000–0070
and
9000–0138
9000–0138
9000–0073
9000–0010
and
9000–0138
9000–0074
9000–0102
9000–0138
9000–0035
9000–0132
9000–0037
9000–0004
and
9000–0005
9000–0037
9000–0125
9000–0013
9000–0076
9000–0076
9000–0056
9000–0026
9000–0075
9000–0077
9000–0061
9000–0027
9000–0028
9000–0029
9000–0031
9000–0032
9000–0018
9000–0091
9000–0097
9000–0145
9000–0159
9000–0114
9000–0159
9000–0136
9000–0159
9000–0047
9000–0044
9000–0044
9000–0039
9000–0034
9000–0013
9000–0048
9000–0044
9000–0034
9000–0047
9000–0078
9000–0013
9000–0013
9000–0080
9000–0115
9000–0013
9000–0013
9000–0068
9000–0068
9000–0068
9000–0071
9000–0071
9000–0069
9000–0067
9000–0069
9000–0069
9000–0067
9000–0067
9000–0006
52.219–10 ..........................................................
52.219–19 ..........................................................
52.219–20 ..........................................................
52.219–21 ..........................................................
52.219–22 ..........................................................
52.219–23 ..........................................................
52.219–25 ..........................................................
52.222–2 ............................................................
52.222–4 ............................................................
52.222–6 ............................................................
52.222–8 ............................................................
52.222–11
52.222–18
52.222–21
52.222–22
52.222–23
52.222–25
52.222–26
52.222–27
52.222–32
52.222–35
52.222–36
52.222–41
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
52.222–46 ..........................................................
52.223–4 ............................................................
52.223–5 ............................................................
52.223–6(b)(5) ...................................................
52.233–7 ............................................................
52.223–9 ............................................................
52.223–13 ..........................................................
52.223–14 ..........................................................
52.225–2 ............................................................
52.225–4 ............................................................
52.225–6 ............................................................
52.225–8 ............................................................
52.225–9 ............................................................
52.225–11 ..........................................................
52.227–14 ..........................................................
52.227–15 ..........................................................
52.227–16 ..........................................................
52.227–17 ..........................................................
52.227–18 ..........................................................
52.227–19 ..........................................................
52.227–20 ..........................................................
52.227–21 ..........................................................
52.227–22 ..........................................................
52.227–23 ..........................................................
52.228–1 ............................................................
52.228–2 ............................................................
52.228–12 ..........................................................
52.228–13 ..........................................................
52.228–15 ..........................................................
52.228–16 ..........................................................
52.229–2 ............................................................
52.230–6 ............................................................
52.232–1 ............................................................
52.232–2 ............................................................
52.232–3 ............................................................
52.232–4 ............................................................
52.232–5 ............................................................
52.232–6 ............................................................
52.232–7 ............................................................
52.232–8 ............................................................
52.232–9 ............................................................
52.232–10 ..........................................................
52.232–11 ..........................................................
52.232–12 ..........................................................
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9000–0006
9000–0100
9000–0100
9000–0100
9000–0150
9000–0150
9000–0150
9000–0065
1215–0119
1215–0140
1215–0149
and
1215–0017
9000–0014
9000–0127
1215–0072
1215–0072
1215–0072
1215–0072
1215–0072
1215–0072
9000–0154
1215–0072
1215–0072
1215–0017
and
1215–0150
9000–0066
9000–0134
9000–0147
9000–0101
9000–0117
9000–0134
9000–0139
9000–0139
9000–0023
and
9000–0024
9000–0130
9000–0025
9000–0022
9000–0141
9000–0141
9000–0090
9000–0090
9000–0090
9000–0090
9000–0090
9000–0090
9000–0090
9000–0090
9000–0090
9000–0090
9000–0045
9000–0045
9000–0135
9000–0045
9000–0045
9000–0045
9000–0059
9000–0129
9000–0070
9000–0070
9000–0070
9000–0070
9000–0070
9000–0070
9000–0070
9000–0070
9000–0070
9000–0070
9000–0070
9000–0073
Federal Acquisition Regulation
1.106
OMB control
No.
FAR segment
52.232–13 ..........................................................
52.232–14 ..........................................................
52.232–15 ..........................................................
52.232–16 ..........................................................
52.232–20 ..........................................................
52.232–21 ..........................................................
52.232–22 ..........................................................
52.232–27 ..........................................................
52.232–29 ..........................................................
52.232–30 ..........................................................
52.232–31 ..........................................................
52.232–32 ..........................................................
52.233–1 ............................................................
52.234–1 ............................................................
52.236–5 ............................................................
52.236–13 ..........................................................
52.236–15 ..........................................................
52.236–19 ..........................................................
52.241–1 ............................................................
52.241–3 ............................................................
52.241–7 ............................................................
52.241–13 ..........................................................
52.242–12 ..........................................................
52.243–1 ............................................................
52.243–2 ............................................................
52.243–3 ............................................................
52.243–4 ............................................................
52.243–6 ............................................................
52.243–7 ............................................................
52.245–2 ............................................................
52.245–3 ............................................................
52.245–5 ............................................................
52.245–7 ............................................................
52.245–8 ............................................................
52.245–9 ............................................................
52.245–10 ..........................................................
52.245–11 ..........................................................
52.245–16 ..........................................................
52.245–17 ..........................................................
52.245–18 ..........................................................
52.246–2 ............................................................
52.246–3 ............................................................
52.246–4 ............................................................
52.246–5 ............................................................
52.246–6 ............................................................
52.246–7 ............................................................
52.246–8 ............................................................
52.246–10 ..........................................................
52.246–12 ..........................................................
52.246–15 ..........................................................
52.247–2 ............................................................
52.247–29 ..........................................................
52.247–30 ..........................................................
52.247–31 ..........................................................
52.247–32 ..........................................................
52.247–33 ..........................................................
52.247–34 ..........................................................
52.247–35 ..........................................................
52.247–36 ..........................................................
52.247–37 ..........................................................
52.247–38 ..........................................................
52.247–39 ..........................................................
52.247–40 ..........................................................
52.247–41 ..........................................................
52.247–42 ..........................................................
52.247–43 ..........................................................
52.247–44 ..........................................................
52.247–48 ..........................................................
52.247–51 ..........................................................
52.247–53 ..........................................................
52.247–57 ..........................................................
OMB control
No.
FAR segment
9000–0010
9000–0010
9000–0010
9000–0010
9000–0074
9000–0074
9000–0074
9000–0102
9000–0138
9000–0138
9000–0138
9000–0138
9000–0035
9000–0133
9000–0062
1220–0029
and
9000–0060
9000–0058
9000–0064
9000–0126
9000–0122
9000–0123
9000–0124
9000–0056
9000–0026
9000–0026
9000–0026
9000–0026
9000–0026
9000–0026
9000–0075
9000–0075
9000–0075
9000–0075
9000–0075
9000–0075
9000–0075
9000–0075
9000–0075
9000–0075
9000–0075
9000–0077
9000–0077
9000–0077
9000–0077
9000–0077
9000–0077
9000–0077
9000–0077
9000–0077
9000–0077
9000–0053
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0061
9000–0057
9000–0055
9000–0061
52.247–63 ..........................................................
52.247–64 ..........................................................
52.248–1 ............................................................
52.248–2 ............................................................
52.248–3 ............................................................
52.249–2 ............................................................
52.249–3 ............................................................
52.249–5 ............................................................
52.249–6 ............................................................
52.249–11 ..........................................................
52.250–1 ............................................................
53.236–1(a) .......................................................
SF 24 .................................................................
SF 25 .................................................................
SF 25–A .............................................................
SF 28 .................................................................
SF 34 .................................................................
SF 35 .................................................................
SF 254 ...............................................................
SF 255 ...............................................................
SF 273 ...............................................................
SF 274 ...............................................................
SF 275 ...............................................................
SF 294 ...............................................................
SF 295 ...............................................................
SF 312 ...............................................................
SF 1403 .............................................................
SF 1404 .............................................................
SF 1405 .............................................................
SF 1406 .............................................................
SF 1407 .............................................................
SF 1408 .............................................................
SF 1413 .............................................................
SF 1416 .............................................................
SF 1417 .............................................................
SF 1418 .............................................................
SF 1423 .............................................................
SF 1424 .............................................................
SF 1426 .............................................................
SF 1427 .............................................................
SF 1428 .............................................................
SF 1429 .............................................................
SF 1430 .............................................................
SF 1431 .............................................................
SF 1432 .............................................................
SF 1433 .............................................................
SF 1434 .............................................................
SF 1435 .............................................................
SF 1436 .............................................................
SF 1437 .............................................................
SF 1438 .............................................................
SF 1439 .............................................................
SF 1440 .............................................................
SF 1443 .............................................................
SF 1444 .............................................................
SF 1445 .............................................................
SF 1446 .............................................................
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9000–0054
9000–0061
9000–0027
9000–0027
9000–0027
9000–0028
9000–0028
9000–0028
9000–0028
9000–0028
9000–0029
9000–0037
9000–0045
9000–0045
9000–0045
9000–0001
9000–0045
9000–0045
9000–0004
9000–0005
9000–0045
9000–0045
9000–0045
9000–0006
9000–0007
9000–0150
9000–0011
9000–0011
9000–0011
9000–0011
9000–0011
9000–0011
9000–0014
9000–0045
9000–0037
9000–0045
9000–0015
9000–0015
9000–0015
9000–0015
9000–0015
9000–0015
9000–0015
9000–0015
9000–0015
9000–0015
9000–0015
9000–0012
9000–0012
9000–0012
9000–0012
9000–0012
9000–0012
9000–0010
9000–0089
9000–0089
9000–0089
1.107
48 CFR Ch. 1 (10–1–03 Edition)
[59 FR 67065, Dec. 28, 1994. Redesignated at 60
FR 34733, 34736, July 3, 1995, as amended at 60
FR 42650, 42665, Aug. 16, 1995; 60 FR 48211,
Sept. 18, 1995; 60 FR 49710, Sept. 26, 1995; 61
FR 18916, Apr. 29, 1996; 61 FR 39188, July 26,
1996; 61 FR 67410, 67430, Dec. 20, 1996; 61 FR
69287, Dec. 31, 1996; 62 FR 227, 235, 271, Jan. 2,
1997; 62 FR 44806, 44810, Aug. 22, 1997; 62 FR
51229, 51270, Sept. 30, 1997; 63 FR 9050, 9051,
Feb. 23, 1998; 63 FR 35720, June 30, 1998; 63 FR
36121, July 1, 1998; 63 FR 58602, Oct. 30, 1998;
63 FR 70292, Dec. 18, 1998; 64 FR 10532, 10549,
Mar. 4, 1999; 64 FR 32748, June 17, 1999; 64 FR
51850, Sept. 24, 1999; 64 FR 72416, 72417, Dec.
27, 1999; 65 FR 16286, Mar. 27, 2000; 66 FR 53480,
Oct. 22, 2001; 67 FR 13050, Mar. 20, 2002; 68 FR
43856, July 24, 2003; 68 FR 56672, Oct. 1, 2003]
1.107
imum quantity of supplies or services
to be acquired or establishes a ceiling
price or establishes the final price to
be based on future events, the final anticipated dollar value must be the
highest final priced alternative to the
Government, including the dollar value
of all options.
(d) Application of FAR changes to solicitations and contracts. Unless otherwise specified—
(1) FAR changes apply to solicitations issued on or after the effective
date of the change;
(2) Contracting officers may, at their
discretion, include the FAR changes in
solicitations issued before the effective
date, provided award of the resulting
contract(s) occurs on or after the effective date; and
(3) Contracting officers may, at their
discretion, include the changes in any
existing contract with appropriate consideration.
(e) Citations. When the FAR cites a
statute, Executive order, Office of
Management and Budget circular, Office of Federal Procurement Policy policy letter, or relevant portion of the
Code of Federal Regulations, the citation includes all applicable amendments, unless otherwise stated.
(f) Imperative sentences. When an imperative sentence directs action, the
contracting officer is responsible for
the action, unless another party is expressly cited.
Certifications.
In accordance with Section 29 of the
Office of Federal Procurement Policy
Act (41 U.S.C. 425), as amended by Section 4301 of the Clinger-Cohen Act of
1996 (Public Law 104–106), a new requirement for a certification by a contractor or offeror may not be included
in this chapter unless—
(a) The certification requirement is
specifically imposed by statute; or
(b) Written justification for such certification is provided to the Administrator for Federal Procurement Policy
by the Federal Acquisition Regulatory
Council, and the Administrator approves in writing the inclusion of such
certification requirement.
[62 FR 44813, Aug. 22, 1997]
1.108
FAR conventions.
[65 FR 36015, June 6, 2000]
The following conventions provide
guidance for interpreting the FAR:
(a) Words and terms. Definitions in
Part 2 apply to the entire regulation
unless specifically defined in another
part, subpart, section, provision, or
clause. Words or terms defined in a specific part, subpart, section, provision,
or clause have that meaning when used
in that part, subpart, section, provision, or clause. Undefined words retain
their common dictionary meaning.
(b) Delegation of authority. Each authority is delegable unless specifically
stated otherwise (see 1.102–4(b)).
(c) Dollar thresholds. Unless otherwise
specified, a specific dollar threshold for
the purpose of applicability is the final
anticipated dollar value of the action,
including the dollar value of all options. If the action establishes a max-
Subpart 1.2—Administration
1.201
Maintenance of the FAR.
1.201–1 The two councils.
(a) Subject to the authorities discussed in 1.103, revisions to the FAR
will be prepared and issued through the
coordinated action of two councils, the
Defense Acquisition Regulations Council (DAR Council) and the Civilian
Agency Acquisition Council (CAA
Council). Members of these councils
shall—
(1) Represent their agencies on a fulltime basis;
(2) Be selected for their superior
qualifications in terms of acquisition
experience and demonstrated professional expertise; and
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Federal Acquisition Regulation
1.301
(3) Be funded by their respective
agencies.
(b) The chairperson of the CAA Council shall be the representative of the
Administrator of General Services. The
other members of this council shall be
one each representative from the (1)
Departments of Agriculture, Commerce, Energy, Health and Human
Services, Interior, Labor, State, Transportation, and Treasury, and (2) Environmental Protection Agency, Social
Security Administration, Small Business Administration, and Department
of Veterans Affairs.
(c) The Director of the DAR Council
shall be the representative of the Secretary of Defense. The operation of the
DAR Council will be as prescribed by
the Secretary of Defense. Membership
shall include representatives of the
military Departments, the Defense Logistics Agency, and the National Aeronautics and Space Administration.
(d) Responsibility for processing revisions to the FAR is apportioned by the
two councils so that each council has
cognizance over specified parts or subparts.
(e) Each council shall be responsible
for—
(1) Agreeing on all revisions with the
other council;
(2) Submitting to the FAR Secretariat (see 1.201–2) the information required under paragraphs 1.501–2(b) and
(e) for publication in the FEDERAL REGISTER of a notice soliciting comments
on a proposed revision to the FAR;
(3) Considering all comments received in response to notice of proposed
revisions;
(4) Arranging for public meetings;
(5) Preparing any final revision in the
appropriate FAR format and language;
and
(6) Submitting any final revision to
the FAR Secretariat for publication in
the FEDERAL REGISTER and printing for
distribution.
operating the FAR Secretariat to
print, publish, and distribute the FAR
through the Code of Federal Regulations system (including a loose-leaf
edition with periodic updates).
(b) Additionally, the FAR Secretariat
shall provide the two councils with
centralized services for—
(1) Keeping a synopsis of current
FAR cases and their status;
(2) Maintaining official files;
(3) Assisting parties interested in reviewing the files on completed cases;
and
(4) Performing miscellaneous administrative tasks pertaining to the maintenance of the FAR.
[48 FR 42103, Sept. 19, 1983, as amended at 62
FR 40236, July 25, 1997]
1.202 Agency
FAR.
compliance
with
Agency compliance with the FAR
(see 1.304) is the responsibility of the
Secretary of Defense (for the military
departments and defense agencies), the
Administrator of General Services (for
civilian agencies other than NASA),
and the Administrator of NASA (for
NASA activities).
Subpart 1.3—Agency Acquisition
Regulations
1.301
Policy.
(a)(1) Subject to the authorities in
paragraph (c) below and other statutory authority, an agency head may
issue or authorize the issuance of agency acquisition regulations that implement or supplement the FAR and incorporate, together with the FAR,
agency policies, procedures, contract
clauses, solicitation provisions, and
forms that govern the contracting
process or otherwise control the relationship between the agency, including
any of its suborganizations, and contractors or prospective contractors.
(2) Subject to the authorities in (c)
below and other statutory authority,
an agency head may issue or authorize
the issuance of internal agency guidance at any organizational level (e.g.,
designations and delegations of authority, assignments of responsibilities,
work-flow procedures, and internal reporting requirements).
[48 FR 42103, Sept. 19, 1983, as amended at 50
FR 2269, Jan. 15, 1985; 50 FR 26903, June 28,
1985; 51 FR 2649, Jan. 17, 1986; 54 FR 29280,
July 11, 1989; 62 FR 64940, Dec. 9, 1997; 63 FR
9069, Feb. 23, 1998; 65 FR 16286, Mar. 27, 2000]
1.201–2 FAR Secretariat.
(a) The General Services Administration is responsible for establishing and
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1.302
48 CFR Ch. 1 (10–1–03 Edition)
(b) Agency heads shall establish procedures to ensure that agency acquisition regulations are published for comment in the FEDERAL REGISTER in conformance with the procedures in subpart 1.5 and as required by section 22 of
the Office of Federal Procurement Policy Act, as amended (41 U.S.C. 418b),
and other applicable statutes, when
they have a significant effect beyond
the internal operating procedures of
the agency or have a significant cost or
administrative impact on contractors
or offerors. However, publication is not
required for issuances that merely implement or supplement higher level
issuances that have previously undergone the public comment process, unless such implementation or supplementation results in an additional
significant cost or administrative impact on contractors or offerors or effect
beyond the internal operating procedures of the issuing organization.
Issuances under 1.301(a)(2) need not be
publicized for public comment.
(c) When adopting acquisition regulations, agencies shall ensure that they
comply with the Paperwork Reduction
Act (44 U.S.C. 3501, et seq.) as implemented in 5 CFR part 1320 (see 1.105)
and the Regulatory Flexibility Act (5
U.S.C. 601, et seq.). Normally, when a
law requires publication of a proposed
regulation, the Regulatory Flexibility
Act applies and agencies must prepare
written analyses or certifications as
provided in the law.
(d) Agency acquisition regulations
implementing or supplementing the
FAR are, for—
(1) The military departments and defense agencies, issued subject to the
authority of the Secretary of Defense;
(2) NASA activities, issued subject to
the authorities of the Administrator of
NASA; and
(3) The civilian agencies other than
NASA, issued by the heads of those
agencies subject to the overall authority of the Administrator of General
Services or independent authority the
agency may have.
1.302
Limitations.
Agency acquisition regulations shall
be limited to—
(a) Those necessary to implement
FAR policies and procedures within the
agency; and
(b) Additional policies, procedures,
solicitation provisions, or contract
clauses that supplement the FAR to
satisfy the specific needs of the agency.
1.303
Publication and codification.
(a) Agency-wide acquisition regulations shall be published in the FEDERAL
REGISTER as required by law, shall be
codified under an assigned chapter in
Title 48, Code of Federal Regulations,
and shall parallel the FAR in format,
arrangement, and numbering system
(but see 1.104–1(c)). Coverage in an
agency acquisition regulation that implements a specific part, subpart, section, or subsection of the FAR shall be
numbered and titled to correspond to
the appropriate FAR number and title.
Supplementary material for which
there is no counterpart in the FAR
shall be codified using chapter, part,
subpart, section, or subsection numbers of 70 and up (e.g., for the Department of Interior, whose assigned chapter number in Title 48 is 14, part 1470,
subpart 1401.70, section 1401.370, or subsection 1401.301–70.)
(b) Issuances under 1.301(a)(2) need
not be published in the FEDERAL REGISTER.
[48 FR 42103, Sept. 19, 1983, as amended at 50
FR 2269, Jan. 15, 1985]
1.304 Agency control and compliance
procedures.
(a) Under the authorities of 1.301(d),
agencies shall control and limit
issuance of agency acquisition regulations and, in particular, local agency
directives that restrain the flexibilities
found in the FAR, and shall establish
formal procedures for the review of
these documents to assure compliance
with this part 1.
(b) Agency acquisition regulations
shall not—
(1) Unnecessarily repeat, paraphrase,
or otherwise restate material contained in the FAR or higher-level agency acquisition regulations; or
[48 FR 42103, Sept. 19, 1983, as amended at 50
FR 2269, Jan. 15, 1985; 54 FR 5054, Jan. 31,
1989]
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Federal Acquisition Regulation
1.404
(2) Except as required by law or as
provided in subpart 1.4, conflict or be
inconsistent with FAR content.
(c) Agencies shall evaluate all regulatory coverage in agency acquisition
regulations to determine if it could
apply to other agencies. Coverage that
is not peculiar to one agency shall be
recommended for inclusion in the FAR.
(f) The issuance of policies or procedures that govern the contracting process or otherwise control contracting relationships that are not incorporated
into agency acquisition regulations in
accordance with 1.301(a).
[48 FR 42103, Sept. 19, 1983, as amended at 66
FR 2118, Jan. 10, 2001]
1.402 Policy.
Unless precluded by law, executive
order, or regulation, deviations from
the FAR may be granted as specified in
this subpart when necessary to meet
the specific needs and requirements of
each agency. The development and
testing of new techniques and methods
of acquisition should not be stifled
simply because such action would require a FAR deviation. The fact that
deviation authority is required should
not, of itself, deter agencies in their development and testing of new techniques and acquisition methods. Refer
to 31.101 for instructions concerning deviations pertaining to the subject matter of part 31, Contract Cost Principles
and Procedures. Deviations are not authorized with respect to 30.201–3 and
30.201–4, or the requirements of the
Cost Accounting Standards Board
(CASB) rules and regulations (48 CFR
Chapter 99 (FAR Appendix)). Refer to
30.201–5 for instructions concerning
waivers pertaining to Cost Accounting
Standards.
[48 FR 42103, Sept. 19, 1983, as amended at 61
FR 39190, July 26, 1996; 65 FR 16286, Mar. 27,
2000]
Subpart 1.4—Deviations from the
FAR
1.400
Scope of subpart.
This subpart prescribes the policies
and procedures for authorizing deviations from the FAR. Exceptions pertaining to the use of forms prescribed
by the FAR are covered in part 53 rather than in this subpart.
1.401
Definition.
Deviation means any one or combination of the following:
(a) The issuance or use of a policy,
procedure, solicitation provision (see
definition in 2.101), contract clause (see
definition in 2.101), method, or practice
of conducting acquisition actions of
any kind at any stage of the acquisition process that is inconsistent with
the FAR.
(b) The omission of any solicitation
provision or contract clause when its
prescription requires its use.
(c) The use of any solicitation provision or contract clause with modified
or alternate language that is not authorized by the FAR (see definition of
‘‘modification’’ in 52.101(a) and definition of ‘‘alternate’’ in 2.101(a)).
(d) The use of a solicitation provision
or contract clause prescribed by the
FAR on a substantially as follows or substantially the same as basis (see definitions in 2.101 and 52.101(a)), if such use
is inconsistent with the intent, principle, or substance of the prescription
or related coverage on the subject matter in the FAR.
(e) The authorization of lesser or
greater limitations on the use of any
solicitation provision, contract clause,
policy, or procedure prescribed by the
FAR.
[48 FR 42103, Sept. 19, 1983, as amended at 52
FR 35612, Sept. 22, 1987; 62 FR 64914, Dec. 9,
1997]
1.403 Individual deviations.
Individual deviations affect only one
contract action, and, unless 1.405(e) is
applicable, may be authorized by the
agency head. The contracting officer
must document the justification and
agency approval in the contract file.
[67 FR 13053, Mar. 20, 2002]
1.404 Class deviations.
Class deviations affect more than one
contract action. When an agency
knows that it will require a class deviation on a permanent basis, it should
propose a FAR revision, if appropriate.
Civilian agencies, other than NASA,
must furnish a copy of each approved
class deviation to the FAR Secretariat.
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1.405
48 CFR Ch. 1 (10–1–03 Edition)
(a) For civilian agencies except
NASA, class deviations may be authorized by agency heads or their designees, unless 1.405(e) is applicable.
Delegation of this authority shall not
be made below the head of a contracting activity. Authorization of
class deviations by agency officials is
subject to the following limitations:
(1) An agency official who may authorize a class deviation, before doing
so, shall consult with the chairperson
of the Civilian Agency Acquisition
Council (CAA Council), unless that
agency official determines that urgency precludes such consultation.
(2) Recommended revisions to the
FAR shall be transmitted to the FAR
Secretariat by agency heads or their
designees for authorizing class deviations.
(b) For DOD, class deviations shall be
controlled, processed, and approved in
accordance with the Defense FAR Supplement.
(c) For NASA, class deviations shall
be controlled and approved by the Assistant Administrator for Procurement. Deviations shall be processed in
accordance with agency regulations.
FAR Secretariat through a central
agency control point.
(e) For civilian agencies other than
NASA, if a deviation required to comply with a treaty or an executive
agreement is not authorized by paragraph (b) or (c) of this section, then the
request for deviation shall be processed
through the FAR Secretariat to the Civilian Agency Acquisition Council.
[48 FR 42103, Sept. 19, 1983, as amended at 61
FR 67411, Dec. 20, 1996]
Subpart 1.5—Agency and Public
Participation
SOURCE: 50 FR 2269, Jan. 15, 1985, unless
otherwise noted.
1.501 Solicitation of agency and public
views.
1.501–1 Definition.
Significant revisions, as used in this
subpart, means revisions that alter the
substantive meaning of any coverage in
the FAR System having a significant
cost or administrative impact on contractors or offerors, or a significant effect beyond the internal operating procedures of the issuing agency. This expression, for example, does not include
editorial, stylistic, or other revisions
that have no impact on the basic meaning of the coverage being revised.
[48 FR 42103, Sept. 19, 1983, as amended at 56
FR 15148, Apr. 15, 1991; 59 FR 11387, March 10,
1994; 61 FR 67411, Dec. 20, 1996; 67 FR 13053,
13068, Mar. 20, 2002]
1.405 Deviations pertaining to treaties
and executive agreements.
(a) Executive agreements, as used in
this section, means Government-toGovernment
agreements,
including
agreements with international organizations, to which the United States is a
party.
(b) Any deviation from the FAR required to comply with a treaty to
which the United States is a party is
authorized, unless the deviation would
be inconsistent with FAR coverage
based on a law enacted after the execution of the treaty.
(c) Any deviation from the FAR required to comply with an executive
agreement is authorized unless the deviation would be inconsistent with
FAR coverage based on law.
(d) For civilian agencies other than
NASA, a copy of the text deviation authorized under paragraph (b) or (c) of
this section shall be transmitted to the
1.501–2 Opportunity for public comments.
(a) Views of agencies and nongovernmental parties or organizations will be
considered in formulating acquisition
policies and procedures.
(b) The opportunity to submit written comments on proposed significant
revisions shall be provided by placing a
notice in the FEDERAL REGISTER. Each
of these notices shall include—
(1) The text of the revision or, if it is
impracticable to publish the full text,
a summary of the proposal;
(2) The address and telephone number
of the individual from whom copies of
the revision, in full text, can be requested and to whom comments thereon should be addressed; and
(3) When 1.501–3(b) is applicable, a
statement that the revision is effective
on a temporary basis pending completion of the public comment period.
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Federal Acquisition Regulation
1.602–2
(c) A minimum of 30 days and, normally, at least 60 days will be given for
the receipt of comments.
1.501–3
(b) Agency heads may mutually agree
to—
(1) Assign contracting functions and
responsibilities from one agency to another; and
(2) Create joint or combined offices
to exercise acquisition functions and
responsibilities.
Exceptions.
(a) Comments need not be solicited
when the proposed coverage does not
constitute a significant revision.
(b) Advance comments need not be
solicited when urgent and compelling
circumstances make solicitation of
comments impracticable prior to the
effective date of the coverage, such as
when a new statute must be implemented in a relatively short period of
time. In such case, the coverage shall
be issued on a temporary basis and
shall provide for at least a 30 day public comment period.
1.502
[60 FR 49721, Sept. 26, 1995]
1.602
1.602–1
Unsolicited proposed revisions.
Public meetings.
Public meetings may be appropriate
when a decision to adopt, amend, or delete coverage is likely to benefit from
significant additional views and discussion.
Subpart 1.6—Career Development, Contracting Authority,
and Responsibilities
1.601
Authority.
(a) Contracting officers have authority to enter into, administer, or terminate contracts and make related determinations and findings. Contracting officers may bind the Government only
to the extent of the authority delegated to them. Contracting officers
shall receive from the appointing authority (see 1.603–1) clear instructions
in writing regarding the limits of their
authority. Information on the limits of
the contracting officers’ authority
shall be readily available to the public
and agency personnel.
(b) No contract shall be entered into
unless the contracting officer ensures
that all requirements of law, executive
orders, regulations, and all other applicable procedures, including clearances
and approvals, have been met.
Consideration shall also be given to
unsolicited recommendations for revisions that have been submitted in writing with sufficient data and rationale
to permit their evaluation.
1.503
Contracting officers.
1.602–2
Responsibilities.
Contracting officers are responsible
for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the
terms of the contract, and safeguarding
the interests of the United States in its
contractual relationships. In order to
perform these responsibilities, contracting officers should be allowed
wide latitude to exercise business judgment. Contracting officers shall—
(a) Ensure that the requirements of
1.602–1(b) have been met, and that sufficient funds are available for obligation;
(b) Ensure that contractors receive
impartial, fair, and equitable treatment; and
(c) Request and consider the advice of
specialists in audit, law, engineering,
transportation, and other fields, as appropriate.
General.
(a) Unless specifically prohibited by
another provision of law, authority and
responsibility to contract for authorized supplies and services are vested in
the agency head. The agency head may
establish contracting activities and
delegate broad authority to manage
the agency’s contracting functions to
heads of such contracting activities.
Contracts may be entered into and
signed on behalf of the Government
only by contracting officers. In some
agencies, a relatively small number of
high level officials are designated contracting officers solely by virtue of
their positions. Contracting officers
below the level of a head of a contracting activity shall be selected and
appointed under 1.603.
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1.602–3
48 CFR Ch. 1 (10–1–03 Edition)
1.602–3 Ratification
commitments.
of
(2) The ratifying official has the authority to enter into a contractual
commitment;
(3) The resulting contract would otherwise have been proper if made by an
appropriate contracting officer;
(4) The contracting officer reviewing
the unauthorized commitment determines the price to be fair and reasonable;
(5) The contracting officer recommends payment and legal counsel
concurs in the recommendation, unless
agency procedures expressly do not require such concurrence;
(6) Funds are available and were
available at the time the unauthorized
commitment was made; and
(7) The ratification is in accordance
with any other limitations prescribed
under agency procedures.
(d) Nonratifiable commitments. Cases
that are not ratifiable under this subsection may be subject to resolution as
recommended by the General Accounting Office under its claim procedure
(GAO Policy and Procedures Manual
for Guidance of Federal Agencies, Title
4, Chapter 2), or as authorized by FAR
part 50. Legal advice should be obtained in these cases.
unauthorized
(a) Definitions.
Ratification, as used in this subsection, means the act of approving an
unauthorized commitment by an official who has the authority to do so.
Unauthorized commitment, as used in
this subsection, means an agreement
that is not binding solely because the
Government representative who made
it lacked the authority to enter into
that agreement on behalf of the Government.
(b) Policy. (1) Agencies should take
positive action to preclude, to the maximum extent possible, the need for
ratification actions. Although procedures are provided in this section for
use in those cases where the ratification of an unauthorized commitment is
necessary, these procedures may not be
used in a manner that encourages such
commitments being made by Government personnel.
(2) Subject to the limitations in paragraph (c) of this subsection, the head of
the contracting activity, unless a higher level official is designated by the
agency, may ratify an unauthorized
commitment.
(3) The ratification authority in subparagraph (b)(2) of this subsection may
be delegated in accordance with agency
procedures, but in no case shall the authority be delegated below the level of
chief of the contracting office.
(4) Agencies should process unauthorized commitments using the ratification authority of this subsection instead of referring such actions to the
General Accounting Office for resolution. (See 1.602–3(d).)
(5) Unauthorized commitments that
would involve claims subject to resolution under the Contract Disputes Act
of 1978 should be processed in accordance with subpart 33.2, Disputes and
Appeals.
(c) Limitations. The authority in subparagraph (b)(2) of this subsection may
be exercised only when—
(1) Supplies or services have been
provided to and accepted by the Government, or the Government otherwise
has obtained or will obtain a benefit resulting from performance of the unauthorized commitment;
[53 FR 3689, Feb. 8, 1988, as amended at 60 FR
48225, Sept. 18, 1995]
1.603 Selection, appointment, and termination of appointment.
1.603–1
General.
Subsection 414(4) of title 41, United
States Code, requires agency heads to
establish and maintain a procurement
career management program and a system for the selection, appointment,
and termination of appointment of contracting officers. Agency heads or their
designees may select and appoint contracting officers and terminate their
appointments. These selections and appointments shall be consistent with Office of Federal Procurement Policy’s
(OFPP) standards for skill-based training in performing contracting and purchasing duties as published in OFPP
Policy Letter No. 92–3, Procurement
Professionalism
Program
Policy—
Training for Contracting Personnel,
June 24, 1992.
[59 FR 67015, Dec. 28, 1994]
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Federal Acquisition Regulation
1.703
Subpart 1.7—Determinations and
Findings
1.603–2 Selection.
In selecting contracting officers, the
appointing official shall consider the
complexity and dollar value of the acquisitions to be assigned and the candidate’s experience, training, education, business acumen, judgment,
character, and reputation. Examples of
selection criteria include—
(a) Experience in Government contracting and administration, commercial purchasing, or related fields;
(b) Education or special training in
business administration, law, accounting, engineering, or related fields;
(c) Knowledge of acquisition policies
and procedures, including this and
other applicable regulations;
(d) Specialized knowledge in the particular assigned field of contracting;
and
(e) Satisfactory completion of acquisition training courses.
SOURCE: 50 FR 1726, Jan. 11, 1985 (interim
rule), and 50 FR 52429, Dec. 23, 1985 (final
rule), unless otherwise noted.
1.700
Scope of subpart.
This subpart prescribes general policies and procedures for the use of determinations and findings (D&F’s). Requirements for specific types of D&F’s
can be found with the appropriate subject matter.
1.701
Definition.
Determination and Findings (D&F)
means a special form of written approval by an authorized official that is
required by statute or regulation as a
prerequisite to taking certain contract
actions. The determination is a conclusion or decision supported by the findings. The findings are statements of
fact or rationale essential to support
the determination and must cover each
requirement of the statute or regulation.
1.603–3 Appointment.
(a) Contracting officers shall be appointed in writing on an SF 1402, Certificate of Appointment, which shall
state any limitations on the scope of
authority to be exercised, other than
limitations contained in applicable law
or regulation. Appointing officials
shall maintain files containing copies
of all appointments that have not been
terminated.
(b) Agency heads are encouraged to
delegate micro-purchase authority to
individuals who are employees of an
executive agency or members of the
Armed Forces of the United States who
will be using the supplies or services
being purchased. Individuals delegated
this authority are not required to be
appointed on an SF 1402, but shall be
appointed in writing in accordance
with agency procedures.
[50 FR 1726, Jan. 11, 1985 (interim rule), and
50 FR 52429, Dec. 23, 1985 (final rule), as
amended at 67 FR 13053, Mar. 20, 2002]
1.702
General.
(a) A D&F shall ordinarily be for an
individual contract action. Unless otherwise prohibited, class D&F’s may be
executed for classes of contract action
(see 1.703). The approval granted by a
D&F is restricted to the proposed contract action(s) reasonably described in
that D&F. D&F’s may provided for a
reasonable degree of flexibility. Furthermore, in their application, reasonable variations in estimated quantities
or prices are permitted, unless the D&F
specifies otherwise.
(b) When an option is anticipated, the
D&F shall state the approximate quantity to be awarded initially and the extent of the increase to be permitted by
the option.
[61 FR 39190, July 26, 1996]
1.603–4 Termination.
Termination of a contracting officer
appointment will be by letter, unless
the Certificate of Appointment contains other provisions for automatic
termination. Terminations may be for
reasons such as reassignment, termination of employment, or unsatisfactory performance. No termination shall
operate retroactively.
1.703 Class determinations and findings.
(a) A class D&F provides authority
for a class of contract actions. A class
may consist of contract actions for the
same or related supplies or services or
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1.704
48 CFR Ch. 1 (10–1–03 Edition)
other contract actions that require essentially identical justification.
(b) The findings in a class D&F shall
fully support the proposed action either for the class as a whole or for each
action. A class D&F shall be for a specified period, with the expiration date
stated in the document.
(c) The contracting officer shall ensure that individual actions taken pursuant to the authority of a class D&F
are within the scope of the D&F.
(b) The contracting officer need not
cancel the solicitation if the D&F, as
modified, supports the contract action.
[50 FR 1726, Jan. 11, 1985 (interim rule), and
50 FR 52429, Dec. 23, 1985 (final rule), as
amended at 67 FR 13053, Mar. 20, 2002]
1.706
[50 FR 1726, Jan. 11, 1985 (interim rule), and
50 FR 52429, Dec. 23, 1985 (final rule), as
amended at 67 FR 13053, Mar. 20, 2002]
1.704
Content.
Each D&F shall set forth enough
facts and circumstances to clearly and
convincingly justify the specific determination made. As a minimum, each
D&F shall include, in the prescribed
agency format, the following information:
(a) Identification of the agency and
of the contracting activity and specific
identifications of the document as a
Determination and Findings.
(b) Nature and/or description of the
action being approved.
(c) Citation of the appropriate statute and/or regulation upon which the
D&F is based.
(d) Findings that detail the particular circumstances, facts, or reasoning essential to support the determination. Necessary supporting documentation shall be obtained from appropriate requirements and technical
personnel.
(e) A determination, based on the
findings, that the proposed action is
justified under the applicable statute
or regulation.
(f) Expiration date of the D&F, if required (see 1.706(b)).
(g) The signature of the official authorized to sign the D&F (see 1.706) and
the date signed.
1.705
Expiration.
Expiration dates are required for
class D&F’s and are optional for individual D&F’s. Authority to act under
an individual D&F expires when it is
exercised or on an expiration date specified in the document, whichever occurs first. Authority to act under a
class D&F expires on the expiration
date specified in the document. When a
solicitation has been furnished to prospective offerors before the expiration
date, the authority under the D&F will
continue until award of the contract(s)
resulting from that solicitation.
1.707
Signatory authority.
When a D&F is required, it shall be
signed by the appropriate official in accordance with agency regulations. Authority to sign or delegate signature
authority for the various D&F’s is as
shown in the applicable FAR part.
PART 2—DEFINITIONS OF WORDS
AND TERMS
Sec.
2.000
Scope of part.
2.101
Definitions.
Subpart 2.1—Definitions
Subpart 2.2—Definitions Clause
2.201
Contract clause.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42107, Sept. 19, 1983, unless
otherwise noted.
2.000 Scope of part.
(a) This part—
(1) Defines words and terms that are
frequently used in the FAR;
(2) Provides cross-references to other
definitions in the FAR of the same
word or term; and
(3) Provides for the incorporation of
these definitions in solicitations and
contracts by reference.
Supersession and modification.
(a) If a D&F is superseded by another
D&F, that action shall not render invalid any action taken under the original D&F prior to the date of its supersession.
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2.101
(b) Other parts, subparts, and sections of this regulation (48 CFR chapter 1) may define other words or terms
and those definitions only apply to the
part, subpart, or section where the
word or term is defined (see the Index
for locations).
a reasonable cost. It includes developing the overall strategy for managing the acquisition.
Adequate evidence means information
sufficient to support the reasonable belief that a particular act or omission
has occurred.
Advisory and assistance services means
those services provided under contract
by nongovernmental sources to support
or improve: organizational policy development; decision-making; management and administration; program and/
or project management and administration; or R&D activities. It can also
mean the furnishing of professional advice or assistance rendered to improve
the effectiveness of Federal management processes or procedures (including those of an engineering and technical nature). In rendering the foregoing services, outputs may take the
form of information, advice, opinions,
alternatives, analyses, evaluations,
recommendations, training and the
day-to-day aid of support personnel
needed for the successful performance
of ongoing Federal operations. All advisory and assistance services are classified in one of the following definitional subdivisions:
(1) Management and professional support services, i.e., contractual services
that provide assistance, advice or
training for the efficient and effective
management and operation of organizations, activities (including management and support services for R&D activities), or systems. These services are
normally closely related to the basic
responsibilities and mission of the
agency originating the requirement for
the acquisition of services by contract.
Included are efforts that support or
contribute to improved organization of
program management, logistics management, project monitoring and reporting, data collection, budgeting, accounting, performance auditing, and
administrative technical support for
conferences and training programs.
(2) Studies, analyses and evaluations,
i.e., contracted services that provide
organized, analytical assessments/evaluations in support of policy development, decision-making, management,
or administration. Included are studies
in support of R&D activities. Also included are acquisitions of models,
[66 FR 2118, Jan. 10, 2001]
Subpart 2.1—Definitions
2.101
Definitions.
(a) A word or a term, defined in this
section,
has
the
same
meaning
throughout this regulation (48 CFR
chapter 1), unless—
(1) The context in which the word or
term is used clearly requires a different meaning; or
(2) Another FAR part, subpart, or
section provides a different definition
for the particular part or portion of the
part.
(b) If a word or term that is defined
in this section is defined differently in
another part, subpart, or section of
this regulation (48 CFR chapter 1, the
definition in—
(1) This section includes a cross-reference to the other definitions; and
(2) That part, subpart, or section applies to the word or term when used in
that part, subpart, or section.
Acquisition means the acquiring by
contract with appropriated funds of
supplies or services (including construction) by and for the use of the
Federal Government through purchase
or lease, whether the supplies or services are already in existence or must be
created, developed, demonstrated, and
evaluated. Acquisition begins at the
point when agency needs are established and includes the description of
requirements to satisfy agency needs,
solicitation and selection of sources,
award of contracts, contract financing,
contract performance, contract administration, and those technical and management functions directly related to
the process of fulfilling agency needs
by contract.
Acquisition planning means the process by which the efforts of all personnel
responsible for an acquisition are coordinated and integrated through a
comprehensive plan for fulfilling the
agency need in a timely manner and at
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2.101
48 CFR Ch. 1 (10–1–03 Edition)
methodologies, and related software
supporting studies, analyses or evaluations.
(3) Engineering and technical services, i.e., contractual services used to
support the program office during the
acquisition cycle by providing such
services as systems engineering and
technical direction (see 9.505–1(b)) to
ensure the effective operation and
maintenance of a weapon system or
major system as defined in OMB Circular No. A–109 or to provide direct
support of a weapon system that is essential to research, development, production, operation or maintenance of
the system.
Affiliates means associated business
concerns or individuals if, directly or
indirectly—
(1) Either one controls or can control
the other; or
(2) A third party controls or can control both.
Agency head or head of the agency
means the Secretary, Attorney General, Administrator, Governor, Chairperson, or other chief official of an executive agency, unless otherwise indicated, including any deputy or assistant chief official of an executive agency.
Alternate means a substantive variation of a basic provision or clause prescribed for use in a defined circumstance. It adds wording to, deletes
wording from, or substitutes specified
wording for a portion of the basic provision or clause. The alternate version
of a provision or clause is the basic
provision or clause as changed by the
addition, deletion, or substitution (see
52.105(a)).
Architect-engineer services, as defined
in 40 U.S.C. 541, means—
(1) Professional services of an architectural or engineering nature, as defined by State law, if applicable, that
are required to be performed or approved by a person licensed, registered,
or certified to provide those services;
(2) Professional services of an architectural or engineering nature performed by contract that are associated
with research, planning, development,
design, construction, alteration, or repair of real property; and
(3) Those other professional services
of an architectural or engineering na-
ture, or incidental services, that members of the architectural and engineering professions (and individuals in
their employ) may logically or justifiably perform, including studies, investigations, surveying and mapping,
tests, evaluations, consultations, comprehensive planning, program management, conceptual designs, plans and
specifications, value engineering, construction phase services, soils engineering, drawing reviews, preparation
of operating and maintenance manuals,
and other related services.
Assignment of claims means the transfer or making over by the contractor to
a bank, trust company, or other financing institution, as security for a loan
to the contractor, of its right to be
paid by the Government for contract
performance.
Basic research means that research directed toward increasing knowledge in
science. The primary aim of basic research is a fuller knowledge or understanding of the subject under study,
rather than any practical application
of that knowledge.
Best value means the expected outcome of an acquisition that, in the
Government’s estimation, provides the
greatest overall benefit in response to
the requirement.
Bid sample means a product sample
required to be submitted by an offeror
to show characteristics of the offered
products that cannot adequately be described by specifications, purchase descriptions, or the solicitation (e.g., balance, facility of use, or pattern).
Broad agency announcement means a
general announcement of an agency’s
research interest including criteria for
selecting proposals and soliciting the
participation of all offerors capable of
satisfying the Government’s needs (see
6.102(d)(2)).
Bundled contract means a contract
where the requirements have been consolidated by bundling. (See the definition of bundling.)
Bundling means—
(1) Consolidating two or more requirements for supplies or services,
previously provided or performed under
separate smaller contracts, into a solicitation for a single contract that is
likely to be unsuitable for award to a
small business concern due to—
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2.101
(i) The diversity, size, or specialized
nature of the elements of the performance specified;
(ii) The aggregate dollar value of the
anticipated award;
(iii) The geographical dispersion of
the contract performance sites; or
(iv) Any combination of the factors
described in paragraphs (1)(i), (ii), and
(iii) of this definition.
(2) ‘‘Separate smaller contract’’ as
used in this definition, means a contract that has been performed by one
or more small business concerns or
that was suitable for award to one or
more small business concerns.
(3) This definition does not apply to a
contract that will be awarded and performed entirely outside of the United
States.
Business unit means any segment of
an organization, or an entire business
organization that is not divided into
segments.
Central Contractor Registration (CCR)
database means the primary Government repository for contractor information required for the conduct of
business with the Government.
Change-of-name agreement means a
legal instrument executed by the contractor and the Government that recognizes the legal change of name of the
contractor without disturbing the
original contractual rights and obligations of the parties.
Change order means a written order,
signed by the contracting officer, directing the contractor to make a
change that the Changes clause authorizes the contracting officer to order
without the contractor’s consent.
Claim means a written demand or
written assertion by one of the contracting parties seeking, as a matter of
right, the payment of money in a sum
certain, the adjustment or interpretation of contract terms, or other relief
arising under or relating to the contract. However, a written demand or
written assertion by the contractor
seeking the payment of money exceeding $100,000 is not a claim under the
Contract Disputes Act of 1978 until certified as required by the Act. A voucher, invoice, or other routine request for
payment that is not in dispute when
submitted is not a claim. The submission may be converted to a claim, by
written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount
or is not acted upon in a reasonable
time.
Classified acquisition means an acquisition in which offerors must have access to classified information to properly submit an offer or quotation, to
understand the performance requirements, or to perform the contract.
Classified contract means any contract
in which the contractor or its employees must have access to classified information during contract performance. A contract may be a classified
contract even though the contract document itself is unclassified.
Classified information means any
knowledge that can be communicated
or any documentary material, regardless of its physical form or characteristics, that—
(1)(i) Is owned by, is produced by or
for, or is under the control of the
United States Government; or
(ii) Has been classified by the Department of Energy as privately generated
restricted data following the procedures in 10 CFR 1045.21; and
(2) Must be protected against unauthorized disclosure according to Executive Order 12958, Classified National Security Information, April 17, 1995, or
classified in accordance with the
Atomic Energy Act of 1954.
Cognizant Federal agency means the
Federal agency that, on behalf of all
Federal agencies, is responsible for establishing final indirect cost rates and
forward pricing rates, if applicable, and
administering cost accounting standards for all contracts in a business
unit.
Commercial component means any
component that is a commercial item.
Commercial item means—
(1) Any item, other than real property, that is of a type customarily used
by the general public or by non-governmental entities for purposes other than
governmental purposes, and—
(i) Has been sold, leased, or licensed
to the general public; or
(ii) Has been offered for sale, lease, or
license to the general public;
(2) Any item that evolved from an
item described in paragraph (1) of this
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definition through advances in technology or performance and that is not
yet available in the commercial marketplace, but will be available in the
commercial marketplace in time to
satisfy the delivery requirements under
a Government solicitation;
(3) Any item that would satisfy a criterion expressed in paragraphs (1) or (2)
of this definition, but for—
(i) Modifications of a type customarily available in the commercial marketplace; or
(ii) Minor modifications of a type not
customarily available in the commercial marketplace made to meet Federal
Government
requirements.
Minor
modifications
means
modifications
that do not significantly alter the nongovernmental function or essential
physical characteristics of an item or
component, or change the purpose of a
process. Factors to be considered in determining whether a modification is
minor include the value and size of the
modification and the comparative
value and size of the final product. Dollar values and percentages may be used
as guideposts, but are not conclusive
evidence that a modification is minor;
(4) Any combination of items meeting the requirements of paragraphs (1),
(2), (3), or (5) of this definition that are
of a type customarily combined and
sold in combination to the general public;
(5) Installation services, maintenance
services, repair services, training services, and other services if—
(i) Such services are procured for support of an item referred to in paragraph (1), (2), (3), or (4) of this definition, regardless of whether such services are provided by the same source or
at the same time as the item; and
(ii) The source of such services provides similar services contemporaneously to the general public under
terms and conditions similar to those
offered to the Federal Government;
(6) Services of a type offered and sold
competitively in substantial quantities
in the commercial marketplace based
on established catalog or market prices
for specific tasks performed under
standard commercial terms and conditions. This does not include services
that are sold based on hourly rates
without an established catalog or mar-
ket price for a specific service performed. For purposes of these services—
(i) Catalog price means a price included in a catalog, price list, schedule,
or other form that is regularly maintained by the manufacturer or vendor,
is either published or otherwise available for inspection by customers, and
states prices at which sales are currently, or were last, made to a significant number of buyers constituting the
general public; and
(ii) Market prices means current
prices that are established in the
course of ordinary trade between buyers and sellers free to bargain and that
can be substantiated through competition or from sources independent of the
offerors.
(7) Any item, combination of items,
or service referred to in paragraphs (1)
through (6) of this definition, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a
contractor; or
(8) A nondevelopmental item, if the
procuring agency determines the item
was developed exclusively at private
expense and sold in substantial quantities, on a competitive basis, to multiple State and local governments.
Component means any item supplied
to the Government as part of an end
item or of another component, except
that for use in—
(1) Part 25, see the definition in
25.003;
(2) 52.225–1 and 52.225–3, see the definition in 52.225–1(a) and 52.225–3(a); and
(3) 52.225–9 and 52.225–11, see the definition in 52.225–9(a) and 52.225–11(a).
Computer software means computer
programs, computer data bases, and related documentation.
Consent to subcontract means the contracting officer’s written consent for
the prime contractor to enter into a
particular subcontract.
Construction means construction, alteration, or repair (including dredging,
excavating, and painting) of buildings,
structures, or other real property. For
purposes of this definition, the terms
‘‘buildings, structures, or other real
property’’ include, but are not limited
to, improvements of all types, such as
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U.S.C. 6301, et seq. For discussion of
various types of contracts, see part 16.
Contract administration office means
an office that performs—
(1) Assigned postaward functions related to the administration of contracts; and
(2) Assigned preaward functions.
Contract clause or clause means a
term or condition used in contracts or
in both solicitations and contracts, and
applying after contract award or both
before and after award.
Contract modification means any written change in the terms of a contract
(see 43.103).
Contracting means purchasing, renting, leasing, or otherwise obtaining
supplies or services from nonfederal
sources. Contracting includes description (but not determination) of supplies and services required, selection
and solicitation of sources, preparation
and award of contracts, and all phases
of contract administration. It does not
include making grants or cooperative
agreements.
Contracting activity means an element
of an agency designated by the agency
head and delegated broad authority regarding acquisition functions.
Contracting office means an office
that awards or executes a contract for
supplies or services and performs
postaward functions not assigned to a
contract administration office (except
for use in part 48, see also 48.001).
Contracting officer means a person
with the authority to enter into, administer, and/or terminate contracts
and make related determinations and
findings. The term includes certain authorized representatives of the contracting officer acting within the limits of their authority as delegated by
the contracting officer. ‘‘Administrative contracting officer (ACO)’’ refers
to a contracting officer who is administering contracts. ‘‘Termination contracting officer (TCO)’’ refers to a contracting officer who is settling terminated contracts. A single contracting
officer may be responsible for duties in
any or all of these areas. Reference in
this regulation (48 CFR chapter 1) to
administrative contracting officer or
termination contracting officer does
not—
bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, cemeteries,
pumping stations, railways, airport facilities,
terminals,
docks,
piers,
wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, and
channels. Construction does not include the manufacture, production, furnishing, construction, alteration, repair, processing, or assembling of vessels, aircraft, or other kinds of personal property.
Contiguous United States (CONUS)
means the 48 contiguous States and the
District of Columbia.
Contingency operation (10 U.S.C.
101(a)(13)) means a military operation
that—
(1) Is designated by the Secretary of
Defense as an operation in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an
enemy of the United States or against
an opposing military force; or
(2) Results in the call or order to, or
retention on, active duty of members
of the uniformed services under section
688, 12301(a), 12302, 12304, 12305, or 12406
of 10 U.S.C., chapter 15 of 10 U.S.C, or
any other provision of law during a war
or during a national emergency declared by the President or Congress.
Continued portion of the contract
means the portion of a contract that
the contractor must continue to perform following a partial termination.
Contract means a mutually binding
legal relationship obligating the seller
to furnish the supplies or services (including construction) and the buyer to
pay for them. It includes all types of
commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to)
awards and notices of awards; job orders or task letters issued under basic
ordering agreements; letter contracts;
orders, such as purchase orders, under
which the contract becomes effective
by written acceptance or performance;
and bilateral contract modifications.
Contracts do not include grants and cooperative agreements covered by 31
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(2) Reflect a clear understanding of
the requirements; and
(3) Are consistent with the various
elements of the offeror’s technical proposal.
Cost sharing means an explicit arrangement under which the contractor
bears some of the burden of reasonable,
allocable, and allowable contract cost.
Customs territory of the United States
means the 50 States, the District of Columbia, and Puerto Rico.
Data Universal Numbering System
(DUNS) number means the 9-digit number assigned by Dun and Bradstreet,
Inc. (D&B), to identify unique business
entities.
Data Universal Numbering System +4
(DUNS+4) number means the DUNS
number assigned by D&B plus a 4-character suffix that may be assigned by a
business concern. (D&B has no affiliation with this 4-character suffix.) This
4-character suffix may be assigned at
the discretion of the business concern
to establish additional CCR records for
identifying
alternative
Electronic
Funds Transfer (EFT) accounts (see
subpart 32.11) for the same concern.
Day means, unless otherwise specified, a calendar day.
Debarment means action taken by a
debarring official under 9.406 to exclude
a contractor from Government contracting
and
Government-approved
subcontracting for a reasonable, specified period; a contractor that is excluded is ‘‘debarred.’’
Delivery order means an order for supplies placed against an established contract or with Government sources.
Descriptive literature means information provided by an offeror, such as
cuts, illustrations, drawings, and brochures, that shows a product’s characteristics or construction of a product
or explains its operation. The term includes only that information needed to
evaluate the acceptability of the product and excludes other information for
operating or maintaining the product.
Design-to-cost means a concept that
establishes cost elements as management goals to achieve the best balance
between life-cycle cost, acceptable performance, and schedule. Under this
concept, cost is a design constraint
during the design and development
phases and a management discipline
(1) Require that a duty be performed
at a particular office or activity; or
(2) Restrict in any way a contracting
officer in the performance of any duty
properly assigned.
Conviction means a judgment or conviction of a criminal offense by any
court of competent jurisdiction, whether entered upon a verdict or a plea, and
includes a conviction entered upon a
plea of nolo contendere. For use in subpart 23.5, see the definition at 23.503.
Cost or pricing data (10 U.S.C.
2306a(h)(1) and 41 U.S.C. 254b) means all
facts that, as of the date of price agreement or, if applicable, an earlier date
agreed upon between the parties that is
as close as practicable to the date of
agreement on price, prudent buyers
and sellers would reasonably expect to
affect price negotiations significantly.
Cost or pricing data are data requiring
certification in accordance with 15.406–
2. Cost or pricing data are factual, not
judgmental; and are verifiable. While
they do not indicate the accuracy of
the prospective contractor’s judgment
about estimated future costs or projections, they do include the data forming
the basis for that judgment. Cost or
pricing data are more than historical
accounting data; they are all the facts
that can be reasonably expected to contribute to the soundness of estimates
of future costs and to the validity of
determinations of costs already incurred. They also include such factors
as—
(1) Vendor quotations;
(2) Nonrecurring costs;
(3) Information on changes in production methods and in production or purchasing volume;
(4) Data supporting projections of
business prospects and objectives and
related operations costs;
(5) Unit-cost trends such as those associated with labor efficiency;
(6) Make-or-buy decisions;
(7) Estimated resources to attain
business goals; and
(8) Information on management decisions that could have a significant
bearing on costs.
Cost realism means that the costs in
an offeror’s proposal—
(1) Are realistic for the work to be
performed;
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throughout the acquisition and operation of the system or equipment.
Drug-free workplace means the site(s)
for the performance of work done by
the contractor in connection with a
specific contract where employees of
the contractor are prohibited from engaging in the unlawful manufacture,
distribution, dispensing, possession, or
use of a controlled substance.
Effective date of termination means the
date on which the notice of termination requires the contractor to stop
performance under the contract. If the
contractor receives the termination
notice after the date fixed for termination, then the effective date of termination means the date the contractor receives the notice.
Electronic and information technology
(EIT) has the same meaning as ‘‘information technology’’ except EIT also includes
any
equipment
or
interconnected system or subsystem of
equipment that is used in the creation,
conversion, or duplication of data or
information. The term EIT, includes,
but is not limited to, telecommunication products (such as telephones),
information kiosks and transaction
machines, worldwide websites, multimedia, and office equipment (such as
copiers and fax machines).
Electronic commerce means electronic
techniques for accomplishing business
transactions including electronic mail
or messaging, World Wide Web technology, electronic bulletin boards, purchase cards, electronic funds transfer,
and electronic data interchange.
Electronic data interchange (EDI)
means a technique for electronically
transferring and storing formatted information between computers utilizing
established and published formats and
codes, as authorized by the applicable
Federal Information Processing Standards.
Electronic Funds Transfer (EFT) means
any transfer of funds, other than a
transaction originated by cash, check,
or similar paper instrument, that is
initiated through an electronic terminal, telephone, computer, or magnetic tape, for the purpose of ordering,
instructing, or authorizing a financial
institution to debit or credit an account. The term includes Automated
Clearing House transfers, Fedwire
transfers, and transfers made at automatic teller machines and point-of-sale
terminals. For purposes of compliance
with 31 U.S.C. 3332 and implementing
regulations at 31 CFR part 208, the
term ‘‘electronic funds transfer’’ includes a Governmentwide commercial
purchase card transaction.
End product means supplies delivered
under a line item of a Government contract, except for use in part 25 and the
associated clauses at 52.225–1, 52.225–3,
and 52.225–5, see the definitions in
25.003, 52.225–1(a), 52.225–3(a), and 52.225–
5(a).
Energy-efficient product means a product that—
(1) Meets Department of Energy and
Environmental Protection Agency criteria for use of the Energy Star trademark label; or
(2) Is in the upper 25 percent of efficiency for all similar products as designated by the Department of Energy’s
Federal Energy Management Program.
Energy-efficient standby power devices
means products that use—
(1) External standby power devices,
or that contain an internal standby
power function; and
(2) No more than one watt of electricity in their standby power consuming mode or meet recommended
low standby levels as designated by the
Department of Energy Federal Energy
Management Program.
Energy-savings performance contract
means a contract that requires the
contractor to—
(1) Perform services for the design,
acquisition, financing, installation,
testing, operation, and where appropriate, maintenance and repair, of an
identified energy conservation measure
or series of measures at one or more locations;
(2) Incur the costs of implementing
the energy savings measures, including
at least the cost (if any) incurred in
making energy audits, acquiring and
installing equipment, and training personnel in exchange for a predetermined
share of the value of the energy savings
directly resulting from implementation of such measures during the term
of the contract; and
(3) Guarantee future energy and cost
savings to the Government.
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Environmentally
preferable
means
products or services that have a lesser
or reduced effect on human health and
the environment when compared with
competing products or services that
serve the same purpose. This comparison may consider raw materials acquisition,
production,
manufacturing,
packaging, distribution, reuse, operation, maintenance, or disposal of the
product or service.
Executive agency means an executive
department, a military department, or
any independent establishment within
the meaning of 5 U.S.C. 101, 102, and
104(1), respectively, and any wholly
owned Government corporation within
the meaning of 31 U.S.C. 9101.
Facilities capital cost of money means
‘‘cost of money as an element of the
cost of facilities capital’’ as used at 48
CFR 9904.414—Cost Accounting Standard—Cost of Money as an Element of
the Cost of Facilities Capital.
Facsimile means electronic equipment
that communicates and reproduces
both printed and handwritten material.
If used in conjunction with a reference
to a document; e.g., facsimile bid, the
terms refers to a document (in the example given, a bid) that has been transmitted to and received by the Government via facsimile.
Federal Acquisition Computer Network
(FACNET) Architecture is a Government
system that provides user access, employs nationally and internationally
recognized data formats, and allows
the electronic data interchange of acquisition information between the private sector and the Federal Government.
Federal agency means any executive
agency or any independent establishment in the legislative or judicial
branch of the Government (except the
Senate, the House of Representatives,
the Architect of the Capitol, and any
activities under the Architect’s direction).
Federally Funded Research and Development Centers (FFRDC’s) means activities that are sponsored under a broad
charter by a Government agency (or
agencies) for the purpose of performing, analyzing, integrating, supporting, and/or managing basic or applied research and/or development, and
that receive 70 percent or more of their
financial support from the Government; and—
(1) A long-term relationship is contemplated;
(2) Most or all of the facilities are
owned or funded by the Government;
and
(3) The FFRDC has access to Government and supplier data, employees, and
facilities beyond that common in a
normal contractual relationship.
Final indirect cost rate means the indirect cost rate established and agreed
upon by the Government and the contractor as not subject to change. It is
usually established after the close of
the contractor’s fiscal year (unless the
parties decide upon a different period)
to which it applies. For cost-reimbursement research and development contracts with educational institutions, it
may be predetermined; that is, established for a future period on the basis
of cost experience with similar contracts, together with supporting data.
First article means a preproduction
model, initial production sample, test
sample, first lot, pilot lot, or pilot
models.
First article testing means testing and
evaluating the first article for conformance with specified contract requirements before or in the initial
stage of production.
F.o.b. means free on board. This term
is used in conjunction with a physical
point to determine—
(1) The responsibility and basis for
payment of freight charges; and
(2) Unless otherwise agreed, the point
where title for goods passes to the
buyer or consignee.
F.o.b. destination means free on board
at destination; i.e., the seller or consignor delivers the goods on seller’s or
consignor’s conveyance at destination.
Unless the contract provides otherwise,
the seller or consignor is responsible
for the cost of shipping and risk of loss.
For use in the clause at 52.247–34, see
the definition at 52.247–34(a).
F.o.b. origin means free on board at
origin; i.e., the seller or consignor
places the goods on the conveyance.
Unless the contract provides otherwise,
the buyer or consignee is responsible
for the cost of shipping and risk of loss.
For use in the clause at 52.247–29, see
the definition at 52.247–29(a).
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F.o.b. * * * (For other types of F.o.b.,
see 47.303).
Forward pricing rate agreement means
a written agreement negotiated between a contractor and the Government to make certain rates available
during a specified period for use in
pricing contracts or modifications.
These rates represent reasonable projections of specific costs that are not
easily estimated for, identified with, or
generated by a specific contract, contract end item, or task. These projections may include rates for such things
as labor, indirect costs, material obsolescence and usage, spare parts provisioning, and material handling.
Forward pricing rate recommendation
means a rate set unilaterally by the
administrative contracting officer for
use by the Government in negotiations
or other contract actions when forward
pricing rate agreement negotiations
have not been completed or when the
contractor will not agree to a forward
pricing rate agreement.
Freight means supplies, goods, and
transportable property.
Full and open competition, when used
with respect to a contract action,
means that all responsible sources are
permitted to compete.
General and administrative (G&A) expense means any management, financial, and other expense which is incurred by or allocated to a business
unit and which is for the general management and administration of the
business unit as a whole. G&A expense
does not include those management expenses whose beneficial or causal relationship to cost objectives can be more
directly measured by a base other than
a cost input base representing the total
activity of a business unit during a
cost accounting period.
Governmentwide acquisition contract
(GWAC) means a task-order or delivery-order contract for information
technology established by one agency
for Governmentwide use that is operated—
(1) By an executive agent designated
by the Office of Management and Budget pursuant to section 5112(e) of the
Clinger-Cohen Act, 40 U.S.C. 1412(e); or
(2) Under a delegation of procurement authority issued by the General
Services Administration (GSA) prior to
August 7, 1996, under authority granted
GSA by the Brooks Act, 40 U.S.C. 759
(repealed by Public Law 104–106). The
Economy Act does not apply to orders
under a Governmentwide acquisition
contract.
Governmentwide point of entry (GPE)
means the single point where Government business opportunities greater
than $25,000, including synopses of proposed contract actions, solicitations,
and associated information, can be
accessed electronically by the public.
The
GPE
is
located
at
http://
www.fedbizopps.gov.
Head of the agency (see ‘‘agency
head’’).
Head of the contracting activity means
the official who has overall responsibility for managing the contracting activity.
Historically black college or university
means an institution determined by
the Secretary of Education to meet the
requirements of 34 CFR 608.2. For the
Department of Defense, the National
Aeronautics and Space Administration,
and the Coast Guard, the term also includes any nonprofit research institution that was an integral part of such
a college or university before November 14, 1986.
HUBZone means a historically underutilized business zone that is an area
located within one or more qualified
census tracts, qualified nonmetropolitan counties, or lands within the external boundaries of an Indian reservation.
HUBZone
small
business
concern
means a small business concern that
appears on the List of Qualified
HUBZone Small Business Concerns
maintained by the Small Business Administration.
Humanitarian or peacekeeping operation means a military operation in
support of the provision of humanitarian or foreign disaster assistance or
in support of a peacekeeping operation
under chapter VI or VII of the Charter
of the United Nations. The term does
not include routine training, force rotation, or stationing (10 U.S.C. 2302(8)
and 41 U.S.C. 259(d)).
In writing, writing, or written means
any worded or numbered expression
that can be read, reproduced, and later
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communicated, and includes electronically transmitted and stored information.
Indirect cost means any cost not directly identified with a single, final
cost objective, but identified with two
or more final cost objectives or an intermediate cost objective.
Indirect cost rate means the percentage or dollar factor that expresses the
ratio of indirect expense incurred in a
given period to direct labor cost, manufacturing cost, or another appropriate
base for the same period (see also
‘‘final indirect cost rate’’).
Ineligible means excluded from Government contracting (and subcontracting, if appropriate) pursuant to
statutory, Executive order, or regulatory authority other than this regulation (48 CFR chapter 1) and its implementing and supplementing regulations; for example, pursuant to the
Davis-Bacon Act and its related statutes and implementing regulations, the
Service Contract Act, the Equal Employment Opportunity Acts and Executive orders, the Walsh-Healey Public
Contracts Act, the Buy American Act,
or the Environmental Protection Acts
and Executive orders.
Information other than cost or pricing
data means any type of information
that is not required to be certified in
accordance with 15.406–2 and is necessary to determine price reasonableness or cost realism. For example, such
information may include pricing, sales,
or cost information, and includes cost
or pricing data for which certification
is determined inapplicable after submission.
Information technology means any
equipment, or interconnected system(s) or subsystem(s) of equipment,
that is used in the automatic acquisition, storage, manipulation, management, movement, control, display,
switching, interchange, transmission,
or reception of data or information by
the agency.
(1) For purposes of this definition,
equipment is used by an agency if the
equipment is used by the agency directly or is used by a contractor under
a contract with the agency that requires—
(i) Its use; or
(ii) To a significant extent, its use in
the performance of a service or the furnishing of a product.
(2) The term ‘‘information technology’’ includes computers, ancillary
equipment, software, firmware and
similar procedures, services (including
support services), and related resources.
(3) The term ‘‘information technology’’ does not include any equipment that—
(i) Is acquired by a contractor incidental to a contract; or
(ii) Contains imbedded information
technology that is used as an integral
part of the product, but the principal
function of which is not the acquisition, storage, manipulation, management, movement, control, display,
switching, interchange, transmission,
or reception of data or information.
For example, HVAC (heating, ventilation, and air conditioning) equipment,
such as thermostats or temperature
control devices, and medical equipment
where information technology is integral to its operation, are not information technology.
Inherently
governmental
function
means, as a matter of policy, a function that is so intimately related to
the public interest as to mandate performance by Government employees.
This definition is a policy determination, not a legal determination. An inherently governmental function includes activities that require either the
exercise of discretion in applying Government authority, or the making of
value judgments in making decisions
for the Government. Governmental
functions normally fall into two categories: the act of governing, i.e., the
discretionary exercise of Government
authority, and monetary transactions
and entitlements.
(1) An inherently governmental function involves, among other things, the
interpretation and execution of the
laws of the United States so as to—
(i) Bind the United States to take or
not to take some action by contract,
policy,
regulation,
authorization,
order, or otherwise;
(ii) Determine, protect, and advance
United States economic, political, territorial, property, or other interests by
military or diplomatic action, civil or
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criminal judicial proceedings, contract
management, or otherwise;
(iii) Significantly affect the life, liberty, or property of private persons;
(iv) Commission, appoint, direct, or
control officers or employees of the
United States; or
(v) Exert ultimate control over the
acquisition, use, or disposition of the
property, real or personal, tangible or
intangible, of the United States, including the collection, control, or disbursement of Federal funds.
(2) Inherently governmental functions do not normally include gathering information for or providing advice, opinions, recommendations, or
ideas to Government officials. They
also do not include functions that are
primarily ministerial and internal in
nature, such as building security, mail
operations, operation of cafeterias,
housekeeping, facilities operations and
maintenance, warehouse operations,
motor vehicle fleet management operations, or other routine electrical or
mechanical services. The list of commercial activities included in the attachment to Office of Management and
Budget (OMB) Circular No. A–76 is an
authoritative, nonexclusive list of
functions that are not inherently governmental functions.
Inspection means examining and testing supplies or services (including,
when appropriate, raw materials, components, and intermediate assemblies)
to determine whether they conform to
contract requirements.
Insurance means a contract that provides that for a stipulated consideration, one party undertakes to indemnify another against loss, damage, or
liability arising from an unknown or
contingent event.
Invoice means a contractor’s bill or
written request for payment under the
contract for supplies delivered or services performed (see also ‘‘proper invoice’’).
Irrevocable letter of credit means a
written commitment by a federally insured financial institution to pay all or
part of a stated amount of money,
until the expiration date of the letter,
upon the Government’s (the beneficiary) presentation of a written demand for payment. Neither the financial institution nor the offeror/con-
tractor can revoke or condition the letter of credit.
Labor surplus area means a geographical area identified by the Department of Labor in accordance with
20 CFR part 654, subpart A, as an area
of concentrated unemployment or
underemployment or an area of labor
surplus.
Labor surplus area concern means a
concern that together with its firsttier subcontractors will perform substantially in labor surplus areas. Performance is substantially in labor surplus areas if the costs incurred under
the contract on account of manufacturing, production, or performance of
appropriate services in labor surplus
areas exceed 50 percent of the contract
price.
Latent defect means a defect that exists at the time of acceptance but cannot be discovered by a reasonable inspection.
List of Parties Excluded from Federal
Procurement and Nonprocurement Programs means a list compiled, maintained, and distributed by the General
Services Administration containing
the names and other information about
parties debarred, suspended, or voluntarily excluded under the Nonprocurement Common Rule or the Federal Acquisition Regulation, parties who have
been proposed for debarment under the
Federal Acquisition Regulation, and
parties determined to be ineligible.
Major system means that combination
of elements that will function together
to produce the capabilities required to
fulfill a mission need. The elements
may include hardware, equipment,
software, or any combination thereof,
but exclude construction or other improvements to real property. A system
is a major system if—
(1) The Department of Defense is responsible for the system and the total
expenditures for research, development, test, and evaluation for the system are estimated to be more than
$115,000,000 (based on fiscal year 1990
constant dollars) or the eventual total
expenditure for the acquisition exceeds
$540,000,000 (based on fiscal year 1990
constant dollars);
(2) A civilian agency is responsible
for the system and total expenditures
for the system are estimated to exceed
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$750,000 (based on fiscal year 1980 constant dollars) or the dollar threshold
for a ‘‘major system’’ established by
the agency pursuant to Office of Management and Budget Circular A–109, entitled ‘‘Major System Acquisitions,’’
whichever is greater; or
(3) The system is designated a ‘‘major
system’’ by the head of the agency responsible for the system (10 U.S.C. 2302
and 41 U.S.C. 403).
Make-or-buy program means that part
of a contractor’s written plan for a
contract identifying those major items
to be produced or work efforts to be
performed in the prime contractor’s facilities and those to be subcontracted.
Market research means collecting and
analyzing information about capabilities within the market to satisfy agency needs.
Master solicitation means a document
containing special clauses and provisions that have been identified as essential for the acquisition of a specific
type of supply or service that is acquired repetitively.
May denotes the permissive. However, the words ‘‘no person may * * *’’
mean that no person is required, authorized, or permitted to do the act described.
Micro-purchase means an acquisition
of supplies or services using simplified
acquisition procedures, the aggregate
amount of which does not exceed the
micro-purchase threshold.
Micro-purchase threshold means $2,500,
except it means—
(1) $2,000 for construction subject to
the Davis Bacon Act; and
(2) $7,500 for acquisitions of supplies
or services that, as determined by the
head of the agency, are to be used to
facilitate defense against or recovery
from terrorism (defined at Public Law
107–296, Sec. 2) or nuclear, biological,
chemical, or radiological attack, as described in 13.201(g)(1)(i), except for construction subject to the Davis Bacon
Act (Public Law 107–296, Sec. 854). The
threshold is $15,000 for acquisitions by
or for the Department of Defense as described in 13.201(g)(1)(ii) (Public Law
107–107, Sec. 836(a)(1)(A)).
Minority Institution means an institution of higher education meeting the
requirements of section 1046(3) of the
Higher Education Act of 1965 (20 U.S.C.
1067k), including a Hispanic-serving institution of higher education, as defined in section 316(b)(1) of the Act (20
U.S.C. 1101a).
Multi-agency contract (MAC) means a
task-order or delivery-order contract
established by one agency for use by
Government agencies to obtain supplies and services, consistent with the
Economy Act (see 17.500(b)). Multiagency contracts include contracts for
information technology established
pursuant to section 5124(a)(2) of the
Clinger-Cohen Act, 40 U.S.C. 1424(a)(2).
Must (see ‘‘shall’’).
National defense means any activity
related to programs for military or
atomic energy production or construction, military assistance to any foreign
nation, stockpiling, or space.
Neutral person means an impartial
third party, who serves as a mediator,
fact finder, or arbitrator, or otherwise
functions to assist the parties to resolve the issues in controversy. A neutral person may be a permanent or
temporary officer or employee of the
Federal Government or any other individual who is acceptable to the parties.
A neutral person must have no official,
financial, or personal conflict of interest with respect to the issues in controversy, unless the interest is fully
disclosed in writing to all parties and
all parties agree that the neutral person may serve (5 U.S.C. 583).
Nondevelopmental item means—
(1) Any previously developed item of
supply used exclusively for governmental purposes by a Federal agency, a
State or local government, or a foreign
government with which the United
States has a mutual defense cooperation agreement;
(2) Any item described in paragraph
(1) of this definition that requires only
minor modification or modifications of
a type customarily available in the
commercial marketplace in order to
meet the requirements of the procuring
department or agency; or
(3) Any item of supply being produced
that does not meet the requirements of
paragraphs (1) or (2) solely because the
item is not yet in use.
Novation agreement means a legal instrument—
(1) Executed by the—
(i) Contractor (transferor);
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(ii) Successor in interest (transferee);
and
(iii) Government; and
(2) By which, among other things, the
transferor guarantees performance of
the contract, the transferee assumes
all obligations under the contract, and
the Government recognizes the transfer of the contract and related assets.
Offer means a response to a solicitation that, if accepted, would bind the
offeror to perform the resultant contract. Responses to invitations for bids
(sealed bidding) are offers called ‘‘bids’’
or ‘‘sealed bids’’; responses to requests
for proposals (negotiation) are offers
called ‘‘proposals’’; however, responses
to requests for quotations (simplified
acquisition) are ‘‘quotations’’, not offers. For unsolicited proposals, see subpart 15.6.
Offeror means offeror or bidder.
Option means a unilateral right in a
contract by which, for a specified time,
the Government may elect to purchase
additional supplies or services called
for by the contract, or may elect to extend the term of the contract.
Organizational conflict of interest
means that because of other activities
or relationships with other persons, a
person is unable or potentially unable
to render impartial assistance or advice to the Government, or the person’s
objectivity in performing the contract
work is or might be otherwise impaired, or a person has an unfair competitive advantage.
Outlying areas means—
(1) Commonwealths. (i) Puerto Rico.
(ii) The Northern Mariana Islands;
(2) Territories. (i) American Samoa.
(ii) Guam.
(iii) U.S. Virgin Islands; and
(3) Minor outlying islands. (i) Baker Island.
(ii) Howland Island.
(iii) Jarvis Island.
(iv) Johnston Atoll.
(v) Kingman Reef.
(vi) Midway Islands.
(vii) Navassa Island.
(viii) Palmyra Atoll.
(ix) Wake Atoll.
Overtime means time worked by a
contractor’s employee in excess of the
employee’s normal workweek.
Overtime premium means the difference between the contractor’s reg-
ular rate of pay to an employee for the
shift involved and the higher rate paid
for overtime. It does not include shift
premium, i.e., the difference between
the contractor’s regular rate of pay to
an employee and the higher rate paid
for extra-pay-shift work.
Ozone-depleting substance means any
substance the Environmental Protection Agency designates in 40 CFR part
82 as—
(1) Class I, including, but not limited
to, chlorofluorocarbons, halons, carbon
tetrachloride, and methyl chloroform;
or
(2) Class II, including, but not limited
to, hydrochlorofluorocarbons.
Partial termination means the termination of a part, but not all, of the
work that has not been completed and
accepted under a contract.
Performance-based contracting means
structuring all aspects of an acquisition around the purpose of the work to
be performed with the contract requirements set forth, in clear, specific,
and objective terms with measurable
outcomes as opposed to either the manner by which the work is to be performed or broad and imprecise statements of work.
Personal services contract means a contract that, by its express terms or as
administered, makes the contractor
personnel appear to be, in effect, Government employees (see 37.104).
Pollution prevention means any practice that—
(1)(i) Reduces the amount of any hazardous substance, pollutant, or contaminant entering any waste stream or
otherwise released into the environment (including fugitive emissions)
prior to recycling, treatment, or disposal; and
(ii) Reduces the hazards to public
health and the environment associated
with the release of such substances,
pollutants, and contaminants;
(2) Reduces or eliminates the creation of pollutants through increased
efficiency in the use of raw materials,
energy, water, or other resources; or
(3) Protects natural resources by conservation.
Power of attorney means the authority given one person or corporation to
act for and obligate another, as specified in the instrument creating the
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power; in corporate suretyship, an instrument under seal that appoints an
attorney-in-fact to act in behalf of a
surety company in signing bonds (see
also ‘‘attorney-in-fact’’ at 28.001).
Preaward survey means an evaluation
of a prospective contractor’s capability
to perform a proposed contract.
Preponderance of the evidence means
proof by information that, compared
with that opposing it, leads to the conclusion that the fact at issue is more
probably true than not.
Pricing means the process of establishing a reasonable amount or
amounts to be paid for supplies or services.
Procurement (see ‘‘acquisition’’).
Procuring activity means a component
of an executive agency having a significant acquisition function and designated as such by the head of the
agency. Unless agency regulations
specify otherwise, the term ‘‘procuring
activity’’ is synonymous with ‘‘contracting activity.’’
Projected average loss means the estimated long-term average loss per period for periods of comparable exposure
to risk of loss.
Proper invoice means an invoice that
meets the minimum standards specified in 32.905(b).
Purchase order, when issued by the
Government, means an offer by the
Government to buy supplies or services, including construction and research and development, upon specified
terms and conditions, using simplified
acquisition procedures.
Qualification requirement means a
Government requirement for testing or
other quality assurance demonstration
that must be completed before award of
a contract.
Qualified products list (QPL) means a
list of products that have been examined, tested, and have satisfied all applicable qualification requirements.
Receiving report means written evidence that indicates Government acceptance of supplies delivered or services performed (see subpart 46.6). Receiving reports must meet the requirements of 32.905(c).
Recovered material means waste materials and by-products recovered or diverted from solid waste, but the term
does not include those materials and
by-products generated from, and commonly reused within, an original manufacturing process. For use in subpart
11.3 for paper and paper products, see
the definition at 11.301.
Registered in the CCR database means
that—
(1) The contractor has entered all
mandatory information, including the
DUNS number or the DUNS+4 number,
into the CCR database; and
(2) The Government has validated
mandatory data fields and has marked
the record ‘‘Active’’.
Renewable energy means energy produced by solar, wind, geothermal, and
biomass power.
Renewable energy technology means—
(1) Technologies that use renewable
energy to provide light, heat, cooling,
or mechanical or electrical energy for
use in facilities or other activities; or
(2) The use of integrated whole-building designs that rely upon renewable
energy resources, including passive
solar design.
Residual value means the proceeds,
less removal and disposal costs, if any,
realized upon disposition of a tangible
capital asset. It usually is measured by
the net proceeds from the sale or other
disposition of the asset, or its fair
value if the asset is traded in on another asset. The estimated residual
value is a current forecast of the residual value.
Responsible audit agency means the
agency that is responsible for performing all required contract audit
services at a business unit.
Responsible
prospective
contractor
means a contractor that meets the
standards in 9.104.
Segment means one of two or more divisions, product departments, plants,
or other subdivisions of an organization reporting directly to a home office, usually identified with responsibility for profit and/or producing a
product or service. The term includes—
(1) Government-owned contractor-operated (GOCO) facilities; and
(2) Joint ventures and subsidiaries
(domestic and foreign) in which the organization has—
(i) A majority ownership; or
(ii) Less than a majority ownership,
but over which it exercises control.
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Self-insurance means the assumption
or retention of the risk of loss by the
contractor, whether voluntarily or involuntarily. Self-insurance includes
the deductible portion of purchased insurance.
Senior procurement executive means
the individual appointed pursuant to
section 16(3) of the Office of Federal
Procurement Policy Act (41 U.S.C.
414(3)) who is responsible for management direction of the acquisition system of the executive agency, including
implementation of the unique acquisition policies, regulations, and standards of the executive agency.
Service-disabled veteran-owned small
business concern—
(1) Means a small business concern—
(i) Not less than 51 percent of which
is owned by one or more service-disabled veterans or, in the case of any
publicly owned business, not less than
51 percent of the stock of which is
owned by one or more service-disabled
veterans; and
(ii) The management and daily business operations of which are controlled
by one or more service-disabled veterans or, in the case of a veteran with
permanent and severe disability, the
spouse or permanent caregiver of such
veteran.
(2) Service-disabled veteran means a
veteran, as defined in 38 U.S.C. 101(2),
with a disability that is service-connected, as defined in 38 U.S.C. 101(16).
Shall denotes the imperative.
Shipment means freight transported
or to be transported.
Shop drawings means drawings submitted by the construction contractor
or a subcontractor at any tier or required under a construction contract,
showing in detail either or both of the
following:
(1) The proposed fabrication and assembly of structural elements.
(2) The installation (i.e., form, fit,
and attachment details) of materials or
equipment.
Should means an expected course of
action or policy that is to be followed
unless inappropriate for a particular
circumstance.
Signature or signed means the discrete, verifiable symbol of an individual which, when affixed to a writing
with the knowledge and consent of the
individual, indicates a present intention to authenticate the writing. This
includes electronic symbols.
Simplified acquisition procedures means
the methods prescribed in part 13 for
making purchases of supplies or services.
Simplified acquisition threshold means
$100,000, except that—
(1) In the case of any contract to be
awarded and performed, or purchase to
be made outside the United States in
support of a contingency operation or a
humanitarian or peacekeeping operation, the term means $200,000; or
(2) For acquisitions of supplies or
services that, as determined by the
head of the agency are to be used to facilitate defense against or recovery
from terrorism (defined at Public Law
107–296, Sec. 2) or nuclear, biological,
chemical, or radiological attack—
(i) For any agency, in support of a
humanitarian or peacekeeping or a
contingency operation if initiated by a
solicitation issued from January 24,
2003, to November 24, 2003 (Public Law
107–296, Sec. 853(a)), the term means—
(A) $200,000 for any contract to be
awarded and performed, or purchase to
be made, inside the United States; and
(B) $300,000 for any contract to be
awarded and performed, or purchase to
be made, outside the United States.
(ii) By or for the Department of Defense in support of a contingency operation if award is made and funds are
obligated on or before September 30,
2003
(Public
Law
107–107,
Sec.
836(a)(1)(B)), the term means—
(A) $250,000 for any contract to be
awarded and performed, or purchase to
be made, inside the United States; and
(B) $500,000 for any contract to be
awarded and performed, or purchase to
be made, outside the United States.
Single, Governmentwide point of entry,
means the one point of entry to be designated by the Administrator of OFPP
that will allow the private sector to
electronically access procurement opportunities Governmentwide.
Small business subcontractor means a
concern, including affiliates, that for
subcontracts valued at—
(1) $10,000 or less, does not have more
than 500 employees; and
(2) More than $10,000, does not have
employees or average annual receipts
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bids.’’ Solicitations under negotiated
procedures are called ‘‘requests for proposals.’’ Solicitations under simplified
acquisition procedures may require
submission of either a quotation or an
offer.
Solicitation provision or provision
means a term or condition used only in
solicitations and applying only before
contract award.
Source selection information means any
of the following information that is
prepared for use by an agency for the
purpose of evaluating a bid or proposal
to enter into an agency procurement
contract, if that information has not
been previously made available to the
public or disclosed publicly:
(1) Bid prices submitted in response
to an agency invitation for bids, or
lists of those bid prices before bid opening.
(2) Proposed costs or prices submitted in response to an agency solicitation, or lists of those proposed costs
or prices.
(3) Source selection plans.
(4) Technical evaluation plans.
(5) Technical evaluations of proposals.
(6) Cost or price evaluations of proposals.
(7) Competitive range determinations
that identify proposals that have a reasonable chance of being selected for
award of a contract.
(8) Rankings of bids, proposals, or
competitors.
(9) Reports and evaluations of source
selection panels, boards, or advisory
councils.
(10) Other information marked as
‘‘Source Selection Information—See
FAR 2.101 and 3.104’’ based on a caseby-case determination by the head of
the agency or the contracting officer,
that its disclosure would jeopardize the
integrity or successful completion of
the Federal agency procurement to
which the information relates.
Special competency means a special or
unique capability, including qualitative aspects, developed incidental to
the primary functions of the Federally
Funded Research and Development
Centers to meet some special need.
exceeding the size standard in 13 CFR
part 121 (see 19.102) for the product or
service it is providing on the subcontract.
Small disadvantaged business concern
(except for 52.212–3(c)(2) and 52.219–
1(b)(2) for general statistical purposes
and 52.212–3(c)(7)(ii), 52.219–22(b)(2), and
52.219–23(a) for joint ventures under the
price evaluation adjustment for small
disadvantaged
business
concerns),
means an offeror that represents, as
part of its offer, that it is a small business under the size standard applicable
to the acquisition; and either—
(1) It has received certification as a
small disadvantaged business concern
consistent with 13 CFR part 124, subpart B; and
(i) No material change in disadvantaged ownership and control has occurred since its certification;
(ii) Where the concern is owned by
one or more disadvantaged individuals,
the net worth of each individual upon
whom the certification is based does
not exceed $750,000 after taking into account the applicable exclusions set
forth at 13 CFR 124.104(c)(2); and
(iii) It is identified, on the date of its
representation, as a certified small disadvantaged business concern in the
data base maintained by the Small
Business Administration (PRO–Net); or
(2) For a prime contractor, it has
submitted a completed application to
the Small Business Administration or
a private certifier to be certified as a
small disadvantaged business concern
in accordance with 13 CFR part 124,
subpart B, and a decision on that application is pending, and that no material
change in disadvantaged ownership and
control has occurred since it submitted
its application. In this case, a contractor must receive certification as a
small disadvantaged business by the
Small Business Administration prior to
contract award.
Sole source acquisition means a contract for the purchase of supplies or
services that is entered into or proposed to be entered into by an agency
after soliciting and negotiating with
only one source.
Solicitation means any request to submit offers or quotations to the Government. Solicitations under sealed bid
procedures are called ‘‘invitations for
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State and local taxes means taxes levied by the States, the District of Columbia, outlying areas of the United
States, or their political subdivisions.
Substantial evidence means information sufficient to support the reasonable belief that a particular act or
omission has occurred.
Substantially as follows or substantially
the same as, when used in the prescription and introductory text of a provision or clause, means that authorization is granted to prepare and utilize a
variation of that provision or clause to
accommodate requirements that are
peculiar to an individual acquisition;
provided that the variation includes
the salient features of the FAR provision or clause, and is not inconsistent
with the intent, principle, and substance of the FAR provision or clause
or related coverage of the subject matter.
Supplemental agreement means a contract modification that is accomplished by the mutual action of the
parties.
Supplies means all property except
land or interest in land. It includes
(but is not limited to) public works,
buildings, and facilities; ships, floating
equipment, and vessels of every character, type, and description, together
with parts and accessories; aircraft and
aircraft parts, accessories, and equipment; machine tools; and the alteration or installation of any of the foregoing.
Surety means an individual or corporation legally liable for the debt, default, or failure of a principal to satisfy
a contractual obligation. The types of
sureties referred to are as follows:
(1) An individual surety is one person, as distinguished from a business
entity, who is liable for the entire
penal amount of the bond.
(2) A corporate surety is licensed
under various insurance laws and,
under its charter, has legal power to
act as surety for others.
(3) A cosurety is one of two or more
sureties that are jointly liable for the
penal sum of the bond. A limit of liability for each surety may be stated.
Suspension means action taken by a
suspending official under 9.407 to disqualify a contractor temporarily from
Government contracting and Govern-
ment-approved subcontracting; a contractor that is disqualified is ‘‘suspended.’’
Task order means an order for services placed against an established contract or with Government sources.
Taxpayer Identification Number (TIN)
means the number required by the IRS
to be used by the offeror in reporting
income tax and other returns. The TIN
may be either a Social Security Number or an Employer Identification
Number.
Termination for convenience means the
exercise of the Government’s right to
completely or partially terminate performance of work under a contract
when it is in the Government’s interest.
Termination for default means the exercise of the Government’s right to
completely or partially terminate a
contract because of the contractor’s
actual or anticipated failure to perform its contractual obligations.
Terminated portion of the contract
means the portion of a contract that
the contractor is not to perform following a partial termination. For construction contracts that have been
completely terminated for convenience, it means the entire contract,
notwithstanding the completion of, and
payment for, individual items of work
before termination.
Unallowable cost means any cost that,
under the provisions of any pertinent
law, regulation, or contract, cannot be
included in prices, cost-reimbursements, or settlements under a Government contract to which it is allocable.
Unique and innovative concept, when
used relative to an unsolicited research
proposal, means that—
(1) In the opinion and to the knowledge of the Government evaluator, the
meritorious proposal—
(i) Is the product of original thinking
submitted confidentially by one source;
(ii) Contains new, novel, or changed
concepts, approaches, or methods;
(iii) Was not submitted previously by
another; and
(iv) Is not otherwise available within
the Federal Government.
(2) In this context, the term does not
mean that the source has the sole capability of performing the research.
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United States, when used in a geographic sense, means the 50 States and
the District of Columbia, except as follows:
(1) For use in subpart 22.8, see the
definition at 22.801.
(2) For use in subpart 22.10, see the
definition at 22.1001.
(3) For use in subpart 22.13, see the
definition at 22.1301.
(4) For use in part 25, see the definition at 25.003.
(5) For use in subpart 47.4, see the
definition at 47.401.
Unsolicited proposal means a written
proposal for a new or innovative idea
that is submitted to an agency on the
initiative of the offeror for the purpose
of obtaining a contract with the Government, and that is not in response to
a request for proposals, Broad Agency
Announcement, Small Business Innovation Research topic, Small Business
Technology Transfer Research topic,
Program Research and Development
Announcement, or any other Government-initiated solicitation or program.
Value engineering means an analysis
of the functions of a program, project,
system, product, item of equipment,
building, facility, service, or supply of
an executive agency, performed by
qualified agency or contractor personnel, directed at improving performance, reliability, quality, safety, and
life-cycle costs (section 36 of the Office
of Federal Procurement Policy Act, 41
U.S.C. 401, et seq.). For use in the clause
at 52.248–2, see the definition at 52.248–
2(b).
Value engineering change proposal
(VECP)–(1) means a proposal that—
(i) Requires a change to the instant
contract to implement; and
(ii) Results in reducing the overall
projected cost to the agency without
impairing essential functions or characteristics, provided that it does not
involve a change—
(A) In deliverable end item quantities
only;
(B) In research and development
(R&D) items or R&D test quantities
that are due solely to results of previous testing under the instant contract; or
(C) To the contract type only.
(2) For use in the clauses at—
(i) 52.248–2, see the definition at
52.248–2(b); and
(ii) 52.248–3, see the definition at
52.248–3(b).
Veteran-owned small business concern
means a small business concern—
(1) Not less than 51 percent of which
is owned by one or more veterans (as
defined at 38 U.S.C. 101(2)) or, in the
case of any publicly owned business,
not less than 51 percent of the stock of
which is owned by one or more veterans; and
(2) The management and daily business operations of which are controlled
by one or more veterans.
Virgin material means—
(1) Previously unused raw material,
including previously unused copper,
aluminum, lead, zinc, iron, other metal
or metal ore; or
(2) Any undeveloped resource that is,
or with new technology will become, a
source of raw materials.
Warranty means a promise or affirmation given by a contractor to the
Government regarding the nature, usefulness, or condition of the supplies or
performance of services furnished
under the contract.
Waste reduction means preventing or
decreasing the amount of waste being
generated through waste prevention,
recycling, or purchasing recycled and
environmentally preferable products.
Women-owned small business concern
means a small business concern—
(1) That is at least 51 percent owned
by one or more women; or, in the case
of any publicly owned business, at least
51 percent of the stock of which is
owned by one or more women; and
(2) Whose management and daily
business operations are controlled by
one or more women.
Writing or written (see ‘‘in writing’’).
[66 FR 2118, Jan. 10, 2001, as amended at 66
FR 20896, Apr. 25, 2001; 66 FR 22083, May 2,
2001; 66 FR 27012, May 15, 2001; 66 FR 27409,
May 16, 2001; 66 FR 53484, 53486, 53488, Oct. 22,
2001; 66 FR 65350, 65352, 65354, Dec. 18, 2001; 67
FR 6114, Feb. 8, 2002; 67 FR 13055, Mar. 20,
2002; 67 FR 42313, June 27, 2002; 67 FR 56121,
Aug. 30, 2002; 67 FR 56118, Aug. 30, 2002; 68 FR
4049, Jan. 27, 2003; 68 FR 28080, May 22, 2003;
68 FR 28091, May 22, 2003; 68 FR 43858, July 24,
2003; 68 FR 56672, 56678, Oct. 1, 2003]
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Federal Acquisition Regulation
Pt. 3
Subpart 3.3—Reports of Suspected Antitrust
Violations
Subpart 2.2—Definitions Clause
2.201
Contract clause.
3.301 General.
3.302 Definitions.
3.303 Reporting suspected antitrust violations.
Insert the clause at 52.202–1, Definitions, in solicitations and contracts
that exceed the simplified acquisition
threshold. If the contract is for personal services, construction, architectengineer services, or dismantling, demolition, or removal of improvements,
use the clause with its Alternate I. The
contracting officer may include additional definitions, provided they are
consistent with the clause and the
FAR.
Subpart 3.4—Contingent Fees
3.400 Scope of subpart.
3.401 Definitions.
3.402 Statutory requirements.
3.403 Applicability.
3.404 Contract clause.
3.405 Misrepresentations or violations of the
Covenant Against Contingent Fees.
3.406 Records.
[66 FR 2127, Jan. 10, 2001]
Subpart 3.5—Other Improper Business
Practices
PART
3—IMPROPER
BUSINESS
PRACTICES
AND
PERSONAL
CONFLICTS OF INTEREST
Sec.
3.000
3.501 Buying-in.
3.501–1 Definition.
3.501–2 General.
3.502 Subcontractor kickbacks.
3.502–1 Definitions.
3.502–2 Subcontractor kickbacks.
3.502–3 Contract clause.
3.503 Unreasonable restrictions on subcontractor sales.
3.503–1 Policy.
3.503–2 Contract clause.
Scope of part.
Subpart 3.1—Safeguards
3.101 Standards of conduct.
3.101–1 General.
3.101–2 Solicitation and acceptance of gratuities by Government personnel.
3.101–3 Agency regulations.
3.102 [Reserved]
3.103 Independent pricing.
3.103–1 Solicitation provision.
3.103–2 Evaluating the certification.
3.103–3 The need for further certifications.
3.104 Procurement integrity.
3.104–1 Definitions.
3.104–2 General.
3.104–3 Statutory and related prohibitions,
restrictions, and requirements.
3.104–4 Disclosure, protection, and marking
of contractor bid or proposal information
and source selection information.
3.104–5 Disqualification.
3.104–6 Ethics advisory opinions regarding
prohibitions on a former official’s acceptance of compensation from a contractor.
3.104–7 Violations or possible violations.
3.104–8 Criminal and civil penalties, and further administrative remedies.
3.104–9 Contract clauses.
Subpart 3.6—Contracts With Government
Employees or Organizations Owned or
Controlled by Them
3.601 Policy.
3.602 Exceptions.
3.603 Responsibilities of the contracting officer.
Subpart 3.7—Voiding and Rescinding
Contracts
3.700
3.701
3.702
3.703
3.704
3.705
Scope of subpart.
Purpose.
Definition.
Authority.
Policy.
Procedures.
Subpart 3.8—Limitation on the Payment of
Funds to Influence Federal Transactions
3.800 Scope of subpart.
3.801 Definitions.
3.802 Prohibitions.
3.803 Certification and disclosure.
3.804 Policy.
3.805 Exemption.
3.806 Processing suspected violations.
3.807 Civil penalties.
3.808 Solicitation provision and contract
clause.
Subpart 3.2—Contractor Gratuities to
Government Personnel
3.201 Applicability.
3.202 Contract clause.
3.203 Reporting suspected violations of the
Gratuities clause.
3.204 Treatment of violations.
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3.000
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 3.9—Whistleblower Protections for
Contractor Employees
terests that may be substantially affected by the performance or nonperformance of the employee’s official
duties. Certain limited exceptions are
authorized in agency regulations.
3.900 Scope of subpart.
3.901 Definitions.
3.902 Applicability.
3.903 Policy.
3.904 Procedures for filing complaints.
3.905 Procedures for investigating complaints.
3.906 Remedies.
3.101–3
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42108, Sept. 19, 1983, unless
otherwise noted.
3.000 Scope of part.
This part prescribes policies and procedures for avoiding improper business
practices and personal conflicts of interest and for dealing with their apparent or actual occurrence.
Subpart 3.1—Safeguards
3.101
Agency regulations.
(a) Agencies are required by Executive Order 11222 of May 8, 1965, and 5
CFR part 735 to prescribe Standards of
Conduct. These agency standards contain—
(1) Agency-authorized exceptions to
3.101–2; and
(2) Disciplinary measures for persons
violating the standards of conduct.
(b) Requirements for employee financial disclosure and restrictions on private employment for former Government employees are in Office of Personnel Management and agency regulations implementing Public Law 95–521,
which amended 18 U.S.C. 207.
Standards of conduct.
3.102
[Reserved]
3.101–1 General.
Government business shall be conducted in a manner above reproach
and, except as authorized by statute or
regulation, with complete impartiality
and with preferential treatment for
none. Transactions relating to the expenditure of public funds require the
highest degree of public trust and an
impeccable standard of conduct. The
general rule is to avoid strictly any
conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. While
many Federal laws and regulations
place restrictions on the actions of
Government personnel, their official
conduct must, in addition, be such that
they would have no reluctance to make
a full public disclosure of their actions.
3.103
Independent pricing.
3.101–2 Solicitation and acceptance of
gratuities by Government personnel.
As a rule, no Government employee
may solicit or accept, directly or indirectly, any gratuity, gift, favor, entertainment, loan, or anything of monetary value from anyone who (a) has or
is seeking to btain Government business with the employee’s agency, (b)
conducts activities that are regulated
by the employee’s agency, or (c) has in-
[48 FR 42108, Sept. 19, 1983, as amended at 50
FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 55 FR 25526, June 21, 1990; 60 FR 34744,
July 3, 1995]
3.103–1
Solicitation provision.
The contracting officer shall insert
the provision at 52.203–2, Certificate of
Independent Price Determination, in
solicitations when a firm-fixed-price
contract or fixed-price contract with
economic price adjustment is contemplated, unless—
(a) The acquisition is to be made
under the simplified acquisition procedures in part 13;
(b) [Reserved]
(c) The solicitation is a request for
technical proposals under two-step
sealed bidding procedures; or
(d) The solicitation is for utility
services for which rates are set by law
or regulation.
3.103–2
Evaluating the certification.
(a) Evaluation guidelines. (1) None of
the following, in and of itself, constitutes disclosure as it is used in subparagraph (a)(2) of the Certificate of
Independent
Price
Determination
(hereafter, the certificate):
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(i) The fact that a firm has published
price lists, rates, or tariffs covering
items being acquired by the Government.
(ii) The fact that a firm has informed
prospective customers of proposed or
pending publication of new or revised
price lists for items being acquired by
the Government.
(iii) The fact that a firm has sold the
same items to commercial customers
at the same prices being offered to the
Government.
(2) For the purpose of subparagraph
(b)(2) of the certificate, an individual
may use a blanket authorization to act
as an agent for the person(s) responsible for determining the offered prices
if—
(i) The proposed contract to which
the certificate applies is clearly within
the scope of the authorization; and
(ii) The person giving the authorization is the person within the offeror’s
organization who is responsible for determining the prices being offered at
the time the certification is made in
the particular offer.
(3) If an offer is submitted jointly by
two or more concerns, the certification
provided by the representative of each
concern applies only to the activities
of that concern.
(b) Rejection of offers suspected of being
collusive. (1) If the offeror deleted or
modified subparagraph (a)(1) or (a)(3)
or paragraph (b) of the certificate, the
contracting officer shall reject the
offeror’s bid or proposal.
(2) If the offeror deleted or modified
subparagraph (a)(2) of the certificate,
the offeror must have furnished with
its offer a signed statement of the circumstances of the disclosure of prices
contained in the bid or proposal. The
chief of the contracting office shall review the altered certificate and the
statement and shall determine, in writing, whether the disclosure was made
for the purpose or had the effect of restricting competition. If the determination is positive, the bid or proposal shall be rejected; if it is negative,
the bid or proposal shall be considered
for award.
(3) Whenever an offer is rejected
under subparagraph (1) or (2) above, or
the certificate is suspected of being
false, the contracting officer shall re-
port the situation to the Attorney General in accordance with 3.303.
(4) The determination made under
subparagraph (2) above shall not prevent or inhibit the prosecution of any
criminal or civil actions involving the
occurrences or transactions to which
the certificate relates.
[48 FR 42108, Sept. 19, 1983, as amended at 55
FR 25526, June 21, 1990]
3.103–3 The need for further certifications.
A contractor that properly executed
the certificate before award does not
have to submit a separate certificate
with each proposal to perform a work
order or similar ordering instrument
issued pursuant to the terms of the
contract, where the Government’s requirements cannot be met from another source.
3.104
Procurement integrity.
3.104–1 Definitions.
As used in this section—
Agency ethics official means the designated agency ethics official described
in 5 CFR 2638.201 or other designated
person, including—
(1) Deputy ethics officials described
in 5 CFR 2638.204, to whom authority
under 3.104–6 has been delegated by the
designated agency ethics official; and
(2) Alternate designated agency ethics officials described in 5 CFR
2638.202(b).
Compensation means wages, salaries,
honoraria, commissions, professional
fees, and any other form of compensation, provided directly or indirectly for
services rendered. Compensation is indirectly provided if it is paid to an entity other than the individual, specifically in exchange for services provided
by the individual.
Contractor bid or proposal information
means any of the following information
submitted to a Federal agency as part
of or in connection with a bid or proposal to enter into a Federal agency
procurement contract, if that information has not been previously made
available to the public or disclosed
publicly:
(1) Cost or pricing data (as defined by
10 U.S.C. 2306a(h)) with respect to procurements subject to that section, and
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3.104–1
48 CFR Ch. 1 (10–1–03 Edition)
section 304A(h) of the Federal Property
and Administrative Services Act of 1949
(41 U.S.C. 254b(h)), with respect to procurements subject to that section.
(2) Indirect costs and direct labor
rates.
(3) Proprietary information about
manufacturing processes, operations,
or techniques marked by the contractor in accordance with applicable
law or regulation.
(4) Information marked by the contractor as ‘‘contractor bid or proposal
information’’ in accordance with applicable law or regulation.
(5) Information marked in accordance with 52.215–1(e).
Decision to award a subcontract or
modification of subcontract means a decision to designate award to a particular source.
Federal agency procurement means the
acquisition (by using competitive procedures and awarding a contract) of
goods or services (including construction) from non-Federal sources by a
Federal agency using appropriated
funds. For broad agency announcements and small business innovative
research programs, each proposal received by an agency constitutes a separate procurement for purposes of the
Act.
In excess of $10,000,000 means—
(1) The value, or estimated value, at
the time of award, of the contract, including all options;
(2) The total estimated value at the
time of award of all orders under an indefinite-delivery, indefinite-quantity,
or requirements contract;
(3) Any multiple award schedule contract, unless the contracting officer
documents a lower estimate;
(4) The value of a delivery order, task
order, or an order under a Basic Ordering Agreement;
(5) The amount paid or to be paid in
settlement of a claim; or
(6) The estimated monetary value of
negotiated overhead or other rates
when applied to the Government portion of the applicable allocation base.
Official means—
(1) An officer, as defined in 5 U.S.C.
2104;
(2) An employee, as defined in 5
U.S.C. 2105;
(3) A member of the uniformed services, as defined in 5 U.S.C. 2101(3); or
(4) A special Government employee,
as defined in 18 U.S.C. 202.
Participating personally and substantially in a Federal agency procurement
means—
(1) Active and significant involvement of an official in any of the following activities directly related to
that procurement:
(i) Drafting, reviewing, or approving
the specification or statement of work
for the procurement.
(ii) Preparing or developing the solicitation.
(iii) Evaluating bids or proposals, or
selecting a source.
(iv) Negotiating price or terms and
conditions of the contract.
(v) Reviewing and approving the
award of the contract.
(2) Participating personally means participating directly, and includes the direct and active supervision of a subordinate’s participation in the matter.
(3) Participating substantially means
that the official’s involvement is of
significance to the matter. Substantial
participation requires more than official responsibility, knowledge, perfunctory involvement, or involvement on
an administrative or peripheral issue.
Participation may be substantial even
though it is not determinative of the
outcome of a particular matter. A finding of substantiality should be based
not only on the effort devoted to a
matter, but on the importance of the
effort. While a series of peripheral involvements may be insubstantial, the
single act of approving or participating
in a critical step may be substantial.
However, the review of procurement
documents solely to determine compliance with regulatory, administrative,
or budgetary procedures, does not constitute substantial participation in a
procurement.
(4) Generally, an official will not be
considered to have participated personally and substantially in a procurement solely by participating in the following activities:
(i) Agency-level boards, panels, or
other advisory committees that review
program milestones or evaluate and
make recommendations regarding alternative technologies or approaches
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3.104–3
18 U.S.C. 208 and 5 CFR part 2635 from
participating personally and substantially in any particular matter that
would affect the financial interests of
any person with whom the employee is
seeking employment. An employee who
engages in negotiations or is otherwise
seeking employment with an offeror or
who has an arrangement concerning future employment with an offeror must
comply with the applicable disqualification requirements of 5 CFR 2635.604
and 2635.606. The statutory prohibition
in 18 U.S.C. 208 also may require an employee’s disqualification from participation in the acquisition even if the
employee’s duties may not be considered ‘‘participating personally and substantially,’’ as this term is defined in
3.104–1;
(3) Post-employment restrictions are
covered by 18 U.S.C. 207 and 5 CFR
parts 2637 and 2641, that prohibit certain activities by former Government
employees, including representation of
a contractor before the Government in
relation to any contract or other particular matter involving specific parties on which the former employee participated personally and substantially
while employed by the Government.
Additional restrictions apply to certain
senior Government employees and for
particular matters under an employee’s
official responsibility;
(4) Parts 14 and 15 place restrictions
on the release of information related to
procurements and other contractor information that must be protected
under 18 U.S.C. 1905;
(5) Release of information both before
and after award (see 3.104–4) may be
prohibited by the Privacy Act (5 U.S.C.
552a), the Trade Secrets Act (18 U.S.C.
1905), and other laws; and
(6) Using nonpublic information to
further an employee’s private interest
or that of another and engaging in a financial transaction using nonpublic information are prohibited by 5 CFR
2635.703.
for satisfying broad agency-level missions or objectives.
(ii) The performance of general, technical, engineering, or scientific effort
having broad application not directly
associated with a particular procurement, notwithstanding that such general, technical, engineering, or scientific effort subsequently may be incorporated into a particular procurement.
(iii) Clerical functions supporting the
conduct of a particular procurement.
(iv) For procurements to be conducted under the procedures of OMB
Circular A–76, participation in management studies, preparation of in-house
cost estimates, preparation of ‘‘most
efficient organization’’ analyses, and
furnishing of data or technical support
to be used by others in the development of performance standards, statements of work, or specifications.
Source selection evaluation board
means any board, team, council, or
other group that evaluates bids or proposals.
[67 FR 13059, Mar. 20, 2002]
3.104–2 General.
(a) This section implements section
27 of the Office of Federal Procurement
Policy Act (the Procurement Integrity
Act) (41 U.S.C. 423) referred to as ‘‘the
Act’’). Agency supplementation of
3.104, including specific definitions to
identify individuals who occupy positions specified in 3.104–3(d)(1)(ii), and
any clauses required by 3.104 must be
approved by the senior procurement executive of the agency, unless a law establishes a higher level of approval for
that agency.
(b) Agency officials are reminded
that there are other statutes and regulations that deal with the same or related prohibited conduct, for example—
(1) The offer or acceptance of a bribe
or gratuity is prohibited by 18 U.S.C.
201 and 10 U.S.C. 2207. The acceptance
of a gift, under certain circumstances,
is prohibited by 5 U.S.C. 7353 and 5 CFR
part 2635;
(2) Contacts with an offeror during
the conduct of an acquisition may constitute
‘‘seeking
employment,’’(see
subpart F of 5 CFR part 2636 and 3.104–
3(c)(2)). Government officers and employees (employees) are prohibited by
[67 FR 13059, Mar. 20, 2002]
3.104–3 Statutory and related prohibitions, restrictions, and requirements.
(a) Prohibition on disclosing procurement information (subsection 27(a) of the
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48 CFR Ch. 1 (10–1–03 Edition)
Act). (1) A person described in paragraph (a)(2) of this subsection must
not, other than as provided by law,
knowingly disclose contractor bid or
proposal information or source selection information before the award of a
Federal agency procurement contract
to which the information relates. (See
3.104–4(a).)
(2) Paragraph (a)(1) of this subsection
applies to any person who—
(i) Is a present or former official of
the United States, or a person who is
acting or has acted for or on behalf of,
or who is advising or has advised the
United States with respect to, a Federal agency procurement; and
(ii) By virtue of that office, employment, or relationship, has or had access to contractor bid or proposal information or source selection information.
(b) Prohibition on obtaining procurement information (subsection 27(b) of the
Act). A person must not, other than as
provided by law, knowingly obtain contractor bid or proposal information or
source selection information before the
award of a Federal agency procurement
contract to which the information relates.
(c) Actions required when an agency official contacts or is contacted by an offeror regarding non-Federal employment
(subsection 27(c) of the Act). (1) If an
agency official, participating personally and substantially in a Federal
agency procurement for a contract in
excess of the simplified acquisition
threshold, contacts or is contacted by a
person who is an offeror in that Federal agency procurement regarding
possible non-Federal employment for
that official, the official must—
(i) Promptly report the contact in
writing to the official’s supervisor and
to the agency ethics official; and
(ii) Either reject the possibility of
non-Federal employment or disqualify
himself or herself from further personal and substantial participation in
that Federal agency procurement (see
3.104–5) until such time as the agency
authorizes the official to resume participation in that procurement, in accordance with the requirements of 18
U.S.C. 208 and applicable agency regulations, because—
(A) The person is no longer an offeror
in that Federal agency procurement; or
(B) All discussions with the offeror
regarding possible non-Federal employment have terminated without an
agreement or arrangement for employment.
(2) A contact is any of the actions included as ‘‘seeking employment’’ in 5
CFR 2635.603(b). In addition, unsolicited
communications from offerors regarding possible employment are considered contacts.
(3) Agencies must retain reports of
employment contacts for 2 years from
the date the report was submitted.
(4) Conduct that complies with subsection 27(c) of the Act may be prohibited by other criminal statutes and the
Standards of Ethical Conduct for Employees of the Executive Branch. See
3.104–2(b)(2).
(d) Prohibition on former official’s acceptance of compensation from a contractor (subsection 27(d) of the Act). (1) A
former official of a Federal agency may
not accept compensation from a contractor that has been awarded a competitive or sole source contract, as an
employee, officer, director, or consultant of the contractor within a period of
1 year after such former official—
(i) Served, at the time of selection of
the contractor or the award of a contract to that contractor, as the procuring contracting officer, the source
selection authority, a member of a
source selection evaluation board, or
the chief of a financial or technical
evaluation team in a procurement in
which that contractor was selected for
award of a contract in excess of
$10,000,000;
(ii) Served as the program manager,
deputy program manager, or administrative contracting officer for a contract in excess of $10,000,000 awarded to
that contractor; or
(iii) Personally made for the Federal
agency a decision to—
(A) Award a contract, subcontract,
modification of a contract or subcontract, or a task order or delivery
order in excess of $10,000,000 to that
contractor;
(B) Establish overhead or other rates
applicable to a contract or contracts
for that contractor that are valued in
excess of $10,000,000;
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(C) Approve issuance of a contract
payment or payments in excess of
$10,000,000 to that contractor; or
(D) Pay or settle a claim in excess of
$10,000,000 with that contractor.
(2) The 1-year prohibition begins on
the date—
(i) Of contract award for positions described in paragraph (d)(1)(i) of this
subsection, or the date of contractor
selection if the official was not serving
in the position on the date of award;
(ii) The official last served in one of
the positions described in paragraph
(d)(1)(ii) of this subsection; or
(iii) The official made one of the decisions described in paragraph (d)(1)(iii)
of this subsection.
(3) Nothing in paragraph (d)(1) of this
subsection may be construed to prohibit a former official of a Federal
agency from accepting compensation
from any division or affiliate of a contractor that does not produce the same
or similar products or services as the
entity of the contractor that is responsible for the contract referred to in
paragraph (d)(1) of this subsection.
cover page and each page that the individual believes contains source selection information with the legend
‘‘Source Selection Information—See
FAR 2.101 and 3.104.’’ Although the information in paragraphs (1) through (9)
of the definition in 2.101 is considered
to be source selection information
whether or not marked, all reasonable
efforts must be made to mark such material with the same legend.
(d) Except as provided in paragraph
(d)(3) of this subsection, the contracting officer must notify the contractor in writing if the contracting officer believes that proprietary information, contractor bid or proposal information, or information marked in accordance with 52.215–1(e) has been inappropriately marked. The contractor
that has affixed the marking must be
given an opportunity to justify the
marking.
(1) If the contractor agrees that the
marking is not justified, or does not respond within the time specified in the
notice, the contracting officer may remove the marking and release the information.
(2) If, after reviewing the contractor’s justification, the contracting officer determines that the marking is not
justified, the contracting officer must
notify the contractor in writing before
releasing the information.
(3) For technical data marked as proprietary by a contractor, the contracting officer must follow the procedures in 27.404(h).
(e) This section does not restrict or
prohibit—
(1) A contractor from disclosing its
own bid or proposal information or the
recipient from receiving that information;
(2) The disclosure or receipt of information, not otherwise protected, relating to a Federal agency procurement
after it has been canceled by the Federal agency, before contract award, unless the Federal agency plans to resume the procurement;
(3) Individual meetings between a
Federal agency official and an offeror
or potential offeror for, or a recipient
of, a contract or subcontract under a
Federal agency procurement, provided
that unauthorized disclosure or receipt
[67 FR 13059, Mar. 20, 2002]
3.104–4 Disclosure, protection, and
marking of contractor bid or proposal information and source selection information.
(a) Except as specifically provided for
in this subsection, no person or other
entity may disclose contractor bid or
proposal information or source selection information to any person other
than a person authorized, in accordance with applicable agency regulations or procedures, by the agency head
or the contracting officer to receive
such information.
(b) Contractor bid or proposal information and source selection information must be protected from unauthorized disclosure in accordance with
14.401, 15.207, applicable law, and agency regulations.
(c) Individuals unsure if particular
information is source selection information, as defined in 2.101, should consult with agency officials as necessary.
Individuals responsible for preparing
material that may be source selection
information as described at paragraph
(10) of the ‘‘source selection information’’ definition in 2.101 must mark the
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48 CFR Ch. 1 (10–1–03 Edition)
promptly submit written notice of disqualification from further participation in the procurement to the contracting officer, the source selection
authority if other than the contracting
officer, and the agency official’s immediate supervisor. As a minimum, the
notice must—
(1) Identify the procurement;
(2) Describe the nature of the agency
official’s participation in the procurement and specify the approximate
dates or time period of participation;
and
(3) Identify the offeror and describe
its interest in the procurement.
(c) Resumption of participation in a
procurement. (1) The official must remain disqualified until such time as
the agency, at its sole and exclusive
discretion, authorizes the official to resume participation in the procurement
in accordance with 3.104–3(c)(1)(ii).
(2) After the conditions of 3.104–
3(c)(1)(ii)(A) or (B) have been met, the
head of the contracting activity (HCA),
after consultation with the agency ethics official, may authorize the disqualified official to resume participation in
the procurement, or may determine
that an additional disqualification period is necessary to protect the integrity of the procurement process. In determining the disqualification period,
the HCA must consider any factors
that create an appearance that the disqualified official acted without complete impartiality in the procurement.
The HCA’s reinstatement decision
should be in writing.
(3) Government officer or employee
must also comply with the provisions
of 18 U.S.C. 208 and 5 CFR part 2635 regarding any resumed participation in a
procurement matter. Government officer or employee may not be reinstated
to participate in a procurement matter
affecting the financial interest of
someone with whom the individual is
seeking employment, unless the individual receives—
(i) A waiver pursuant to 18 U.S.C.
208(b)(1) or (b)(3); or
(ii) An authorization in accordance
with the requirements of subpart F of 5
CFR part 2635.
of contractor bid or proposal information or source selection information
does not occur; or
(4) The Government’s use of technical
data in a manner consistent with the
Government’s rights in the data.
(f) This section does not authorize—
(1) The withholding of any information pursuant to a proper request from
the Congress, any committee or subcommittee thereof, a Federal agency,
the Comptroller General, or an Inspector General of a Federal agency, except
as otherwise authorized by law or regulation. Any release containing contractor bid or proposal information or
source selection information must
clearly identify the information as
contractor bid or proposal information
or source selection information related
to the conduct of a Federal agency procurement and notify the recipient that
the disclosure of the information is restricted by section 27 of the Act;
(2) The withholding of information
from, or restricting its receipt by, the
Comptroller General in the course of a
protest against the award or proposed
award of a Federal agency procurement
contract;
(3) The release of information after
award of a contract or cancellation of a
procurement if such information is
contractor bid or proposal information
or source selection information that
pertains to another procurement; or
(4) The disclosure, solicitation, or receipt of bid or proposal information or
source selection information after
award if disclosure, solicitation, or receipt is prohibited by law. (See 3.104–
2(b)(5) and subpart 24.2.)
[67 FR 13059, Mar. 20, 2002]
3.104–5 Disqualification.
(a) Contacts through agents or other
intermediaries. Employment contacts
between the employee and the offeror,
that are conducted through agents, or
other intermediaries, may require disqualification under 3.104–3(c)(1). These
contacts may also require disqualification under other statutes and regulations. (See 3.104–2(b)(2).)
(b) Disqualification notice. In addition
to submitting the contact report required by 3.104–3(c)(1), an agency official who must disqualify himself or
herself pursuant to 3.104–3(c)(1)(ii) must
[67 FR 13059, Mar. 20, 2002]
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that the information is fraudulent,
misleading, or otherwise incorrect.
(3) If the requester is advised in a
written opinion by the agency ethics
official that the requester may accept
compensation from a particular contractor, and accepts such compensation
in good faith reliance on that advisory
opinion, then neither the requester nor
the contractor will be found to have
knowingly violated subsection 27(d) of
the Act. If the requester or the contractor has actual knowledge or reason
to believe that the opinion is based
upon fraudulent, misleading, or otherwise incorrect information, their reliance upon the opinion will not be
deemed to be in good faith.
3.104–6 Ethics advisory opinions regarding prohibitions on a former official’s acceptance of compensation
from a contractor.
(a) An official or former official of a
Federal agency who does not know
whether he or she is or would be precluded by subsection 27(d) of the Act
(see 3.104–3(d)) from accepting compensation from a particular contractor
may request advice from the appropriate agency ethics official before accepting such compensation.
(b) The request for an advisory opinion must be in writing, include all relevant information reasonably available
to the official or former official, and be
dated and signed. The request must include information about the—
(1) Procurement(s), or decision(s) on
matters under 3.104–3(d)(1)(iii), involving the particular contractor, in which
the individual was or is involved, including contract or solicitation numbers, dates of solicitation or award, a
description of the supplies or services
procured or to be procured, and contract amount;
(2) Individual’s participation in the
procurement or decision, including the
dates or time periods of that participation, and the nature of the individual’s
duties, responsibilities, or actions; and
(3) Contractor, including a description of the products or services produced by the division or affiliate of the
contractor from whom the individual
proposes to accept compensation.
(c) Within 30 days after receipt of a
request containing complete information, or as soon thereafter as practicable, the agency ethics official
should issue an opinion on whether the
proposed conduct would violate subsection 27(d) of the Act.
(d)(1) If complete information is not
included in the request, the agency
ethics official may ask the requester to
provide more information or request
information from other persons, including the source selection authority,
the contracting officer, or the requester’s immediate supervisor.
(2) In issuing an opinion, the agency
ethics official may rely upon the accuracy of information furnished by the
requester or other agency sources, unless he or she has reason to believe
[67 FR 13059, Mar. 20, 2002]
3.104–7 Violations or possible violations.
(a) A contracting officer who receives
or obtains information of a violation or
possible violation of subsection 27(a),
(b), (c), or (d) of the Act (see 3.104–3)
must determine if the reported violation or possible violation has any impact on the pending award or selection
of the contractor.
(1) If the contracting officer concludes that there is no impact on the
procurement, the contracting officer
must forward the information concerning the violation or possible violation and documentation supporting a
determination that there is no impact
on the procurement to an individual
designated in accordance with agency
procedures.
(i) If that individual concurs, the
contracting officer may proceed with
the procurement.
(ii) If that individual does not concur, the individual must promptly forward the information and documentation to the HCA and advise the contracting officer to withhold award.
(2) If the contracting officer concludes that the violation or possible
violation impacts the procurement, the
contracting officer must promptly forward the information to the HCA.
(b) The HCA must review all information available and, in accordance with
agency procedures, take appropriate
action, such as—
(1) Advise the contracting officer to
continue with the procurement;
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3.104–8
48 CFR Ch. 1 (10–1–03 Edition)
(2) Begin an investigation;
(3) Refer the information disclosed to
appropriate
criminal
investigative
agencies;
(4) Conclude that a violation occurred; or
(5) Recommend that the agency head
determine that the contractor, or
someone acting for the contractor, has
engaged in conduct constituting an offense punishable under subsection 27(e)
of the Act, for the purpose of voiding or
rescinding the contract.
(c) Before concluding that an offeror,
contractor, or person has violated the
Act, the HCA may consider that the interests of the Government are best
served by requesting information from
appropriate parties regarding the violation or possible violation.
(d) If the HCA concludes that section
27 of the Act has been violated, the
HCA may direct the contracting officer
to—
(1) If a contract has not been awarded—
(i) Cancel the procurement;
(ii) Disqualify an offeror; or
(iii) Take any other appropriate actions in the interests of the Government.
(2) If a contract has been awarded—
(i) Effect appropriate contractual
remedies, including profit recapture
under the clause at 52.203–10, Price or
Fee Adjustment for Illegal or Improper
Activity, or, if the contract has been
rescinded under paragraph(d)(2)(ii) of
this subsection, recovery of the
amount expended under the contract;
(ii) Void or rescind the contract with
respect to which—
(A) The contractor or someone acting
for the contractor has been convicted
for an offense where the conduct constitutes a violation of subsection 27(a)
or (b) of the Act for the purpose of either—
(1) Exchanging the information covered by the subsections for anything of
value; or
(2) Obtaining or giving anyone a competitive advantage in the award of a
Federal agency procurement contract;
or
(B) The agency head has determined,
based upon a preponderance of the evidence, that the contractor or someone
acting for the contractor has engaged
in conduct constituting an offense punishable under subsection 27(e)(1) of the
Act; or
(iii) Take any other appropriate actions in the best interests of the Government.
(3) Refer the matter to the agency
suspending or debarring official.
(e) The HCA should recommend or direct an administrative or contractual
remedy commensurate with the severity and effect of the violation.
(f) If the HCA determines that urgent
and compelling circumstances justify
an award, or award is otherwise in the
interests of the Government, the HCA,
in accordance with agency procedures,
may authorize the contracting officer
to award the contract or execute the
contract modification after notifying
the agency head.
(g) The HCA may delegate his or her
authority under this subsection to an
individual at least one organizational
level above the contracting officer and
of General Officer, Flag, Senior Executive Service, or equivalent rank.
[67 FR 13059, Mar. 20, 2002]
3.104–8 Criminal and civil penalties,
and further administrative remedies.
Criminal and civil penalties, and administrative remedies, may apply to
conduct that violates the Act (see
3.104–3). See 33.102(f) for special rules
regarding bid protests. See 3.104–7 for
administrative remedies relating to
contracts.
(a) An official who knowingly fails to
comply with the requirements of 3.104–
3 is subject to the penalties and administrative action set forth in subsection
27(e) of the Act.
(b) An offeror who engages in employment discussion with an official
subject to the restrictions of 3.104–3,
knowing that the official has not complied with 3.104–3(c)(1), is subject to the
criminal, civil, or administrative penalties set forth in subsection 27(e) of
the Act.
(c) An official who refuses to terminate employment discussions (see
3.104–5) may be subject to agency administrative actions under 5 CFR
2635.604(d) if the official’s disqualification from participation in a particular
procurement interferes substantially
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with the individual’s ability to perform
assigned duties.
3.204
[67 FR 13059, Mar. 20, 2002]
3.104–9
Contract clauses.
In solicitations and contracts for
other than commercial items that exceed the simplified acquisition threshold, insert the clauses at—
(a) 52.203–8, Cancellation, Rescission,
and Recovery of Funds for Illegal or
Improper Activity; and
(b) 52.203–10, Price or Fee Adjustment
for Illegal or Improper Activity.
[67 FR 13059, Mar. 20, 2002]
Subpart 3.2—Contractor Gratuities
to Government Personnel
3.201
Applicability.
This subpart applies to all executive
agencies, except that coverage concerning exemplary damages applies
only to the Department of Defense (10
U.S.C. 2207).
3.202
Treatment of violations.
(a) Before taking any action against
a contractor, the agency head or a designee shall determine, after notice and
hearing under agency procedures,
whether the contractor, its agent, or
another representative, under a contract
containing
the
Gratuities
clause—
(1) Offered or gave a gratuity (e.g., an
entertainment or gift) to an officer, official, or employee of the Government;
and
(2) Intended by the gratuity to obtain
a contract or favorable treatment
under a contract (intent generally
must be inferred).
(b) Agency procedures shall afford
the contractor an opportunity to appear with counsel, submit documentary
evidence, present witnesses, and confront any person the agency presents.
The procedures should be as informal
as practicable, consistent with principles of fundamental fairness.
(c) When the agency head or designee
determines that a violation has occurred, the Government may—
(1) Terminate the contractor’s right
to proceed;
(2) Initiate debarment or suspension
measures as set forth in subpart 9.4;
and
(3) Assess exemplary damages, if the
contract uses money appropriated to
the Department of Defense.
Contract clause.
The contracting officer shall insert
the clause at 52.203–3, Gratuities, in solicitations and contracts with a value
exceeding the simplified acquisition
threshold, except those for personal
services and those between military departments or defense agencies and foreign governments that do not obligate
any funds appropriated to the Department of Defense.
Subpart 3.3—Reports of Suspected
Antitrust Violations
[61 FR 39200, July 26, 1996]
3.301 General.
(a) Practices that eliminate competition or restrain trade usually lead to
excessive prices and may warrant
criminal, civil, or administrative action against the participants. Examples of anticompetitive practices are
collusive
bidding,
follow-the-leader
pricing, rotated low bids, collusive
price estimating systems, and sharing
of the business.
(b) Contracting personnel are an important potential source of investigative leads for antitrust enforcement
and should therefore be sensitive to indications of unlawful behavior by
offerors and contractors. Agency personnel shall report, in accordance with
3.203 Reporting suspected violations
of the Gratuities clause.
Agency personnel shall report suspected violations of the Gratuities
clause to the contracting officer or
other designated official in accordance
with agency procedures. The agency reporting procedures shall be published
as an implementation of this section
3.203 and shall clearly specify—
(a) What to report and how to report
it; and
(b) The channels through which reports must pass, including the function
and authority of each official designated to review them.
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3.302
48 CFR Ch. 1 (10–1–03 Edition)
(4) Rotation of bids or proposals, so
that each competitor takes a turn in
sequence as low bidder, or so that certain competitors bid low only on some
sizes of contracts and high on other
sizes;
(5) Division of the market, so that
certain competitors bid low only for
contracts let by certain agencies, or for
contracts in certain geographical
areas, or on certain products, and bid
high on all other jobs;
(6) Establishment by competitors of a
collusive price estimating system;
(7) The filing of a joint bid by two or
more competitors when at least one of
the competitors has sufficient technical capability and productive capacity for contract performance;
(8) Any incidents suggesting direct
collusion among competitors, such as
the appearance of identical calculation
or spelling errors in two or more competitive offers or the submission by one
firm of offers for other firms; and
(9) Assertions by the employees,
former employees, or competitors of
offerors, that an agreement to restrain
trade exists.
(d) Identical bids shall be reported
under this section if the agency has
some reason to believe that the bids resulted from collusion.
(e) For offers from foreign contractors for contracts to be performed outside the United States and its outlying
areas, contracting officers may refer
suspected collusive offers to the authorities of the foreign government
concerned for appropriate action.
(f) Agency reports shall be addressed
to the Attorney General, U.S. Department of Justice, Washington, DC 20530,
Attention: Assistant Attorney General,
Antitrust Division, and shall include—
(1) A brief statement describing the
suspected practice and the reason for
the suspicion; and
(2) The name, address, and telephone
number of an individual in the agency
who can be contacted for further information.
(g) Questions concerning this reporting requirement may be communicated
by telephone directly to the Office of
agency regulations, evidence of suspected antitrust violations in acquisitions for possible referral to (1) the Attorney General under 3.303 and (2) the
agency office responsible for contractor debarment and suspension
under subpart 9.4.
[48 FR 42108, Sept. 19, 1983, as amended at 50
FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
3.302 Definitions.
As used in this subpart—
Identical bids means bids for the same
line item that are determined to be
identical as to unit price or total line
item amount, with or without the application of evaluation factors (e.g.,
discount or transportation cost).
Line item means an item of supply or
service, specified in a solicitation, that
the offeror must separately price.
[49 FR 12974, Mar. 30, 1984, as amended at 66
FR 2127, Jan. 10, 2001; 67 FR 13055, Mar. 20,
2002]
3.303 Reporting suspected antitrust
violations.
(a) Agencies are required by 41 U.S.C.
253b(i) and 10 U.S.C. 2305(b)(9) to report
to the Attorney General any bids or
proposals that evidence a violation of
the antitrust laws. These reports are in
addition to those required by subpart
9.4.
(b) The antitrust laws are intended to
ensure that markets operate competitively. Any agreement or mutual understanding among competing firms
that restrains the natural operation of
market forces is suspect. Paragraph (c)
below identifies behavior patterns that
are often associated with antitrust violations. Activities meeting the descriptions in paragraph (c) are not necessarily improper, but they are sufficiently questionable to warrant notifying the appropriate authorities, in
accordance with agency procedures.
(c) Practices or events that may evidence violations of the antitrust laws
include—
(1) The existence of an industry price
list or price agreement to which contractors refer in formulating their offers;
(2) A sudden change from competitive
bidding to identical bidding;
(3) Simultaneous price increases or
follow-the-leader pricing;
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3.405
the Assistant Attorney General, Antitrust Division.
been considered contrary to public policy because such arrangements may
lead to attempted or actual exercise of
improper influence. In 10 U.S.C. 2306(b)
and 41 U.S.C. 254(a), Congress affirmed
this public policy but permitted certain exceptions. These statutes—
(a) Require in every negotiated contract a warranty by the contractor
against contingent fees;
(b) Permit, as an exception to the
warranty, contingent fee arrangements
between contractors and bona fide employees or bona fide agencies; and
(c) Provide that, for breach or violation of the warranty by the contractor,
the Government may annul the contract without liability or deduct from
the contract price or consideration, or
otherwise recover, the full amount of
the contingent fee.
[48 FR 42108, Sept. 19, 1983, as amended at 49
FR 12974, Mar. 30, 1984; 50 FR 1727, Jan. 11,
1985; 50 FR 52429, Dec. 23, 1985; 55 FR 25526,
June 21, 1990; 65 FR 36030, June 6, 2000; 68 FR
28080, May 22, 2003]
Subpart 3.4—Contingent Fees
3.400
Scope of subpart.
This subpart prescribes policies and
procedures that restrict contingent fee
arrangements for soliciting or obtaining Government contracts to those permitted by 10 U.S.C. 2306(b) and 41
U.S.C. 254(a).
3.401
Definitions.
As used in this subpart—
Bona fide agency, means an established commercial or selling agency,
maintained by a contractor for the purpose of securing business, that neither
exerts nor proposes to exert improper
influence to solicit or obtain Government contracts nor holds itself out as
being able to obtain any Government
contract or contracts through improper influence.
Bona fide employee, means a person,
employed by a contractor and subject
to the contractor’s supervision and
control as to time, place, and manner
of performance, who neither exerts nor
proposes to exert improper influence to
solicit or obtain Government contracts
nor holds out as being able to obtain
any Government contract or contracts
through improper influence.
Contingent fee, means any commission, percentage, brokerage, or other
fee that is contingent upon the success
that a person or concern has in securing a Government contract.
Improper influence, means any influence that induces or tends to induce a
Government employee or officer to
give consideration or to act regarding a
Government contract on any basis
other than the merits of the matter.
3.403
Applicability.
This subpart applies to all contracts.
Statutory requirements for negotiated
contracts are, as a matter of policy, extended to sealed bid contracts.
[48 FR 42108, Sept. 19, 1983, as amended at 50
FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
3.404
Contract clause.
The contracting officer shall insert
the clause at 52.203–5, Covenant
Against Contingent Fees, in all solicitations and contracts exceeding the
simplified acquisition threshold, other
than those for commercial items (see
parts 2 and 12).
[61 FR 39188, July 26, 1996]
3.405 Misrepresentations or violations
of the Covenant Against Contingent
Fees.
(a) Government personnel who suspect or have evidence of attempted or
actual exercise of improper influence,
misrepresentation of a contingent fee
arrangement, or other violation of the
Covenant Against Contingent Fees
shall report the matter promptly to
the contracting officer or appropriate
higher authority in accordance with
agency procedures.
(b) When there is specific evidence or
other reasonable basis to suspect one
or more of the violations in paragraph
(a) above, the chief of the contracting
[48 FR 42108, Sept. 19, 1983, as amended at 66
FR 2127, Jan. 10, 2001]
3.402 Statutory requirements.
Contractors’ arrangements to pay
contingent fees for soliciting or obtaining Government contracts have long
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3.406
48 CFR Ch. 1 (10–1–03 Edition)
office shall review the facts and, if appropriate, take or direct one or more of
the following, or other, actions:
(1) If before award, reject the bid or
proposal.
(2) If after award, enforce the Government’s right to annul the contract or
to recover the fee.
(3) Initiate suspension or debarment
action under subpart 9.4.
(4) Refer suspected fraudulent or
criminal matters to the Department of
Justice, as prescribed in agency regulations.
change orders or (2) follow-on contracts
subject to cost analysis.
(b) The Government should minimize
the opportunity for buying-in by seeking a price commitment covering as
much of the entire program concerned
as is practical by using—
(1) Multiyear contracting, with a requirement in the solicitation that a
price be submitted only for the total
multiyear quantity; or
(2) Priced options for additional
quantities that, together with the firm
contract quantity, equal the program
requirements (see subpart 17.2).
(c) Other safeguards are available to
the contracting officer to preclude recovery of buying-in losses (e.g., amortization of nonrecurring costs (see 15.408,
Table 15–2, paragraph A., column (2)
under ‘‘Formats for Submission of Line
Item Summaries) and treatment of unreasonable price quotations (see 15.405).
[48 FR 42108, Sept. 19, 1983. Redesignated at
61 FR 39188, July 26, 1996]
3.406 Records.
For enforcement purposes, agencies
shall preserve any specific evidence of
one or more of the violations in
3.405(a), together with all other pertinent data, including a record of actions
taken. Contracting offices shall not retire or destroy these records until it is
certain that they are no longer needed
for enforcement purposes. If the original record is maintained in a central
file, a copy must be retained in the
contract file.
48 FR 42108, Sept. 19, 1983, as amended at 62
FR 51270, Sept. 30, 1997]
3.502
3.502–1
Definitions.
As used in this section—
Kickback, means any money, fee,
commission, credit, gift, gratuity,
thing of value, or compensation of any
kind which is provided, directly or indirectly, to any prime contractor,
prime contractor employee, subcontractor, or subcontractor employee for
the purpose of improperly obtaining or
rewarding favorable treatment in connection with a prime contract or in
connection with a subcontract relating
to a prime contract.
Person, means a corporation, partnership, business association of any kind,
trust, joint-stock company, or individual.
Prime contract, means a contract or
contractual action entered into by the
United States for the purpose of obtaining supplies, materials, equipment,
or services of any kind.
Prime Contractor, means a person who
has entered into a prime contract with
the United States.
Prime Contractor employee, as used in
this section, means any officer, partner, employee, or agent of a prime contractor.
[48 FR 42108, Sept. 19, 1983. Redesignated and
amended at 61 FR 39188, July 26, 1996]
Subpart 3.5—Other Improper
Business Practices
3.501
Subcontractor kickbacks.
Buying-in.
3.501–1 Definition.
Buying-in as used in this section,
means submitting an offer below anticipated costs, expecting to—
(1) Increase the contract amount
after award (e.g., through unnecessary
or excessively priced change orders); or
(2) Receive follow-on contracts at artificially high prices to recover losses
incurred on the buy-in contract.
[48 FR 42108, Sept. 19, 1983, as amended at 66
FR 2127, Jan. 10, 2001]
3.501–2 General.
(a) Buying-in may decrease competition or result in poor contract performance. The contracting officer must
take appropriate action to ensure buying-in losses are not recovered by the
contractor through the pricing of (1)
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3.502–2
Subcontract, means a contract or
contractural action entered into by a
prime contractor or subcontractor for
the purpose of obtaining supplies, materials, equipment, or service of any
kind under a prime contract.
Subcontractor, (1) means any person,
other than the prime contractor, who
offers to furnish or furnishes any supplies, materials, equipment, or services
of any kind under a prime contract or
a subcontract entered into in connection with such prime contract, and (2)
includes any person who offers to furnish or furnishes general supplies to
the prime contractor or a higher tier
subcontractor.
Subcontractor employee, as used in this
section, means any officer, partner,
employee, or agent of a subcontractor.
such prohibited conduct and from any
person whose employee, subcontractor,
or subcontractor employee provides,
accepts, or charges a kickback.
(d) Provides that—
(1) The contracting officer may offset
the amount of a kickback against monies owed by the United States to the
prime contractor under the prime contract to which such kickback relates;
(2) The contracting officer may direct a prime contractor to withhold
from any sums owed to a subcontract
under a subcontractor of the prime
contract the amount of any kickback
which was or may be offset against the
prime contractor under subparagraph
(d)(1) of this subsection; and
(3) An offset under subparagraph
(d)(1) or a direction under subparagraph (d)(2) of this subsection is a
claim by the Government for the purposes of the Contract Disputes Act of
1978.
(e) Authorizes contracting officers to
order that sums withheld under subparagraph (d)(2) of this subsection be
paid to the contracting agency, or if
the sum has already been offset against
the prime contractor, that it be retained by the prime contractor.
(f) Requires the prime contractor to
notify the contracting officer when the
withholding under subparagraph (d)(2)
of this subsection has been accomplished unless the amount withheld has
been paid to the Government.
(g) Requires a prime contractor or
subcontractor to report in writing to
the inspector general of the contracting agency, the head of the contracting agency if the agency does not
have an inspector general, or the Department of Justice any possible violation of the Act when the prime contractor or subcontractor has reasonable grounds to believe such violation
may have occurred.
(h) Provides that, for the purpose of
ascertaining whether there has been a
violation of the Act with respect to
any prime contract, the General Accounting Office and the inspector general of the contracting agency, or a
representative of such contracting
agency designated by the head of such
agency if the agency does not have an
inspector general, shall have access to
and may inspect the facilities and
[52 FR 6121, Feb. 27, 1987, as amended at 53
FR 34226, Sept. 2, 1988; 66 FR 2127, Jan. 10,
2001]
EDITORIAL NOTE: At 66 FR 2127, Jan. 10,
2001, as amended at 66 FR 14260, Mar. 9, 2001,
§ 3.502–1 was amended by redesignating paragraphs (a) and (b) as (1) and (2). There are no
designated paragraphs (a) and (b) in § 3.502–1.
3.502–2 Subcontractor kickbacks.
The Anti-Kickback Act of 1986 (41
U.S.C. 51–58) was passed to deter subcontractors from making payments
and contractors from accepting payments for the purpose of improperly
obtaining or rewarding favorable treatment in connection with a prime contract or a subcontract relating to a
prime contract. The Act—
(a) Prohibits any person from—
(1) Providing, attempting to provide,
or offering to provide any kickback;
(2) Soliciting, accepting, or attempting to accept any kickbacks; or
(3) Including, directly or indirectly,
the amount of any kickback in the
contract price charged by a subcontractor to a prime contractor or a
higher tier subcontractor or in the contract price charged by a prime contractor to the United States.
(b) Imposes criminal penalties on any
person who knowingly and willfully engages in the prohibited conduct addressed in paragraph (a) of this subsection.
(c) Provides for the recovery of civil
penalties by the United States from
any person who knowingly engages in
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3.502–3
48 CFR Ch. 1 (10–1–03 Edition)
audit the books and records, including
any electronic data or records, of any
prime contractor or subcontractor
under a prime contract awarded by
such agency.
(i) Requires each contracting agency
to include in each prime contract exceeding $100,000 for other than commercial items (see part 12), a requirement
that the prime contractor shall—
(1) Have in place and follow reasonable procedures designed to prevent
and detect violations of the Act in its
own operations and direct business relationships (e.g., company ethics rules
prohibiting kickbacks by employees,
agents, or subcontractors; education
programs for new employees and subcontractors, explaining policies about
kickbacks, related company procedures
and the consequences of detection; procurement procedures to minimize the
opportunity for kickbacks; audit procedures designed to detect kickbacks;
periodic surveys of subcontractors to
elicit information about kickbacks;
procedures to report kickbacks to law
enforcement officials; annual declarations by employees of gifts or gratuities received from subcontractors; annual employee declarations that they
have violated no company ethics rules;
personnel practices that document unethical or illegal behavior and make
such information available to prospective employers); and
(2) Cooperate fully with any Federal
agency investigating a possible violation of the Act.
(j) Notwithstanding paragraph (i) of
this subsection, a prime contractor
shall cooperate fully with any Federal
government agency investigating a
violation of Section 3 of the Anti-Kickback Act of 1986 (41 U.S.C. 51–58).
3.503 Unreasonable restrictions
subcontractor sales.
3.503–1
Policy.
10 U.S.C. 2402 and 41 U.S.C. 253(g) require that subcontractors not be unreasonably precluded from making direct
sales to the Government of any supplies or services made or furnished
under a contract. However, this does
not preclude contractors from asserting rights that are otherwise authorized by law or regulation.
[50 FR 35475, Aug. 30, 1985, and 51 FR 27116,
July 29, 1986]
3.503–2
Contract clause.
The contracting officer shall insert
the clause at 52.203–6, Restrictions on
Subcontractor Sales to the Government, in solicitations and contracts exceeding the simplified acquisition
threshold. For the acquisition of commercial items, the contracting officer
shall use the clause with its Alternate
I.
[60 FR 48235, Sept. 18, 1995, as amended at 61
FR 39190, July 26, 1996]
Subpart 3.6—Contracts With Government Employees or Organizations Owned or Controlled
by Them
3.601
Policy.
(a) Except as specified in 3.602, a contracting officer shall not knowingly
award a contract to a Government employee or to a business concern or
other organization owned or substantially owned or controlled by one or
more Government employees. This policy is intended to avoid any conflict of
interest that might arise between the
employees’ interests and their Government duties, and to avoid the appearance of favoritism or preferential
treatment by the Government toward
its employees.
(b) For purposes of this subpart, special Government employees (as defined
in 18 U.S.C. 202) performing services as
experts, advisors, or consultants, or as
members of advisory committees, are
not considered Government employees
unless—
[52 FR 6121, Feb. 27, 1987; 52 FR 9989, Mar. 27,
1987, as amended at 53 FR 34226, Sept. 2, 1988;
60 FR 48235, Sept. 18, 1995; 61 FR 39191, July
26, 1996; 62 FR 235, Jan. 2, 1997]
3.502–3 Contract clause.
The contracting officer shall insert
the clause at 52.203–7, Anti-Kickback
Procedures, in solicitations and contracts exceeding the simplified acquisition threshold, other than those for
commercial items (see part 12).
[60 FR 48235, Sept. 18, 1995, as amended at 61
FR 39190, July 26, 1996]
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Federal Acquisition Regulation
3.702
advantage in the award of a Federal
agency procurement contract, or similar misconduct; or
(2) There has been an agency head determination that contractor bid or proposal information or source selection
information has been disclosed or received in exchange for a thing of value,
or for the purpose of obtaining or giving anyone a competitive advantage in
the award of a Federal agency procurement contract.
(b) This subpart does not prescribe
policies or procedures for, or govern
the exercise of, any other remedy
available to the Government with respect to such contracts, including but
not limited to, the common law right
of avoidance, rescission, or cancellation.
(1) The contract arises directly out of
the individual’s activity as a special
Government employee;
(2) In the individual’s capacity as a
special Government employee, the individual is in a position to influence
the award of the contract; or
(3) Another conflict of interest is determined to exist.
[55 FR 34864, Aug. 24, 1990]
3.602 Exceptions.
The agency head, or a designee not
below the level of the head of the contracting activity, may authorize an exception to the policy in 3.601 only if
there is a most compelling reason to do
so, such as when the Government’s
needs cannot reasonably be otherwise
met.
[51 FR 27116, July 29, 1986, as amended at 62
FR 232, Jan. 2, 1997]
3.603 Responsibilities of the contracting officer.
(a) Before awarding a contract, the
contracting officer shall obtain an authorization under 3.602 if—
(1) The contracting officer knows, or
has reason to believe, that a prospective contractor is one to which award
is otherwise prohibited under 3.601; and
(2) There is a most compelling reason
to make an award to that prospective
contractor.
(b) The contracting officer shall comply with the requirements and guidance in subpart 9.5 before awarding a
contract to an organization owned or
substantially owned or controlled by
Government employees.
3.701 Purpose.
This subpart provides—
(a) An administrative remedy with
respect to contracts in relation to
which there has been—
(1) A final conviction for bribery,
conflict of interest, disclosure or receipt of contractor bid or proposal information or source selection information in exchange for a thing of value or
to give anyone a competitive advantage in the award of a Federal agency
procurement contract, or similar misconduct; or
(2) An agency head determination
that contractor bid or proposal information or source selection information
has been disclosed or received in exchange for a thing of value, or for the
purpose of obtaining or giving anyone a
competitive advantage in the award of
a Federal agency procurement contract; and
(b) A means to deter similar misconduct in the future by those who are
involved in the award, performance,
and administration of Government contracts.
Subpart 3.7—Voiding and
Rescinding Contracts
SOURCE: 51 FR 27116, July 29, 1986, unless
otherwise noted.
3.700 Scope of subpart.
(a) This subpart prescribes Governmentwide policies and procedures for
exercising discretionary authority to
declare void and rescind contracts in
relation to which—
(1) There has been a final conviction
for bribery, conflict of interest, disclosure or receipt of contractor bid or proposal information or source selection
information in exchange for a thing of
value or to give anyone a competitive
[62 FR 232, Jan. 2, 1997]
3.702 Definition.
Final conviction means a conviction,
whether entered on a verdict or plea,
including a plea of nolo contendere, for
which sentence has been imposed.
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3.703
3.703
48 CFR Ch. 1 (10–1–03 Edition)
cordance with subpart 9.4, Debarment,
Suspension, and Ineligibility, if debarment has not been initiated or is not in
effect at the time the final conviction
is entered.
(c) If there is a final conviction for an
offense punishable under subsection
27(e) of the OFPP Act, or if the head of
the agency, or designee, has determined, based upon a preponderance of
the evidence, that the contractor or
someone acting for the contractor has
engaged in conduct constituting such
an offense, then the head of the contracting activity shall consider, in addition to any other penalty prescribed
by law or regulation—
(1) Declaring void and rescinding contracts, as appropriate, and recovering
the amounts expended under the contracts by using the procedures at 3.705
(see 3.104–7); and
(2) Recommending the initiation of
suspension or debarment proceedings
in accordance with subpart 9.4.
Authority.
(a) Section 1(e) of Pub. L. 87–849, 18
U.S.C. 218 (the Act), empowers the
President or the heads of executive
agencies acting under regulations prescribed by the President, to declare
void and rescind contracts and other
transactions enumerated in the Act, in
relation to which there has been a final
conviction for bribery, conflict of interest, or any other violation of Chapter 11 of Title 18 of the United States
Code (18 U.S.C. 201–224). Executive
Order 12448, November 4, 1983, delegates
the President’s authority under the
Act to the heads of the executive agencies and military departments.
(b) Subsection 27(e)(3) of the Office of
Federal Procurement Policy Act (41
U.S.C. 423) (the OFPP Act), as amended, requires a Federal agency, upon receiving information that a contractor
or a person has engaged in conduct
constituting a violation of subsection
27 (a) or (b) of the OFPP Act, to consider recission of a contract with respect to which—
(1) The contractor or someone acting
for the contractor has been convicted
for an offense punishable under subsection 27(e)(1) of the OFPP Act; or
(2) The head of the agency, or designee, has determined, based upon a
preponderance of the evidence, that the
contractor or someone acting for the
contractor has engaged in conduct constituting such an offense.
[51 FR 27116, July 29, 1986, as amended at 62
FR 232, Jan. 2, 1997; 67 FR 13063, Mar. 20, 2002]
3.705 Procedures.
(a) Reporting. The facts concerning
any final conviction for any violation
of 18 U.S.C. 201–224 involving or relating to agency contracts shall be reported promptly to the agency head or
designee for that official’s consideration. The agency head or designee
shall promptly notify the Civil Division, Department of Justice, that an
action is being considered under this
subpart.
(b) Decision. Following an assessment
of the facts, the agency head or designee may declare void and rescind
contracts with respect to which a final
conviction has been entered, and recover the amounts expended and the
property transferred by the agency
under the terms of the contracts involved.
(c) Decision-making process. Agency
procedures governing the voiding and
rescinding decision-making process
shall be as informal as is practicable,
consistent with the principles of fundamental fairness. As a minimum, however, agencies shall provide the following:
(1) A notice of the proposed action to
declare void and rescind the contract
[51 FR 27116, July 29, 1986, as amended at 62
FR 232, Jan. 2, 1997]
3.704
Policy.
(a) In cases in which there is a final
conviction for any violation of 18
U.S.C. 201–224 involving or relating to
contracts awarded by an agency, the
agency head or designee shall consider
the facts available and, if appropriate,
may declare void and rescind contracts, and recover the amounts expended and property transferred by the
agency in accordance with the policies
and procedures of this subpart.
(b) Since a final conviction under 18
U.S.C. 201–224 relating to a contract
also may justify the conclusion that
the party involved is not presently responsible, the agency should consider
initiating debarment proceedings in ac-
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Federal Acquisition Regulation
3.801
shall be made in writing and sent by
certified mail, return receipt requested.
(2) A thirty calendar day period after
receipt of the notice, for the contractor
to submit pertinent information before
any final decision is made.
(3) Upon request made within the period for submission of pertinent information, an opportunity shall be afforded for a hearing at which witnesses
may be presented, and any witness the
agency presents may be confronted.
However, no inquiry shall be made regarding the validity of a conviction.
(4) If the agency head or designee decides to declare void and rescind the
contracts involved, that official shall
issue a written decision which—
(i) States that determination;
(ii) Reflects consideration of the fair
value of any tangible benefits received
and retained by the agency; and
(iii) States the amount due, and the
property to be returned, to the agency.
(d) Notice of proposed action. The notice of the proposed action, as a minimum shall—
(1) Advise that consideration is being
given to declaring void and rescinding
contracts awarded by the agency, and
recovering the amounts expended and
property transferred therefor, under
the provisions of 18 U.S.C. 218;
(2) Specifically identify the contracts
affected by the action;
(3) Specifically identify the offense or
final conviction on which the action is
based;
(4) State the amounts expended and
property transferred under each of the
contracts involved, and the money and
the property demanded to be returned;
(5) Identify any tangible benefits received and retained by the agency
under the contract, and the value of
those benefits, as calculated by the
agency;
(6) Advise that pertinent information
may be submitted within 30 calendar
days after receipt of the notice, and
that, if requested within that time, a
hearing shall be held at which witnesses may be presented and any witness the agency presents may be confronted; and
(7) Advise that action shall be taken
only after the agency head or designee
issues a final written decision on the
proposed action.
(e) Final agency decision. The final
agency decision shall be based on the
information available to the agency
head or designee, including any pertinent information submitted or, if a
hearing was held, presented at the
hearing. If the agency decision declares
void and rescinds the contract, the
final
decision
shall
specify
the
amounts due and property to be returned to the agency, and reflect consideration of the fair value of any tangible benefits received and retained by
the agency. Notice of the decision shall
be sent promptly by certified mail, return receipt requested. Rescission of
contracts under the authority of the
Act and demand for recovery of the
amounts expended and property transferred therefor, is not a claim within
the meaning of the Contract Disputes
Act of 1978 (CDA), 41 U.S.C. 601–613, or
part 33. Therefore, the procedures required by the CDA and the FAR for the
issuance of a final contracting officer
decision are not applicable to final
agency decisions under this subpart,
and shall not be followed.
[51 FR 27116, July 29, 1986, as amended at 62
FR 232, Jan. 2, 1997]
Subpart 3.8—Limitations on the
Payment of Funds to Influence
Federal Transactions
SOURCE: 55 FR 3190, Jan. 30, 1990, unless
otherwise noted.
3.800
Scope of subpart.
This subpart prescribes policies and
procedures implementing section 319 of
the Department of the Interior and Related Agencies Appropriations Act,
Pub. L. 101–121, which added a new section 1352 to title 31 U.S.C., entitled
‘‘Limitation on use of appropriated
funds to influence certain Federal contracting and financial transactions’’
(the Act).
3.801
Definitions.
Agency, as used in this section,
means an executive agency as defined
in 2.101.
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3.801
48 CFR Ch. 1 (10–1–03 Edition)
Person, as used in this section, means
an individual, corporation, company,
association, authority, firm, partnership, society, State, and local government, regardless of whether such entity is operated for profit or not for profit. This term excludes an Indian tribe,
tribal organization, or any other Indian organization with respect to expenditures specifically permitted by
other Federal law.
Reasonable compensation, as used in
this section, means, with respect to a
regularly employed officer or employee
of any person, compensation that is
consistent with the normal compensation for such officer or employee for
work that is not furnished to, not funded by, or not furnished in cooperation
with the Federal Government.
Reasonable payment, as used in this
section, means, with respect to professional and other technical services, a
payment in an amount that is consistent with the amount normally paid
for such services in the private sector.
Recipient, as used in this section, includes the contractor and all subcontractors. This term excludes an Indian tribe, tribal organization, or any
other Indian organization with respect
to expenditures specifically permitted
by other Federal law.
Regularly employed, as used in this
section, means, with respect to an officer or employee of a person requesting
or receiving a Federal contract, an officer or employee who is employed by
such person for at least 130 working
days within 1 year immediately preceding the date of the submission that
initiates agency consideration of such
person for receipt of such contract. An
officer or employee who is employed by
such person for less than 130 working
days within 1 year immediately preceding the date of the submission that
initiates agency consideration of such
person shall be considered to be regularly employed as soon as he or she is
employed by such person for 130 working days.
State, as used in this section, means a
State of the United States, the District
of Columbia, an outlying area of the
Covered Federal action, as used in this
section, means any of the following
Federal actions:
(a) The awarding of any Federal contract.
(b) The making of any Federal grant.
(c) The making of any Federal loan.
(d) The entering into of any cooperative agreement.
(e) The extension, continuation, renewal, amendment, or modification of
any Federal contract, grant, loan, or
cooperative agreement.
Indian tribe and tribal organization, as
used in this section, have the meaning
provided in section 4 of the Indian SelfDetermination and Education Assistance Act (25 U.S.C. 450B) and include
Alaskan Natives.
Influencing or attempting to influence,
as used in this section, means making,
with the intent to influence, any communication to or appearance before an
officer or employee of any agency, a
Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with
any covered Federal action.
Local government, as used in this section, means a unit of government in a
State and, if chartered, established, or
otherwise recognized by a State for the
performance of a governmental duty,
including a local public authority, a
special district, an intrastate district,
a council of governments, a sponsor
group representative organization, and
any other instrumentality of a local
government.
Officer or employee of an agency, as
used in this section, includes the following individuals who are employed
by an agency:
(a) An individual who is appointed to
a position in the Government under
title 5, United States Code, including a
position under a temporary appointment;
(b) A member of the uniformed services, as defined in subsection 101(3),
title 37, United States Code;
(c) A special Government employee,
as defined in section 202, title 18,
United States Code; and
(d) An individual who is a member of
a Federal advisory committee, as defined by the Federal Advisory Committee Act, title 5, United States Code,
appendix 2.
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United States, an agency or instrumentality of a State, and multi-State, regional, or interstate entity having governmental duties and powers.
compensation made to an officer or
employee of a person requesting or receiving a covered Federal action if the
payment is for agency and legislative
liaison activities not directly related
to a covered Federal action.
(ii) For purposes of subdivision
(c)(1)(i) of this section, providing any
information specifically requested by
an agency or Congress is permitted at
any time.
(iii) The following agency and legislative liaison activities are permitted
at any time where they are not related
to a specific solicitation for any covered Federal action:
(A) Discussing with an agency the
qualities and characteristics (including
individual demonstrations) of the person’s products or services, conditions
or terms of sale, and service capabilities;
(B) Technical discussions and other
activities regarding the application or
adaptation of the person’s products or
services for an agency’s use.
(iv) The following agency and legislative liaison activities are permitted
where they are prior to formal solicitation of any covered Federal action:
(A) Providing any information not
specifically requested but necessary for
an agency to make an informed decision about initiation of a covered Federal action;
(B) Technical discussions regarding
the preparation of an unsolicited proposal prior to its official submission;
and
(C) Capability presentations by persons seeking awards from an agency
pursuant to the provisions of the Small
Business Act, as amended by Pub. L.
95–507, and subsequent amendments.
(v) Only those activities expressly
authorized by subparagraph (c)(1) of
this section are permitted under this
section.
(2) Professional and technical services.
(i) The prohibition on the use of appropriated funds, in paragraph (a) of this
section, does not apply in the case of—
(A) Payment of reasonable compensation made to an officer or employee of
a person requesting or receiving a covered Federal action or an extension,
continuation, renewal, amendment, or
modification of a covered Federal action, if payment is for professional or
[55 FR 3190, Jan. 30, 1990, as amended at 68
FR 28080, May 22, 2003]
3.802 Prohibitions.
(a) Section 1352 of title 31, United
States Code, among other things, prohibits a recipient of a Federal contract,
grant, loan, or cooperative agreement
from using appropriated funds to pay
any person for influencing or attempting to influence an officer or employee
of any agency, a Member of Congress,
an officer or employee of Congress, or
an employee of a Member of Congress
in connection with any of the following
covered Federal actions: the awarding
of any Federal contract; the making of
any Federal grant; the making of any
Federal loan; the entering into of any
cooperative agreement; or, the modification of any Federal contract, grant,
loan, or cooperative agreement.
(b) The Act also requires offerors to
furnish a declaration consisting of both
a certification and a disclosure. These
requirements are contained in the provision at 52.203–11, Certification and
Disclosure Regarding Payments to Influence Certain Federal Transactions,
and the clause at 52.203–12, Limitation
on Payments to Influence Certain Federal Transactions.
(1) By signing its offer, an offeror certifies that no appropriated funds have
been paid or will be paid in violation of
the prohibitions in 31 U.S.C. 1352.
(2) The disclosure shall identify if
any funds other than Federal appropriated funds (including profit or fee
received under a covered Federal action) have been paid, or will be paid, to
any person for influencing or attempting to influence an officer or employee
of any agency, a Member of Congress,
an officer or employee of Congress, or
an employee of a Member of Congress
in connection with a Federal contract,
grant, loan, or cooperative agreement.
(c) The prohibitions of the Act do not
apply under the following conditions:
(1) Agency and legislative liaison by
own employees. (i) The prohibition on
the use of appropriated funds, in paragraph (a) of this section, does not apply
in the case of a payment of reasonable
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48 CFR Ch. 1 (10–1–03 Edition)
technical services rendered directly in
the preparation, submission, or negotiation of any bid, proposal, or application for that Federal action or for
meeting requirements imposed by or
pursuant to law as a condition for receiving that Federal action;
(B) Any reasonable payment to a person, other than an officer or employee
of a person requesting or receiving a
covered Federal action, if the payment
is for professional or technical services
rendered directly in the preparation,
submission, r negotiation of any bid,
proposal, or application for that Federal action, or for meeting requirements imposed by or pursuant to law
as a condition for receiving that Federal action. Persons other than officers
or employees of a person requesting or
receiving a covered Federal action include consultants and trade associations.
(ii) For purposes of subdivision
(c)(2)(i) of this section, ‘‘professional
and technical services’’ shall be limited
to advice and analysis directly applying any professional or technical discipline. For example, drafting of a
legal document accompanying a bid or
proposal by a lawyer is allowable.
Similarly, technical advice provided by
an engineer on the performance or
operational capability of a piece of
equipment rendered directly in the negotiation of a contract is allowable.
However, communications with the intent to influence made by a professional (such as a licensed lawyer) or a
technical person (such as a licensed accountant) are not allowable under this
section unless they provide advice and
analysis directly applying their professional or technical expertise and unless
the advice or analysis is rendered directly and solely in the preparation,
submission or negotiation of a covered
Federal action. Thus, for example,
communications with the intent to influence made by a lawyer that do not
provide legal advice or analysis directly and solely related to the legal
aspects of his or her client’s proposal,
but generally advocate one proposal
over another are not allowable under
this section because the lawyer is not
providing professional legal services.
Similarly, communications with the
intent to influence made by an engi-
neer providing an engineering analysis
prior to the preparation or submission
of a bid or proposal are not allowable
under this section since the engineer is
providing technical services but not directly in the preparation, submission
or negotiation of a covered Federal action.
(iii) Requirements imposed by or pursuant to law as a condition for receiving a covered Federal award include
those required by law or regulation and
any other requirements in the actual
award documents
(iv) Only those services expressly authorized by subdivisions (c)(2)(i) (A)
and (B) of this section are permitted
under this section.
(v) The reporting requirements of
3.803(a) shall not apply with respect to
payments of reasonable compensation
made to regularly employed officers or
employees of a person.
3.803 Certification and disclosure.
(a) Any contractor who requests or
receives a Federal contract exceeding
$100,000 shall submit the certification
and disclosures required by the provision at 52.203–11, Certification and Disclosure Regarding Payments to Influence Certain Federal Transactions,
with its offer. Disclosures under this
section shall be submitted to the contracting officer using OMB standard
form LLL, Disclosure of Lobbying Activities.
(b) The contractor shall file a disclosure form at the end of each calendar
quarter in which there occurs any
event that materially affects the accuracy of the information contained in
any disclosure form previously filed by
such person under paragraph (a) of this
section. An event that materially affects the accuracy of the information
reported includes—
(1) A cumulative increase of $25,000 or
more in the amount paid or expected to
be paid for influencing or attempting
to influence a covered Federal action;
or
(2) A change in the person(s) or individual(s) influencing or attempting to
influence a covered Federal action; or
(3) A change in the officer(s), employee(s), or Member(s) of Congress
contacted to influence or attempt to
influence a covered Federal action.
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(c) The contractor shall require the
submittal of a certification, and if required, a disclosure form, by any person who requests or receives any subcontract exceeding $100,000 under the
Federal contract.
(d) All subcontractor disclosure
forms (but not certifications), shall be
forwarded from tier to tier until received by the prime contractor. The
prime contractor shall submit all disclosure forms to the contracting officer
at the end of the calendar quarter in
which the disclosure form is submitted
by the subcontractor. Each subcontractor certification shall be retained
in the subcontract file of the awarding
contractor.
3.807 Civil penalties.
Agencies shall impose and collect
civil penalties pursuant to the provisions of the Program Fraud and Civil
Remedies Act, 31 U.S.C. 3803 (except
subsection (c)), 3804–3808, and 3812, insofar as the provisions therein are not inconsistent with the requirements of
this subpart.
[55 FR 3190, Jan. 30, 1990, as amended at 67
FR 6120, Feb. 8, 2002]
3.808 Solicitation provision and contract clause.
(a) The provision at 52.203–11, Certification and Disclosure Regarding Payments to Influence Certain Federal
Transactions, shall be included in solicitations expected to exceed $100,000.
(b) The clause at 52.203–12, Limitation on Payments to Influence Certain
Federal Transactions, shall be included
in solicitations and contracts expected
to exceed $100,000.
[55 FR 3190, Jan. 30, 1990, as amended at 55
FR 38516, Sept. 18, 1990]
3.804
Policy.
(a) The contracting officer shall obtain certifications and disclosures as
required by the provision at 52.203–11,
Certification and Disclosure Regarding
Payments to Influence Certain Federal
Transactions, prior to the award of any
contract exceeding $100,000.
(b) The contracting officer shall forward a copy of all contractor disclosures furnished pursuant to the clause
at 52.203–12, Limitation on Payments
to Influence Certain Federal Transactions, to the official designated in
accordance with agency procedures, for
subsequent submission to Congress.
The original of the disclosure shall be
retained in the contract file.
3.805
Subpart 3.9—Whistleblower Protections for Contractor Employees
SOURCE: 60 FR 37776, July 21, 1995, unless
otherwise noted.
3.900 Scope of subpart.
This subpart implements 10 U.S.C.
2409 and 41 U.S.C. 251, et seq., as amended by Sections 6005 and 6006 of the Federal Acquisition Streamlining Act of
1994 (Pub. L. 103–355).
3.901 Definitions.
As used in this supart—
Authorized official of an agency means
an officer or employee responsible for
contracting, program management,
audit, inspection, investigation, or enforcement of any law or regulation relating to Government procurement or
the subject matter of the contract.
Authorized official of the Department of
Justice means any person responsible
for the investigation, enforcement, or
prosecution of any law or regulation.
Inspector General means an Inspector
General appointed under the Inspector
General Act of 1978, as amended. In the
Department of Defense that is the DOD
Inspector General. In the case of an executive agency that does not have an
Exemption.
The Secretary of Defense may exempt, on a case-by-case basis, a covered Federal action from the prohibitions of this section whenever the Secretary determines, in writing, that
such an exemption is in the national
interest. The Secretary shall transmit
a copy of such exemption to Congress
immediately after making such a determination.
3.806
Processing suspected violations.
Suspected violations of the requirements of the Act shall be referred to
the official designated in agency procedures.
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3.902
48 CFR Ch. 1 (10–1–03 Edition)
Inspector General, the duties shall be
performed by an official designated by
the head of the executive agency.
tivity. The Inspector General shall conduct an investigation and provide a
written report of findings to the head
of the agency or designee.
(c) Upon completion of the investigation, the head of the agency or designee shall ensure that the Inspector
General provides the report of findings
to—
(1) The complainant and any person
acting on the complainant’s behalf;
(2) The contractor alleged to have
committed the violation; and
(3) The head of the contracting activity.
(d) The complainant and contractor
shall be afforded the opportunity to
submit a written response to the report
of findings within 30 days to the head
of the agency or designee. Extensions
of time to file a written response may
be granted by the head of the agency or
designee.
(e) At any time, the head of the agency or designee may request additional
investigative work be done on the complaint.
[48 FR 42108, Sept. 19, 1983, as amended at 66
FR 2127, Jan. 10, 2001]
3.902 Applicability.
This subpart applies to all Government contracts.
3.903 Policy.
Government contractors shall not
discharge, demote or otherwise discriminate against an employee as a reprisal for disclosing information to a
Member of Congress, or an authorized
official of an agency or of the Department of Justice, relating to a substantial violation of law related to a contract (including the competition for or
negotiation of a contract).
3.904 Procedures for filing complaints.
(a) Any employee of a contractor who
believes that he or she has been discharged, demoted, or otherwise discriminated against contrary to the policy in 3.903 may file a complaint with
the Inspector General of the agency
that awarded the contract.
(b) The complaint shall be signed and
shall contain—
(1) The name of the contractor;
(2) The contract number, if known; if
not, a description reasonably sufficient
to identify the contract(s) involved;
(3) The substantial violation of law
giving rise to the disclosure;
(4) The nature of the disclosure giving rise to the discriminatory act; and
(5) The specific nature and date of
the reprisal.
3.906 Remedies.
(a) If the head of the agency or designee determines that a contractor has
subjected one of its employees to a reprisal for providing information to a
Member of Congress, or an authorized
official of an agency or of the Department of Justice, the head of the agency
or designee may take one or more of
the following actions:
(1) Order the contractor to take affirmative action to abate the reprisal.
(2) Order the contractor to reinstate
the person to the position that the person held before the reprisal, together
with the compensation (including back
pay), employment benefits, and other
terms and conditions of employment
that would apply to the person in that
position if the reprisal had not been
taken.
(3) Order the contractor to pay the
complainant an amount equal to the
aggregate amount of all costs and expenses (including attorneys’ fees and
expert witnesses’ fees) that were reasonably incurred by the complainant
for, or in connection with, bringing the
complaint regarding the reprisal.
(b) Whenever a contractor fails to
comply with an order, the head of the
3.905 Procedures
for
investigating
complaints.
(a) Upon receipt of a complaint, the
Inspector General shall conduct an initial inquiry. If the Inspector General
determines that the complaint is frivolous or for other reasons does not merit
further investigation, the Inspector
General shall advise the complainant
that no further action on the complaint will be taken.
(b) If the Inspector General determines that the complaint merits further investigation, the Inspector General shall notify the complainant, contractor, and head of the contracting ac-
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Pt. 4
Subpart 4.6—Contract Reporting
agency or designee shall request the
Department of Justice to file an action
for enforcement of such order in the
United States district court for a district in which the reprisal was found to
have occurred. In any action brought
under this section, the court may grant
appropriate relief, including injunctive
relief and compensatory and exemplary
damages.
(c) Any person adversely affected or
aggrieved by an order issued under this
section may obtain review of the order’s conformance with the law, and
this subpart, in the United States
Court of Appeals for a circuit in which
the reprisal is alleged in the order to
have occurred. No petition seeking
such review may be filed more than 60
days after issuance of the order by the
head of the agency or designee. Review
shall conform to Chapter 7 of Title 5,
United States Code.
4.600
4.601
4.602
4.603
Subpart 4.7—Contractor Records Retention
4.700 Scope of subpart.
4.701 Purpose.
4.702 Applicability.
4.703 Policy.
4.704 Calculation of retention periods.
4.705 Specific retention periods.
4.705–1 Financial
and
cost
accounting
records.
4.705–2 Pay administration records.
4.705–3 Acquisition and supply records.
4.706 [Reserved]
Subpart 4.8—Government Contract Files
4.800 Scope of subpart.
4.801 General.
4.802 Contract files.
4.803 Contents of contract files.
4.804 Closeout of contract files.
4.804–1 Closeout by the office administering
the contract.
4.804–2 Closeout of the contracting office
files if another office administers the
contract.
4.804–3 Closeout of paying office contract
files.
4.804–4 Physically completed contracts.
4.804–5 Procedures for closing out contract
files.
4.805 Storage, handling, and disposal of contract files.
PART 4—ADMINISTRATIVE MATTERS
Sec.
4.000
Scope of part.
Subpart 4.1—Contract Execution
4.101
4.102
4.103
Scope of subpart.
Record requirements.
Federal Procurement Data System.
Solicitation provisions.
Contracting officer’s signature.
Contractor’s signature.
Contract clause.
Subpart 4.2—Contract Distribution
4.201
4.202
4.203
Subpart 4.9—Taxpayer Identification
Number Information
Procedures.
Agency distribution requirements.
Taxpayer identification information.
4.900 Scope of subpart.
4.901 Definition.
4.902 General.
4.903 Reporting contract information to the
IRS.
4.904 Reporting payment information to the
IRS.
4.905 Solicitation provision.
Subpart 4.3—Paper Documents
4.300
4.301
4.302
4.303
Scope of subpart.
Definition.
Policy.
Contract clause.
Subpart 4.10—Administrative Matters
Subpart 4.4—Safeguarding Classified
Information Within Industry
4.1001
4.401 [Reserved]
4.402 General.
4.403 Responsibilities of contracting officers.
4.404 Contract clause.
Subpart 4.11—Central Contractor
Registration
4.1100 Scope.
4.1101 Definitions.
4.1102 Policy.
4.1103 Procedures.
4.1104 Solicitation provision and contract
clauses.
Subpart 4.5—Electronic Commerce in
Contracting
4.500
4.501
4.502
Policy.
Scope of subpart.
[Reserved]
Policy.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
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4.000
48 CFR Ch. 1 (10–1–03 Edition)
SOURCE: 48 FR 42113, Sept. 19, 1983, unless
otherwise noted.
bination of individuals, partnerships,
or corporations. The contract shall be
signed by each participant in the joint
venture in the manner prescribed in
paragraphs (a) through (c) above for
each type of participant. When a corporation is participating, the contracting officer shall verify that the
corporation is authorized to participate in the joint venture.
(e) Agents. When an agent is to sign
the contract, other than as stated in
paragraphs (a) through (d) above, the
agent’s authorization to bind the principal must be established by evidence
satisfactory to the contracting officer.
4.000 Scope of part.
This part prescribes policies and procedures relating to the administrative
aspects of contract execution, contractor-submitted paper documents,
distribution, reporting, retention, and
files.
[60 FR 28493, May 31, 1995]
Subpart 4.1—Contract Execution
4.101 Contracting officer’s signature.
Only contracting officers shall sign
contracts on behalf of the United
States. The contracting officer’s name
and official title shall be typed,
stamped, or printed on the contract.
The contracting officer normally signs
the contract after it has been signed by
the contractor. The contracting officer
shall ensure that the signer(s) have authority to bind the contractor (see specific requirements in 4.102 of this subpart).
[48 FR 42113, Sept. 19, 1983, as amended at 62
FR 235, Jan. 2, 1997]
4.103
Contract clause.
The contracting officer shall insert
the clause at 52.204–1, Approval of Contract, in solicitations and contracts if
required by agency procedures.
[49 FR 26741, June 29, 1984]
Subpart 4.2—Contract Distribution
[60 FR 34736, July 3, 1995]
4.201
4.102 Contractor’s signature.
(a) Individuals. A contract with an individual shall be signed by that individual. A contract with an individual
doing business as a firm shall be signed
by that individual, and the signature
shall be followed by the individual’s
typed, stamped, or printed name and
the words ‘‘, an individual doing business as .......................’’ [insert name of
firm].
(b) Partnerships. A contract with a
partnership shall be signed in the partnership name. Before signing for the
Government, the contracting officer
shall obtain a list of all partners and
ensure that the individual(s) signing
for the partnership have authority to
bind the partnership.
(c) Corporations. A contract with a
corporation shall be signed in the corporate name, followed by the word
‘‘by’’ and the signature and title of the
person authorized to sign. The contracting officer shall ensure that the
person signing for the corporation has
authority to bind the corporation.
(d) Joint venturers. A contract with
joint venturers may involve any com-
Procedures.
Contracting officers shall distribute
copies of contracts or modifications
within 10 working days after execution
by all parties. As a minimum, the contracting officer shall—
(a) Distribute simultaneously one
signed copy or reproduction of the
signed contract to the contractor and
the paying office;
(b) When a contract is assigned to another office for contract administration (see subpart 42.2), provide to that
office—
(1) One copy or reproduction of the
signed contract and of each modification; and
(2) A copy of the contract distribution list, showing those offices that
should receive copies of modifications,
and any changes to the list as they
occur;
(c) Distribute one copy to each accounting and finance office (funding office) whose funds are cited in the contract;
(d) When the contract is not assigned
for administration but contains a Cost
Accounting Standards clause, provide
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Federal Acquisition Regulation
4.203
(b) If the TIN or type of organization
is derived from a source other than the
provision at 52.204–3 or 52.212–3(b), the
contracting officer shall annotate the
last page of the contract or order forwarded to the payment office to state
the contractor’s TIN and type of organization, unless this information is
otherwise provided to the payment office in accordance with agency procedures.
(c) If the contractor provides its TIN
or type of organization to the contracting officer after award, the contracting officer shall forward the information to the payment office within 7
days of its receipt.
(d) Federal Supply Schedule contracts.
Each contracting officer that places an
order under a Federal Supply Schedule
contract (see Subpart 8.4) shall provide
the TIN and type of organization information to the payment office in accordance with paragraph (b) of this section.
(e) Basic ordering agreements and indefinite-delivery contracts (other than
Federal Supply Schedule contracts).
(1) Each contracting officer that
issues a basic ordering agreement or
indefinite-delivery
contract
(other
than a Federal Supply Schedule contract) shall provide to contracting officers placing orders under the agreement or contract (if the contractor is
not required to provide this information to a central contractor registration database)—
(i) A copy of the agreement or contract with a copy of the completed solicitation provision at 52.204–3 or
52.212–3(b) as the last page of the agreement or contract; or
(ii) The contractor’s TIN and type of
organization information.
(2) Each contracting officer that
places an order under a basic ordering
agreement or indefinite-delivery contract (other than a Federal Supply
Schedule contract) shall provide the
TIN and type of organization information to the payment office in accordance with paragraph (a) or (b) of this
section.
one copy of the contract to the cognizant administrative contracting officer and mark the copy ‘‘FOR COST ACCOUNTING STANDARDS ADMINISTRATION ONLY’’ (see 30.601(b));
(e) Provide one copy of each contract
or modification that requires audit
service to the appropriate field audit
office listed in the ‘‘Directory of Federal Contract Audit Offices’’ (copies of
this directory can be ordered from the
U.S. Government Printing Office, Superintendent of Documents, Washington, DC 20402, referencing stock
numbers 008–007–03189–9 and 008–007–
03190–2 for Volumes I and II, respectively); and
(f) Provide copies of contracts and
modifications to those organizations
required to perform contract administration support functions (e.g., when
manufacturing is performed at multiple sites, the contract administration
office cognizant of each location).
[48 FR 42113, Sept. 19, 1983, as amended at 60
FR 34736, July 3, 1995]
4.202 Agency
ments.
distribution
require-
Agencies shall limit additional distribution requirements to the minimum necessary for proper performance of essential functions. When contracts are assigned for administration
to a contract administration office located in an agency different from that
of the contracting office (see part 42),
the two agencies shall agree on any
necessary distribution in addition to
that prescribed in 4.201 above.
4.203 Taxpayer identification information.
(a) If the contractor has furnished a
Taxpayer Identification Number (TIN)
when completing the solicitation provision at 52.204–3, Taxpayer Identification, or paragraph (b) of the solicitation provision at 52.212–3, Offeror Representations and Certifications—Commercial Items, the contracting officer
shall, unless otherwise provided in
agency procedures, attach a copy of the
completed solicitation provision as the
last page of the copy of the contract
sent to the payment office.
[63 FR 58588, Oct. 30, 1998, as amended at 68
FR 56672, Oct. 1, 2003]
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4.300
48 CFR Ch. 1 (10–1–03 Edition)
Order 10909, January 17, 1961 (26 FR 508,
January 20, 1961).
(b) The National Industrial Security
Program Operating Manual (NISPOM)
incorporates the requirements of these
Executive Orders. The Secretary of Defense, in consultation with all affected
agencies and with the concurrence of
the Secretary of Energy, the Chairman
of the Nuclear Regulatory Commission,
and the Director of Central Intelligence, is responsible for issuance and
maintenance of this Manual. The following DOD publications implement
the program:
(1) National Industrial Security Program Operating Manual (NISPOM) (DOD
5220.22–M).
(2) Industrial Security Regulation (ISR)
(DOD 5220.22–R).
(c) Procedures for the protection of
information relating to foreign classified contracts awarded to U.S. industry, and instructions for the protection
of U.S. information relating to classified contracts awarded to foreign firms,
are prescribed in Chapter 10 of the
NISPOM.
(d) Part 27, Patents, Data, and Copyrights, contains policy and procedures
for safeguarding classified information
in patent applications and patents.
Subpart 4.3—Paper Documents
4.300
Scope of subpart.
This subpart provides policies and
procedures on contractor-submitted
paper documents.
[60 FR 28493, May 31, 1995]
4.301
Definition.
Printed or copied double-sided, as used
in this subpart, means printing or reproducing a document so that information is on both sides of a sheet of paper.
[65 FR 36017, June 6, 2000]
4.302
Policy.
When electronic commerce methods
(see 4.502) are not being used, a contractor should submit paper documents
to the Government relating to an acquisition printed or copied double-sided
on recycled paper whenever practicable. If the contractor cannot print
or copy double-sided, it should print or
copy single-sided on recycled paper.
[65 FR 36017, June 6, 2000]
4.303
Contract clause.
Insert the clause at 52.204–4, Printed
or Copied Double-Sided on Recycled
Paper, in solicitations and contracts
that exceed the simplified acquisition
threshold.
[48 FR 42113, Sept. 19, 1983, as amended at 61
FR 31617, June 20, 1996]
4.403 Responsibilities of contracting
officers.
(a) Presolicitation phase. Contracting
officers shall review all proposed solicitations to determine whether access to
classified information may be required
by offerors, or by a contractor during
contract performance.
(1) If access to classified information
of another agency may be required, the
contracting officer shall—
(i) Determine if the agency is covered
by the NISP; and
(ii) Follow that agency’s procedures
for determining the security clearances
of firms to be solicited.
(2) If the classified information required is from the contracting officer’s
agency, the contracting officer shall
follow agency procedures.
(b) Solicitation phase. Contracting officers shall—
(1) Ensure that the classified acquisition is conducted as required by the
[65 FR 36017, June 6, 2000]
Subpart 4.4—Safeguarding Classified Information Within Industry
4.401
[Reserved]
4.402
General.
(a) Executive Order 12829, January 6,
1993 (58 FR 3479, January 8, 1993), entitled ‘‘National Industrial Security Program’’ (NISP), establishes a program to
safeguard Federal Government classified information that is released to
contractors, licensees, and grantees of
the United States Government. Executive Order 12829 amends Executive
Order 10865, February 20, 1960 (25 FR
1583, February 25, 1960), entitled ‘‘Safeguarding Classified Information Within
Industry,’’ as amended by Executive
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4.502
agency-prescribed clause as required by
agency procedures.
NISP or agency procedures, as appropriate; and
(2) Include (i) an appropriate Security Requirements clause in the solicitation (see 4.404), and (ii) as appropriate, in solicitations and contracts
when the contract may require access
to classified information, a requirement for security safeguards in addition to those provided in the clause
(52.204–2, Security Requirements).
(c) Award phase. Contracting officers
shall inform contractors and subcontractors of the security classifications and requirements assigned to the
various documents, materials, tasks,
subcontracts, and components of the
classified contract as follows:
(1) Agencies covered by the NISP
shall use the Contract Security Classification Specification, DD Form 254.
The contracting officer, or authorized
representative, is the approving official
for the form and shall ensure that it is
prepared and distributed in accordance
with the ISR.
(2) Contracting officers in agencies
not covered by the NISP shall follow
agency procedures.
[48 FR 42113, Sept. 19, 1983, as amended at 61
FR 31617, June 20, 1996]
Subpart 4.5—Electronic
Commerce in Contracting
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 63 FR 58592, Oct. 30, 1998, unless
otherwise noted.
4.500
4.501
[Reserved]
4.502
Policy.
(a) The Federal Government shall use
electronic commerce whenever practicable or cost-effective. The use of
terms commonly associated with paper
transactions (e.g., ‘‘copy,’’ ‘‘document,’’ ‘‘page,’’ ‘‘printed,’’ ‘‘sealed envelope,’’ and ‘‘stamped’’) shall not be
interpreted to restrict the use of electronic commerce. Contracting officers
may supplement electronic transactions by using other media to meet
the requirements of any contract action governed by the FAR (e.g., transmit hard copy of drawings).
(b) Agencies may exercise broad discretion in selecting the hardware and
software that will be used in conducting electronic commerce. However,
as required by Section 30 of the OFPP
Act (41 U.S.C. 426), the head of each
agency, after consulting with the Administrator of OFPP, shall ensure that
systems, technologies, procedures, and
processes used by the agency to conduct electronic commerce—
(1)
Are
implemented
uniformly
throughout the agency, to the maximum extent practicable;
(2) Are implemented only after considering the full or partial use of existing infrastructures, (e.g., the Federal
Acquisition
Computer
Network
(FACNET));
[48 FR 42113, Sept. 19, 1983, as amended at 61
FR 31617, June 20, 1996]
4.404
Scope of subpart.
This subpart provides policy and procedures for the establishment and use
of electronic commerce in Federal acquisition as required by Section 30 of
the Office of Federal Procurement Policy (OFPP) Act (41 U.S.C. 426).
Contract clause.
(a) The contracting officer shall insert the clause at 52.204–2, Security Requirements, in solicitations and contracts when the contract may require
access to classified information, unless
the conditions specified in paragraph
(d) below apply.
(b) If a cost contract (see 16.302) for
research and development with an educational institution is contemplated,
the contracting officer shall use the
clause with its Alternate I.
(c) If a construction or architect-engineer contract where employee identification is required for security reasons
is contemplated, the contracting officer shall use the clause with its Alternate II.
(d) If the contracting agency is not
covered by the NISP and has prescribed
a clause and alternates that are substantially the same as those at 52.204–
2, the contracting officer shall use the
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4.600
48 CFR Ch. 1 (10–1–03 Edition)
(3) Facilitate access to Government
acquisition opportunities by small
business concerns, small disadvantaged
business concerns, and women-owned
small business concerns;
(4) Include a single means of providing widespread public notice of acquisition opportunities through the
Governmentwide point of entry and a
means of responding to notices or solicitations electronically; and
(5) Comply with nationally and internationally recognized standards that
broaden interoperability and ease the
electronic interchange of information,
such as standards established by the
National Institute of Standards and
Technology.
(c) Before using electronic commerce,
the agency head shall ensure that the
agency systems are capable of ensuring
authentication
and
confidentiality
commensurate with the risk and magnitude of the harm from loss, misuse,
or unauthorized access to or modification of the information.
(d) Agencies may accept electronic
signatures and records in connection
with Government contracts.
(5) Those procurements which result
in the submission of a single bid or proposal so that they can be separately
categorized
and
designated
noncompetitive procurements using competitive procedures.
(c) In addition to paragraph (b) of
this section with respect to each procurement carried out using procedures
other than competitive procedures,
agencies shall be able to access from
the computer file—
(1) The reason under subpart 6.3 for
the use of such procedures; and
(2) The identity of the organization
or activity which conducted the procurement.
(d) In addition to the information described in paragraphs (b) and (c) of this
section, for procurements in excess of
$25,000, agencies shall be able to access
information on the following from the
computer file:
(1) Awards to small disadvantaged
businesses using either set-asides or
full and open competition.
(2) Awards to business concerns
owned and controlled by women.
(3) The number of offers received in
response to a solicitation.
(4) Task or delivery order contracts.
(5) Contracts for the acquisition of
commercial items.
(e) In addition to the information described in paragraphs (b), (c), and (d) of
this section, agencies must be able to
access information from the computer
file to identify bundled contracts with
a total contract value, including all options, exceeding $5,000,000.
(f) Agencies must transmit this information to the Federal Procurement
Data System in accordance with its
procedures.
[63 R 58592, Oct. 30, 1998, as amended at 66 FR
27409, May 16, 2001; 68 FR 28094, May 22, 2003]
Subpart 4.6—Contract Reporting
4.600
Scope of subpart.
This subpart prescribes uniform reporting requirements for the Federal
Procurement Data System (FPDS).
4.601
Record requirements.
(a) Each executive agency shall establish and maintain for a period of 5
years a computer file, by fiscal year,
containing unclassified records of all
procurements exceeding $25,000.
(b) With respect to each procurement
carried out using competitive procedures, agencies shall be able to access
from the computer file, as a minimum,
the following information:
(1) The date of contract award.
(2)
Information
identifying
the
source to whom the contract was
awarded.
(3) The property or services obtained
by the Government under the procurement.
(4) The total cost of the procurement.
[50 FR 52429, Dec. 23, 1985, as amended at 52
FR 19802, May 27, 1987; 60 FR 42653, Aug. 16,
1995; 64 FR 72442, Dec. 27, 1999]
4.602 Federal Procurement Data System.
(a) The FPDS provides a comprehensive mechanism for assembling, organizing, and presenting contract placement data for the Federal Government.
Federal agencies report data to the
Federal Procurement Data Center
(FPDC), which collects, processes, and
disseminates official statistical data
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4.603
on Federal contracting. The data provide (1) a basis for recurring and special reports to the President, the Congress, the General Accounting Office,
Federal executive agencies, and the
general public;
(2) A means of measuring and assessing the impact of Federal contracting
on the Nation’s economy and the extent to which small, veteran-owned
small, service-disabled veteran-owned
small, HUBZone small, small disadvantaged, and women-owned small business concerns are sharing in Federal
contracts; and
(3) Data for other policy and management control purposes.
(b) The FPDS Reporting Manual provides a complete list of reporting and
nonreporting agencies and organizations. This manual (available at no
charge from the General Services Administration, Federal Procurement
Data Center, 7th & D Streets SW.,
room 5652, Washington, DC 20407, telephone (202) 401–1529, FAX (202) 401–1546)
provides the necessary instruction to
the data collection point in each agency as to what data are required and
how often to provide the data.
(c) Data collection points in each
agency report data on SF 279, Federal
Procurement Data System (FPDS) Individual Contract Action Report, and
SF 281, Federal Procurement Data System (FPDS) Summary Contract Action
Report ($25,000 or Less), or computergenerated equivalent. Although the SF
279 and SF 281 are not mandatory for
use by the agencies, they do provide
the mandatory format for submitting
data to the FPDS.
(d) The contracting officer must report a Contractor Identification Number for each successful offeror. A Data
Universal Numbering System (DUNS)
number, which is a nine-digit number
assigned by Dun and Bradstreet Information Services to an establishment, is
the Contractor Identification Number
for Federal contractors. The DUNS
number reported must identify the successful offeror’s name and address exactly as stated in the offer and resultant contract. The contracting officer
must ask the offeror to provide its
DUNS number by using the provision
prescribed at 4.603(a). If the successful
offeror does not provide its number,
the contracting officer must contact
the offeror and obtain the DUNS number.
(e) Unique Procurement Instrument
Identifier (PIID). (1) The FPDS requires
that each reporting agency assign a
unique identifier for every contract,
purchase order, BOA, Basic Agreement,
and BPA reported to FPDS. Such identifiers shall comply with the contract
numbering guidelines established by
the Joint Financial Management Improvement Project. The PIID shall consist of alpha characters in the first positions to indicate the agency, followed
by alphanumeric characters identifying bureau, offices, or other administrative subdivisions. The last portion
of the PIID shall be numbered sequentially. The PIID may include other elements, as appropriate, such as fiscal
year. Delivery orders, task orders, and
call numbers must be unique in combination with the basic reference contract vehicle identifier. When the basic
reference contract is available for
multi-agency use (GWAC, Federal Supply Schedule contract, etc.), an ordering agency shall use the same agency
identification prefix for its delivery orders, task orders, and call numbers as
it uses for its contractual instruments.
(2) Agencies are required to have in
place, no later than October 1, 2003, a
process that will ensure that each PIID
reported to FPDS is unique, Governmentwide, and will remain so for at
least 20 years from the date of contract
award. To eliminate the possibility of
duplication between agencies, agencies
must submit their proposed identifier
to the Federal Procurement Data Center, which will maintain a registry of
the identifiers on the FPDC website
and validate their use in all transactions.
[48 FR 42113, Sept. 19. 1983. Redesignated at
50 FR 52429, Dec. 23, 1985, and amended at 54
FR 29280, July 11, 1989; 53 FR 43388, Oct. 26,
1988; 55 FR 52788, Dec. 21, 1990; 56 FR 41744,
Aug. 22, 1991; 57 FR 60572, Dec. 21, 1992; 60 FR
48259, Sept. 18, 1995; 61 FR 67412, Dec. 20, 1996;
62 FR 40236, July 25, 1997; 65 FR 60544, Oct. 11,
2000; 68 FR 56680, Oct. 1, 2003]
4.603
Solicitation provisions.
(a) Insert the provision at 52.204–6,
Data Universal Numbering System
(DUNS) Number, in solicitations that—
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4.700
48 CFR Ch. 1 (10–1–03 Edition)
Chapter 137, Title 10, U.S.C., and the
Federal Property and Administrative
Services Act of 1949, as amended, 40
U.S.C. 471 et seq.
(1) Are expected to result in a requirement for the generation of an SF
279, Federal Procurement Data System
(FPDS)—Individual Contract Action
Report (see 4.602(c)), or a similar agency form; and
(2) Do not contain the clause at
52.204–7, Central Contractor Registration.
(b) Insert the provision at 52.204–5,
Women-Owned Business (Other Than
Small Business), in solicitations that—
(1) Are not set aside for small business concerns;
(2) Exceed the simplified acquisition
threshold; and
(3) Are for contracts that will be performed in the United States or its outlying areas.
[48 FR 42113, Sept. 19, 1983, as amended at 50
FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 42650, Aug. 16, 1995; 60 FR 48211,
Sept. 18, 1995; 62 FR 258, Jan. 2, 1997]
4.703 Policy.
(a) Except as stated in 4.703(b), contractors shall make available records,
which includes books, documents, accounting procedures and practices, and
other data, regardless of type and regardless of whether such items are in
written form, in the form of computer
data, or in any other form, and other
supporting evidence to satisfy contract
negotiation, administration, and audit
requirements of the contracting agencies and the Comptroller General for (1)
3 years after final payment or, for certain records, (2) the period specified in
4.705 through 4.705–3, whichever of
these periods expires first.
(b) Contractors shall make available
the foregoing records and supporting
evidence for a longer period of time
than is required in 4.703(a) if—
(1) A retention period longer than
that cited in 4.703(a) is specified in any
contract clause; or
(2) The contractor, for its own purposes, retains the foregoing records and
supporting evidence for a longer period.
Under this circumstance, the retention
period shall be the period of the contractor’s retention or 3 years after
final payment, whichever period expires first.
(3) The contractor does not meet the
original due date for submission of
final indirect cost rate proposals specified in subparagraph (d)(2) of the clause
at 52.216–7, Allowable Cost and Payment, and subparagraph (c)(2) of the
clause at 52.216–13, Allowable Cost and
Payment—Facilities. Under these circumstances, the retention periods in
4.705 shall be automatically extended
one day for each day the proposal is
not submitted after the original due
date.
(c) Nothing in this section shall be
construed to preclude a contractor
from duplicating or storing original
records in electronic form unless they
contain significant information not
[61 FR 67412, Dec. 20, 1996, as amended at 63
FR 9050, Feb. 23, 1998; 64 FR 10532, Mar. 4,
1999; 68 FR 28080, May 22, 2003; 68 FR 56672,
Oct. 1, 2003]
Subpart 4.7—Contractor Records
Retention
4.700 Scope of subpart.
This subpart provides policies and
procedures for retention of records by
contractors to meet the records review
requirements of the Government. In
this subpart, the terms ‘‘contracts’’
and
‘‘contractors’’
include
‘‘subcontracts’’ and ‘‘subcontractors.’’
4.701 Purpose.
The purpose of this subpart is to generally describe records retention requirements and to allow reductions in
the retention period for specific classes
of records under prescribed circumstances.
4.702 Applicability.
(a) This subpart applies to records
generated under contracts that contain
one of the following clauses:
(1) Audit and Records—Sealed Bidding (52.214–26).
(2) Audit and Records—Negotiation
(52.215–2).
(b) This subpart is not mandatory on
Department of Energy contracts for
which the Comptroller General allows
alternative records retention periods.
Apart from this exception, this subpart
applies to record retention periods
under contracts that are subject to
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4.705–1
shown on the record copy. Original
records need not be maintained or produced in an audit if the contractor or
subcontractor provides photographic or
electronic images of the original
records and meets the following requirements:
(1) The contractor or subcontractor
has established procedures to ensure
that the imaging process preserves accurate images of the original records,
including signatures and other written
or graphic images, and that the imaging process is reliable and secure so as
to maintain the integrity of the
records.
(2) The contractor or subcontractor
maintains an effective indexing system
to permit timely and convenient access
to the imaged records.
(3) The contractor or subcontractor
retains the original records for a minimum of one year after imaging to permit periodic validation of the imaging
systems.
(d) If the information described in
paragraph (a) of this section is maintained on a computer, contractors shall
retain the computer data on a reliable
medium for the time periods prescribed. Contractors may transfer computer data in machine readable form
from one reliable computer medium to
another. Contractors’ computer data
retention and transfer procedures shall
maintain the integrity, reliability, and
security of the original computer data.
Contractors shall also retain an audit
trail describing the data transfer. For
the record retention time periods prescribed, contractors shall not destroy,
discard, delete, or write over such computer data.
entry is made. The contractor should
cut off the records in annual blocks
and retain them for block disposal
under the prescribed retention periods.
(b) When records generated during a
prior contract are relied upon by a contractor for cost or pricing data in negotiating a succeeding contract, the prescribed periods shall run from the date
of the succeeding contract.
(c) If two or more of the record categories described in 4.705 are interfiled
and screening for disposal is not practical, the contractor shall retain the
entire record series for the longest period prescribed for any category of
records.
4.705 Specific retention periods.
The contractor shall retain the
records identified in 4.705–1 through
4.705–3 for the periods designated, provided retention is required under 4.702.
Records are identified in this subpart
in terms of their purpose or use and
not by specific name or form number.
Although the descriptive identifications may not conform to normal contractor usage or filing practices, these
identifications apply to all contractor
records that come within the description.
4.705–1 Financial and cost accounting
records.
(a) Accounts receivable invoices, adjustments to the accounts, invoice registers, carrier freight bills, shipping orders, and other documents which detail
the material or services billed on the
related invoices: Retain 4 years.
(b) Material, work order, or service
order files, consisting of purchase requisitions or purchase orders for material or services, or orders for transfer
of material or supplies: Retain 4 years.
(c) Cash advance recapitulations, prepared as posting entries to accounts receivable ledgers for amounts of expense
vouchers prepared for employees’ travel and related expenses: Retain 4 years.
(d) Paid, canceled, and voided checks,
other than those issued for the payment of salary and wages: Retain 4
years.
(e) Accounts payable records to support disbursements of funds for materials, equipment, supplies, and services,
containing originals or copies of the
[48 FR 42113, Sept. 19, 1983, as amended at 51
FR 2649, Jan. 17, 1986; 53 FR 43388, Oct. 26,
1988; 54 FR 48982, Nov. 28, 1989; 59 FR 67015,
Dec. 28, 1994; 60 FR 42650, Aug. 16, 1995; 62 FR
64915, Dec. 9, 1997]
4.704 Calculation of retention periods.
(a) The retention periods in 4.705 are
calculated from the end of the contractor’s fiscal year in which an entry is
made charging or allocating a cost to a
Government contract or subcontract. If
a specific record contains a series of
entries, the retention period is calculated from the end of the contractor’s fiscal year in which the final
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4.705–2
48 CFR Ch. 1 (10–1–03 Edition)
following and related documents: remittance advices and statements, vendors’ invoices, invoice audits and distribution slips, receiving and inspection reports or comparable certifications of receipt and inspection of material or services, and debit and credit
memoranda: Retain 4 years.
(f) Labor cost distribution cards or
equivalent documents: Retain 2 years.
(g) Petty cash records showing description of expenditures, to whom
paid, name of person authorizing payment, and date, including copies of
vouchers and other supporting documents: Retain 2 years.
randa of negotiations showing the principal elements of subcontract price negotiations (see 52.244–2): Retain 4 years.
(g) Production records of quality control, reliability, and inspection: Retain
4 years.
[48 FR 42113, Sept. 19, 1983, as amended at 63
FR 34060, June 22, 1998]
4.706
[Reserved]
Subpart 4.8—Government
Contract Files
4.800
Scope of subpart.
This subpart prescribes requirements
for establishing, maintaining, and disposing of contract files.
4.705–2 Pay administration records.
(a) Payroll sheets, registers, or their
equivalent, of salaries and wages paid
to individual employees for each payroll period; change slips; and tax withholding statements: Retain 4 years.
(b) Clock cards or other time and attendance cards: Retain 2 years.
(c) Paid checks, receipts for wages
paid in cash, or other evidence of payments for services rendered by employees: Retain 2 years.
[65 FR 36022, June 6, 2000]
4.801
General.
(a) The head of each office performing contracting, contract administration, or paying functions shall establish files containing the records of
all contractual actions.
(b) The documentation in the files
(see 4.803) shall be sufficient to constitute a complete history of the transaction for the purpose of—
(1) Providing a complete background
as a basis for informed decisions at
each step in the acquisition process;
(2) Supporting actions taken;
(3) Providing information for reviews
and investigations; and
(4) Furnishing essential facts in the
event of litigation or congressional inquiries.
(c) The files to be established include—
(1) A file for cancelled solicitations;
(2) A file for each contract; and
(3) A file such as a contractor general
file, containing documents relating—
for example—to (i) no specific contract,
(ii) more than one contract, or (iii) the
contractor in a general way (e.g., contractor’s management systems, past
performance, or capabilities).
[48 FR 42113, Sept. 19, 1983, as amended at 65
FR 36022, June 6, 2000; 67 FR 70517, Nov. 22,
2002]
4.705–3 Acquisition
and
supply
records.
(a) Store requisitions for materials,
supplies, equipment, and services: Retain 2 years.
(b) Work orders for maintenance and
other services: Retain 4 years.
(c) Equipment records, consisting of
equipment usage and status reports
and equipment repair orders: Retain 4
years.
(d) Expendable property records, reflecting accountability for the receipt
and use of material in the performance
of a contract: Retain 4 years.
(e) Receiving and inspection report
records, consisting of reports reflecting
receipt and inspection of supplies,
equipment, and materials: Retain 4
years.
(f) Purchase order files for supplies,
equipment, material, or services used
in the performance of a contract; supporting documentation and backup
files including, but not limited to, invoices, and memoranda; e.g., memo-
4.802
Contract files.
(a) A contract file should generally
consist of—
(1) The contracting office contract
file, that documents the basis for the
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acquisition and the award, the assignment of contract administration (including payment responsibilities), and
any subsequent actions taken by the
contracting office;
(2) The contract administration office contract file, that documents actions reflecting the basis for and the
performance of contract administration responsibilities; and
(3) The paying office contract file,
that documents actions prerequisite to,
substantiating, and reflecting contract
payments.
(b) Normally, each file should be kept
separately; however, if appropriate,
any or all of the files may be combined;
e.g., if all functions or any combination of the functions are performed by
the same office.
(c) Files must be maintained at organizational levels that ensure—
(1) Effective documentation of contract actions;
(2) Ready accessibility to principal
users;
(3) Minimal establishment of duplicate and working files;
(4) The safeguarding of classified documents; and
(5) Conformance with agency regulations for file location and maintenance.
(d) If the contract files or file segments are decentralized (e.g., by type
or function) to various organizational
elements or to other outside offices, responsibility for their maintenance
must be assigned. A central control
and, if needed, a locator system should
be established to ensure the ability to
locate promptly any contract files.
(e) Contents of contract files that are
contractor bid or proposal information
or source selection information as defined in 2.101 must be protected from
disclosure to unauthorized persons (see
3.104–4).
(f) Agencies may retain contract files
in any medium (paper, electronic,
microfilm, etc.) or any combination of
media, as long as the requirements of
this subpart are satisfied.
4.803
Contents of contract files.
The following are examples of the
records normally contained, if applicable, in contract files:
(a) Contracting office contract file. (1)
Purchase request, acquisition planning
information, and other presolicitation
documents.
(2) Justifications and approvals, determinations and findings, and associated documents.
(3) Evidence of availability of funds.
(4) Synopsis of proposed acquisition
as required by part 5 or a reference to
the synopsis.
(5) The list of sources solicited, and a
list of any firms or persons whose requests for copies of the solicitation
were denied, together with the reasons
for denial.
(6) Set-aside decision.
(7) Government estimate of contract
price.
(8) A copy of the solicitation and all
amendments thereto.
(9) Security requirements and evidence of required clearances.
(10) A copy of each offer or quotation,
the related abstract, and records of determinations concerning late offers or
quotations. Unsuccessful offers or
quotations may be maintained separately, if cross-referenced to the contract file. The only portions of the unsuccessful offer or quotation that need
be retained are—
(i) Completed solicitation sections A,
B, and K;
(ii) Technical and management proposals;
(iii) Cost/price proposals;
(iv) Any other pages of the solicitation that the offeror or quoter has altered or annotated.
(11) Contractor’s certifications and
representations.
(12) Preaward survey reports or reference to previous preaward survey reports relied upon.
(13) Source selection documentation.
(14) Contracting officer’s determination of the contractor’s responsibility.
(15) Small Business Administration
Certificate of Competency.
(16) Records of contractor’s compliance with labor policies including
equal employment opportunity policies.
[48 FR 42113, Sept. 19, 1983, as amended at 54
FR 20496, May 11, 1989; 55 FR 36794, Sept. 6,
1990; 59 FR 67016, Dec. 28, 1994; 62 FR 232, Jan.
2, 1997; 67 FR 13063, Mar. 20, 2002]
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48 CFR Ch. 1 (10–1–03 Edition)
(17) Cost or pricing data and Certificates of Current Cost or Pricing Data
or a required justification for waiver,
or information other than cost or pricing data.
(18) Packaging and transportation
data.
(19) Cost or price analysis.
(20) Audit reports or reasons for
waiver.
(21) Record of negotiation.
(22) Justification for type of contract.
(23) Authority for deviations from
this regulation, statutory requirements, or other restrictions.
(24) Required approvals of award and
evidence of legal review.
(25) Notice of award.
(26) The original of (i) the signed contract or award, (ii) all contract modifications, and (iii) documents supporting modifications executed by the
contracting office.
(27) Synopsis of award or reference
thereto.
(28) Notice to unsuccessful quoters or
offerors and record of any debriefing.
(29) Acquisition management reports
(see subpart 4.6).
(30) Bid, performance, payment, or
other bond documents, or a reference
thereto, and notices to sureties.
(31) Report of postaward conference.
(32) Notice to proceed, stop orders,
and any overtime premium approvals
granted at the time of award.
(33) Documents requesting and authorizing modification in the normal
assignment of contract administration
functions and responsibility.
(34) Approvals or disapprovals of requests for waivers or deviations from
contract requirements.
(35) Rejected engineering change proposals.
(36) Royalty, invention, and copyright reports (including invention disclosures) or reference thereto.
(37) Contract completion documents.
(38) Documentation regarding termination actions for which the contracting office is responsible.
(39) Cross-references to pertinent
documents that are filed elsewhere.
(40) Any additional documents on
which action was taken or that reflect
actions by the contracting office pertinent to the contract.
(41) A current chronological list identifying the awarding and successor contracting officers, with inclusive dates
of responsibility.
(b) Contract administration office contract file. (1) Copy of the contract and
all modifications, together with official record copies of supporting documents executed by the contract administration office.
(2) Any document modifying the normal assignment of contract administration functions and responsibility.
(3) Security requirements.
(4) Cost or pricing data, Certificates
of Current Cost or Pricing Data, or information other than cost or pricing
data; cost or price analysis; and other
documentation supporting contractual
actions executed by the contract administration office.
(5) Preaward survey information.
(6) Purchasing system information.
(7) Consent to subcontract or purchase.
(8) Performance and payment bonds
and surety information.
(9) Postaward conference records.
(10) Orders issued under the contract.
(11) Notice to proceed and stop orders.
(12) Insurance policies or certificates
of insurance or references to them.
(13) Documents supporting advance
or progress payments.
(14) Progressing, expediting, and production surveillance records.
(15) Quality assurance records.
(16) Property administration records.
(17) Documentation regarding termination actions for which the contract
administration office is responsible.
(18) Cross reference to other pertinent documents that are filed elsewhere.
(19) Any additional documents on
which action was taken or that reflect
actions by the contract administration
office pertinent to the contract.
(20) Contract completion documents.
(c) Paying office contract file. (1) Copy
of the contract and any modifications.
(2) Bills, invoices, vouchers, and supporting documents.
(3) Record of payments or receipts.
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(4) Other pertinent documents.
4.804–2 Closeout of the contracting office files if another office administers the contract.
[48 FR 42113, Sept. 19, 1983, as amended at 50
FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 54 FR 5054, Jan. 31, 1989; 55 FR 36794,
Sept. 6, 1990; 60 FR 48211, Sept. 18, 1995; 61 FR
39188, July 26, 1996; 61 FR 67430, Dec. 20, 1996;
62 FR 232, Jan. 2, 1997; 63 FR 9052, Feb. 23,
1998; 65 FR 46074, July 26, 2000; 66 FR 27409,
May 16, 2001]
4.804
(a) Contract files for contracts using
simplified
acquisition
procedures
should be considered closed when the
contracting officer receives evidence of
receipt of property and final payment,
unless otherwise specified by agency
regulation.
(b) All other contract files shall be
closed as soon as practicable after the
contracting officer receives a contract
completion statement from the contract administration office. The contracting officer shall ensure that all
contractual actions required have been
completed and shall prepare a statement to that effect. This statement is
authority to close the contract file and
shall be made a part of the official contract file.
Closeout of contract files.
4.804–1 Closeout by the office administering the contract.
(a) Except as provided in paragraph
(c) below, time standards for closing
out contract files are as follows:
(1) Files for contracts using simplified acquisition procedures should be
considered closed when the contracting
officer receives evidence of receipt of
property and final payment, unless
otherwise specified by agency regulations.
(2) Files for firm-fixed-price contracts, other than those using simplified acquisition procedures, should
be closed within 6 months after the
date on which the contracting officer
receives evidence of physical completion.
(3) Files for contracts requiring settlement of indirect cost rates should be
closed within 36 months of the month
in which the contracting officer receives evidence of physical completion.
(4) Files for all other contracts
should be closed within 20 months of
the month in which the contracting officer receives evidence of physical completion.
(b) When closing out the contract
files at 4.804–1(a)(2), (3), and (4), the
contracting officer shall use the closeout procedures at 4.804–5. However,
these closeout actions may be modified
to reflect the extent of administration
that has been performed. Quick closeout procedures (see 42.708) should be
used, when appropriate, to reduce administrative costs and to enable
deobligation of excess funds.
(c) A contract file shall not be closed
if (1) the contract is in litigation or
under appeal, or (2) in the case of a termination, all termination actions have
not been completed.
[48 FR 42113, Sept. 19, 1983, as amended at 60
FR 34746, July 3, 1995]
4.804–3 Closeout of paying office contract files.
The paying office shall close the contract file upon issuance of the final
payment voucher.
4.804–4 Physically
tracts.
completed
(a) Except as provided in paragraph
(b) below, a contract is considered to be
physically completed when—
(1)(i) The contractor has completed
the required deliveries and the Government has inspected and accepted the
supplies;
(ii) The contractor has performed all
services and the Government has accepted these services; and
(iii) All option provisions, if any,
have expired; or
(2) The Government has given the
contractor a notice of complete contract termination.
(b) Facilities contracts and rental,
use, and storage agreements are considered to be physically completed
when—
(1) The Government has given the
contractor a notice of complete contract termination; or
(2) The contract period has expired.
[48 FR 42113, Sept. 19, 1983, as amended at 54
FR 34752, Aug. 21, 1989; 60 FR 34746, July 3,
1995]
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48 CFR Ch. 1 (10–1–03 Edition)
4.804–5 Procedures
contract files.
for
closing
(9) Invoice number and date, if the
final approved invoice has been forwarded to a disbursing office of another
agency or activity and the status of
the payment is unknown.
(10) A statement that all required
contract administration actions have
been fully and satisfactorily accomplished.
(11) Name and signature of the contracting officer.
(12) Date.
(c) When the statement is completed,
the contracting officer must ensure
that—
(1) The signed original is placed in
the contracting office contract file (or
forwarded to the contracting office for
placement in the files if the contract
administration office is different from
the contracting office); and
(2) A signed copy is placed in the appropriate contract administration file
if administration is performed by a
contract administration office.
out
(a) The contract administration office is responsible for initiating (automated or manual) administrative
closeout of the contract after receiving
evidence of its physical completion. At
the outset of this process, the contract
administration office must review the
contract funds status and notify the
contracting office of any excess funds
the contract administration office
might deobligate. When complete, the
administrative closeout procedures
must ensure that—
(1) Disposition of classified material
is completed;
(2) Final patent report is cleared;
(3) Final royalty report is cleared;
(4) There is no outstanding value engineering change proposal;
(5) Plant clearance report is received;
(6) Property clearance is received;
(7) All interim or disallowed costs are
settled;
(8) Price revision is completed;
(9) Subcontracts are settled by the
prime contractor;
(10) Prior year indirect cost rates are
settled;
(11) Termination docket is completed;
(12) Contract audit is completed;
(13) Contractor’s closing statement is
completed;
(14) Contractor’s final invoice has
been submitted; and
(15) Contract funds review is completed and excess funds deobligated.
(b) When the actions in paragraph (a)
above have been verified, the contracting officer administering the contract must ensure that a contract completion statement, containing the following information, is prepared:
(1) Contract administration office
name and address (if different from the
contracting office).
(2) Contracting office name and address.
(3) Contract number.
(4) Last modification number.
(5) Last call or order number.
(6) Contractor name and address.
(7) Dollar amount of excess funds, if
any.
(8) Voucher number and date, if final
payment has been made.
[48 FR 42113, Sept. 19, 1983, as amended at 54
FR 34752, Aug. 21, 1989; 64 FR 72445, Dec. 27,
1999]
4.805 Storage, handling, and disposal
of contract files.
(a) Agencies must prescribe procedures for the handling, storing, and disposing of contract files. These procedures must take into account documents held in all types of media, including microfilm and various electronic media. Agencies may change the
original medium to facilitate storage
as long as the requirements of Part 4,
law, and other regulations are satisfied. The process used to create and
store records must record and reproduce the original document, including
signatures and other written and
graphic images completely, accurately,
and clearly. Data transfer, storage, and
retrieval procedures must protect the
original data from alteration. Unless
law or other regulations require signed
originals to be kept, they may be destroyed after the responsible agency official verifies that record copies on alternate media and copies reproduced
from the record copy are accurate,
complete, and clear representations of
the originals. Agency procedures for
contract file disposal must include provisions that the documents specified in
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Federal Acquisition Regulation
4.805
paragraph (b) of this section may not
be destroyed before the times indicated, and may be retained longer if
the responsible agency official determines that the files have future value
to the Government. When original documents have been converted to alternate media for storage, the requirements in paragraph (b) of this section
also apply to the record copies in the
alternate media.
(b) If administrative records are
mixed with program records and cannot be economically segregated, the
entire file should be kept for the period
of time approved for the program
records. Similarly, if documents described in the following table are part
of a subject or case file that documents
activities that are not described in the
table, they should be treated in the
same manner as the files of which they
are a part. The retention periods for
acquisitions at or below the simplified
acquisition threshold also apply to acquisitions conducted prior to July 3,
1995, that used small purchase procedures. The retention periods for acquisitions above the simplified acquisition
threshold also apply to acquisitions
conducted prior to July 3, 1995, that
used other than small purchase procedures.
Document
Document
Retention period
(iii) Related records or
documents, including
successful proposals,
except for contractor’s
payrolls (see (b)(4)(iv)).
Same as contract file.
(iv) Contractor’s payrolls
submitted in accordance with Department
of Labor regulations,
with related certifications, anti-kickback
affidavits, and other related papers.
3 years after contract completion unless contract performance is the subject of
an enforcement action on
that date.
(5) Solicited and unsolicited
unsuccessful offers,
quotations, bids, and proposals:
(i) Relating to contracts
above the simplified
acquisition threshold.
(ii) Relating to contracts
at or below the simplified acquisition
threshold.
If filed separately from contract file, until contract is
completed. Otherwise, the
same as related contract
file.
1 year after date of award or
until final payment, whichever is later.
(6) Files for canceled solicitations.
5 years after cancellation.
(7) Other copies of procurement file records used by
component elements of a
contracting office for administrative purposes.
Upon termination or completion.
(8) Documents pertaining
generally to the contractor
as described at 4.801(c)(3).
Until superseded or obsolete.
(9) Data submitted to the
Federal Procurement Data
System (FPDS). Electronic
data file maintained by fiscal year, containing unclassified records of all procurements other than simplified acquisitions, and information required under
4.601.
5 years after submittal to
FPDS.
(10) Investigations, cases
pending or in litigation (including protests), or similar
matters.
Until final clearance or settlement, or, if related to a
document identified in
(b)(1)–(9), for the retention
period specified for the related document, whichever
is later.
Retention period
(1) Records pertaining to
Contract Disputes Act actions.
6 years and 3 months after
final action or decision for
files created prior to October 1, 1979. 1 year after
final action or decision for
files created on or after October 1, 1979.
(2) Contracts (and related
records or documents, including successful proposals) exceeding the simplified acquisition threshold
for other than construction.
6 years and 3 months after
final payment.
(3) Contracts (and related
records or documents, including successful proposals) at or below the
simplified acquisition
threshold for other than
construction.
3 years after final payment.
(4) Construction contracts:
(i) Above $2,000 .............
(ii) $2,000 or less ...........
[65 FR 36022, June 6, 2000]
Subpart 4.9—Taxpayer
Identification Number Information
6 years and 3 months after
final payment.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
3 years after final payment.
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4.900
48 CFR Ch. 1 (10–1–03 Edition)
SOURCE: 63 FR 58589, Oct. 30, 1998, unless
otherwise noted.
(2) The reporting requirement also
applies to certain contracts and modifications thereto in excess of $25,000 entered into on or after January 1, 1989.
(c) The information to report is—
(1) Name, address, and TIN of the
contractor;
(2) Name and TIN of the common parent (if any);
(3) Date of the contract action;
(4) Amount obligated on the contract
action; and
(5) Estimated contract completion
date.
(d) Transmit the information to the
IRS through the Federal Procurement
Data System (see Subpart 4.6 and implementing instructions).
4.900 Scope of subpart.
This subpart provides policies and
procedures for obtaining—
(a) Taxpayer Identification Number
(TIN) information that may be used for
debt collection purposes; and
(b) Contract information and payment information for submittal to the
payment office for Internal Revenue
Service (IRS) reporting purposes.
4.901 Definition.
Common parent, as used in this subpart, means that corporate entity that
owns or controls an affiliated group of
corporations that files its Federal income tax returns on a consolidated
basis, and of which the offeror is a
member.
4.904 Reporting payment information
to the IRS.
26 U.S.C. 6041 and 6041A, as implemented in 26 CFR, in part, require
payors, including Government agencies, to report to the IRS, on Form
1099, payments made to certain contractors. 26 U.S.C. 6109 requires a contractor to provide its TIN if a Form
1099 is required. The payment office is
responsible for submitting reports to
the IRS.
[60 FR 28493, May 31, 1995, as amended at 66
FR 2127, Jan. 10, 2001]
4.902 General.
(a) Debt collection. 31 U.S.C. 7701(c) requires each contractor doing business
with a Government agency to furnish
its TIN to that agency. 31 U.S.C. 3325(d)
requires the Government to include,
with each certified voucher prepared by
the Government payment office and
submitted to a disbursing official, the
TIN of the contractor receiving payment under the voucher. The TIN may
be used by the Government to collect
and report on any delinquent amounts
arising out of the contractor’s relationship with the Government.
(b) Information reporting to the IRS.
The TIN is also required for Government reporting of certain contract information (see 4.903) and payment information (see 4.904) to the IRS.
4.905
Solicitation provision.
The contracting officer shall insert
the provision at 52.204–3, Taxpayer
Identification, in solicitations that—
(a) Do not include the clause at
52.204–7, Central Contractor Registration; and
(b) Are not conducted under the procedures of part 12.
[68 FR 56672, Oct. 1, 2003]
Subpart 4.10—Administrative
Matters
4.903 Reporting contract information
to the IRS.
(a) 26 U.S.C. 6050M, as implemented
in 26 CFR, requires heads of Federal executive agencies to report certain information to the IRS.
(b)(1) The required information applies to contract modifications—
(i) Increasing the amount of a contract awarded before January 1, 1989,
by $50,000 or more; and
(ii) Entered into on or after April 1,
1990.
SOURCE: 62 FR 51230, Sept. 30, 1997, unless
otherwise noted.
4.1001
Policy.
Contracts may identify the items or
services to be acquired as separately
identified line items. Contract line
items should provide unit prices or
lump sum prices for separately identifiable contract deliverables, and associated delivery schedules or performance
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Federal Acquisition Regulation
4.1102
periods. Line items may be further subdivided or stratified for administrative
purposes (e.g., to provide for traceable
accounting classification citations).
101(a)(13) or humanitarian or peacekeeping operations as defined in 10
U.S.C. 2302(7); or
(ii) Contracting officers in the conduct of emergency operations, such as
responses to natural or environmental
disasters or national or civil emergencies, e.g., Robert T. Stafford Disaster Relief and Emergency Assistance
Act (42 U.S.C. 5121);
(4) Contracts to support unusual or
compelling needs (see 6.302–2);
(5) Awards made to foreign vendors
for work performed outside the United
States, if it is impractical to obtain
CCR registration; and
(6) Micro-purchases that do not use
the electronic funds transfer (EFT)
method for payment and are not required to be reported (see subpart 4.6).
(b) If practical, the contracting officer shall modify the contract or agreement awarded under paragraph (a)(3) or
(a)(4) of this section to require CCR
registration.
(c)(1)(i) If a contractor has legally
changed its business name, ‘‘doing
business as’’ name, or division name
(whichever is shown on the contract),
or has transferred the assets used in
performing the contract, but has not
completed the necessary requirements
regarding novation and change-ofname agreements in Subpart 42.12, the
contractor shall provide the responsible contracting officer a minimum of
one business day’s written notification
of its intention to change the name in
the CCR database; comply with the requirements of Subpart 42.12; and agree
in writing to the timeline and procedures specified by the responsible contracting officer. The contractor must
provide with the notification sufficient
documentation to support the legally
changed name.
(ii) If the contractor fails to comply
with the requirements of paragraph
(g)(1)(i) of the clause at 52.204–7, Central Contractor Registration, or fails
to perform the agreement at 52.204–
7(g)(1)(i)(3), and, in the absence of a
properly executed novation or changeof-name agreement, the CCR information that shows the contractor to be
other than the contractor indicated in
the contract will be considered to be
incorrect information within the meaning of the ‘‘Suspension of Payment’’
[62 FR 51230, Sept. 30, 1997]
Subpart 4.11—Central Contractor
Registration
SOURCE: 68 FR 56672, Oct. 1, 2003, unless
otherwise noted.
4.1100 Scope.
This subpart prescribes policies and
procedures for requiring contractor
registration in the Central Contractor
Registration (CCR) database, a part of
the Business Partner Network (BPN)
to—
(a) Increase visibility of vendor
sources (including their geographical
locations) for specific supplies and
services; and
(b) Establish a common source of
vendor data for the Government.
4.1101 Definitions.
As used in this subpart—
Agreement means basic agreement,
basic ordering agreement, or blanket
purchase agreement.
Business Partner Network means an integrated electronic infrastructure the
Government uses to manage (i.e., collect, validate, access and maintain) the
information it needs to transact business with its contractors.
4.1102 Policy.
(a) Prospective contractors shall be
registered in the CCR database prior to
award of a contract or agreement, except for—
(1) Purchases that use a Governmentwide commercial purchase card as both
the purchasing and payment mechanism, as opposed to using the purchase
card only as a payment method;
(2) Classified contracts (see 2.101)
when registration in the CCR database,
or use of CCR data, could compromise
the safeguarding of classified information or national security;
(3) Contracts awarded by—
(i) Deployed contracting officers in
the course of military operations, including, but not limited to, contingency operations as defined in 10 U.S.C.
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4.1103
48 CFR Ch. 1 (10–1–03 Edition)
(ii) In sufficient time to permit CCR
registration by December 31, 2003.
(b) Need not verify registration before placing an order or call if the contract or agreement includes the clause
at 52.204–7, or 52.212–4(t), or a similar
agency clause.
(c) If the contracting officer, when
awarding a contract or agreement, determines that a prospective contractor
is not registered in the CCR database
and an exception to the registration requirements for the award does not
apply (see 4.1102), the contracting officer shall—
(1) If the needs of the requiring activity allow for a delay, make award after
the apparently successful offeror has
registered in the CCR database. The
contracting officer shall advise the offeror of the number of days it will be
allowed to become registered. If the offeror does not become registered by the
required date, the contracting officer
shall award to the next otherwise successful registered offeror following the
same procedures (i.e., if the next apparently successful offeror is not registered, the contracting officer shall
advise the offeror of the number of
days it will be allowed to become registered, etc.); or
(2) If the needs of the requiring activity do not allow for a delay, proceed to
award to the next otherwise successful
registered offeror, provided that written approval is obtained at one level
above the contracting officer.
(d) Agencies shall protect against improper disclosure of contractor CCR information.
(e) The contracting officer shall, on
contractual documents transmitted to
the payment office, provide the DUNS
number, or, if applicable, the DUNS+4,
in accordance with agency procedures.
paragraph of the EFT clause of the
contract.
(2) The contractor shall not change
the name or address for electronic
funds transfer payments (EFT) or manual payments, as appropriate, in the
CCR record to reflect an assignee for
the purpose of assignment of claims
(see subpart 32.8, Assignment of
Claims).
(3) Assignees shall be separately registered in the CCR database. Information provided to the contractor’s CCR
record that indicates payments, including those made by EFT, to an ultimate
recipient other than that contractor
will be considered to be incorrect information within the meaning of the
‘‘Suspension of payment’’ paragraph of
the EFT clause of the contract.
4.1103
Procedures.
(a) Unless the acquisition is exempt
under 4.1102, the contracting officer—
(1) Shall verify that the prospective
contractor is registered in the CCR
database (see paragraph (b) of this section) before awarding a contract or
agreement;
(2) Should use the DUNS number or,
if applicable, the DUNS+4 number, to
verify registration—
(i) Via the Internet at http://
www.ccr.gov;
(ii) By calling toll-free: 1–888–227–2423,
commercial: (269) 961–5757, or Defense
Switched Network (DSN) (used at certain Department of Defense locations):
932–5757; or
(iii) As otherwise provided by agency
procedures; and
(3) Shall modify a contract or agreement that does not already include the
requirement to be registered in the
CCR database and maintain registration until final payment, and whose period of performance extends beyond December 31, 2003—
(i) To incorporate, as appropriate,
the clause at 52.204–7, Central Contractor Registration, and its Alternate
I, or, for a contract for commercial
items, an addendum to 52.212–4, Contract Terms and Conditions—Commercial Items, that requires the contractor
to be registered in the CCR database by
December 31, 2003, and maintain registration until final payment; and
4.1104 Solicitation provision and contract clauses.
Except as provided in 4.1102(a), use
the clause at 52.204–7, Central Contractor Registration, in solicitations
and contracts. If modifying a contract
or an agreement to require registration, use the clause with its Alternate
I.
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SUBCHAPTER B—ACQUISITION PLANNING
PART 5—PUBLICIZING CONTRACT
ACTIONS
Sec.
5.000
5.001
5.002
5.003
5.000 Scope of part.
This part prescribes policies and procedures for publicizing contract opportunities and award information.
Scope of part.
Definition.
Policy.
Governmentwide point of entry.
5.001 Definition.
Contract action, as used in this part,
means an action resulting in a contract, as defined in subpart 2.1, including actions for additional supplies or
services outside the existing contract
scope, but not including actions that
are within the scope and under the
terms of the existing contract, such as
contract modifications issued pursuant
to the Changes clause, or funding and
other administrative changes.
Subpart 5.1—Dissemination of Information
5.101
5.102
Methods of disseminating information.
Availability of solicitations.
Subpart 5.2—Synopses of Proposed
Contract Actions
5.201 General.
5.202 Exceptions.
5.203 Publicizing and response time.
5.204 Presolicitation notices.
5.205 Special situations.
5.206 Notice of subcontracting opportunities.
5.207 Preparation and transmittal of synopses.
[67 FR 13053, Mar. 20, 2002]
5.002 Policy.
Contracting officers must publicize
contract actions in order to—
(a) Increase competition;
(b) Broaden industry participation in
meeting Government requirements;
and
(c) Assist small business concerns,
veteran-owned small business concerns,
service-disabled veteran-owned small
business concerns, HUBZone small
business concerns, small disadvantaged
business concerns, and women-owned
small business concerns in obtaining
contracts and subcontracts.
Subpart 5.3—Synopses of Contract Awards
5.301 General.
5.302 Preparation and transmittal of synopses of awards.
5.303 Announcement of contract awards.
Subpart 5.4—Release of Information
5.401 General.
5.402 General public.
5.403 Requests from Members of Congress.
5.404 Release of long-range acquisition estimates.
5.404–1 Release procedures.
5.404–2 Announcements of long-range acquisition estimates.
5.405 Exchange of acquisition information.
[50 FR 52429, Dec. 23, 1985, as amended at 60
FR 48259, Sept. 18, 1995; 65 FR 60544, Oct. 11,
2000]
5.003 Governmentwide point of entry.
For any requirement in the FAR to
publish a notice, the contracting officer must transmit the notices to the
GPE.
Subpart 5.5—Paid Advertisements
5.501
5.502
5.503
5.504
Definitions.
Authority.
Procedures.
Use of advertising agencies.
[68 FR 56678, Oct. 1, 2003]
Subpart 5.1—Dissemination of
Information
Subpart 5.6—Publicizing Multi-Agency Use
Contracts
5.601 Governmentwide
tracts.
database
of
con-
5.101 Methods of disseminating information.
(a) As required by the Small Business
Act (15 U.S.C. 637(e)) and the Office of
Federal Procurement Policy Act (41
U.S.C. 416), contracting officers must
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42119, Sept. 19, 1983, unless
otherwise noted.
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5.102
48 CFR Ch. 1 (10–1–03 Edition)
disseminate information on proposed
contract actions as follows:
(1) For proposed contract actions expected to exceed $25,000, by synopsizing
in the GPE (see 5.201).
(2) For proposed contract actions expected to exceed $10,000, but not expected to exceed $25,000, by displaying
in a public place, or by any appropriate
electronic means, an unclassified notice of the solicitation or a copy of the
solicitation satisfying the requirements of 5.207(c). The notice must include a statement that all responsible
sources may submit a response which,
if timely received, must be considered
by the agency. The information must
be posted not later than the date the
solicitation is issued, and must remain
posted for at least 10 days or until after
quotations have been opened, whichever is later.
(i) If solicitations are posted instead
of a notice, the contracting officer may
employ various methods of satisfying
the requirements of 5.207(c). For example, the contracting officer may meet
the requirements of 5.207(c) by stamping the solicitation, by a cover sheet to
the solicitation, or by placing a general
statement in the display room.
(ii) The contracting officer need not
comply with the display requirements
of this section when the exemptions at
5.202(a)(1), (a)(4) through (a)(9), or
(a)(11) apply, when oral or Federal Acquisition
Computer
Network
(FACNET) solicitations are used, or
when providing access to a notice of
proposed contract action and solicitation through the GPE and the notice
permits the public to respond to the solicitation electronically.
(iii) Contracting officers may use
electronic posting of requirements in a
place accessible by the general public
at the Government installation to satisfy the public display requirement.
Contracting offices using electronic
systems for public posting that are not
accessible outside the installation
must periodically publicize the methods for accessing the information.
(b) In addition, one or more of the
following methods may be used:
(1) Preparing periodic handouts listing proposed contracts, and displaying
them as in 5.101(a)(2).
(2) Assisting local trade associations
in disseminating information to their
members.
(3) Making brief announcements of
proposed contracts to newspapers,
trade journals, magazines, or other
mass communication media for publication without cost to the Government.
(4) Placing paid advertisements in
newspapers or other communications
media, subject to the following limitations:
(i) Contracting officers shall place
paid advertisements of proposed contracts only when it is anticipated that
effective competition cannot be obtained otherwise (see 5.205(d)).
(ii) Contracting officers shall not
place advertisements of proposed contracts in a newspaper published and
printed in the District of Columbia unless the supplies or services will be furnished, or the labor performed, in the
District of Columbia or adjoining counties in Maryland or Virginia (44 U.S.C.
3701).
(iii) Advertisements published in
newspapers must be under proper written authority in accordance with 44
U.S.C. 3702 (see 5.502(a)).
[48 FR 42119, Sept. 19, 1983, as amended at 50
FR 1728, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 27117, July 29, 1986; 52 FR 21885,
June 9, 1987; 56 FR 41731, Aug. 22, 1991; 60 FR
34736, 34746, July 3, 1995; 61 FR 39191, July 26,
1996; 62 FR 12692, Mar. 17, 1997; 63 FR 58592,
Oct. 30, 1998; 66 FR 27409, May 16, 2001; 68 FR
56678, Oct. 1, 2003]
5.102
Availability of solicitations.
(a)(1) Except as provided in paragraph (a)(4) of this section, the contracting officer must make available
through the GPE solicitations synopsized through the GPE, including specifications and other pertinent information determined necessary by the contracting officer. Transmissions to the
GPE must be in accordance with the
interface description available via the
Internet at http://www.fedbizopps.gov.
(2) The contracting officer is encouraged, when practicable and cost-effective, to make accessible through the
GPE additional information related to
a solicitation.
(3) The contracting officer must ensure that solicitations transmitted to
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Federal Acquisition Regulation
5.201
FACNET are forwarded to the GPE to
satisfy the requirements of paragraph
(a)(1) of this section.
(4) The contracting officer need not
make a solicitation available through
the GPE when—
(i) Disclosure would compromise the
national security (e.g., would result in
disclosure of classified information) or
create other security risks. The fact
that access to classified matter may be
necessary to submit a proposal or perform the contract does not, in itself,
justify use of this exception;
(ii) The nature of the file (e.g., size,
format) does not make it cost-effective
or practicable for contracting officers
to provide access through the GPE;
(iii) The agency’s senior procurement
executive makes a written determination that access through the GPE is
not in the Government’s interest; or
(iv) The contracting office lacks the
capability to access the GPE and the
synopsis is issued prior to October 1,
2001.
(b) When the contracting officer does
not make a solicitation available
through the GPE pursuant to paragraph (a)(4) of this section, the contracting officer—
(1) Should employ other electronic
means (e.g., CD–ROM or electronic
mail) whenever practicable and cost-effective. When solicitations are provided electronically on physical media
(e.g., disks) or in paper form, the contracting officer must—
(i) Maintain a reasonable number of
copies of solicitations, including specifications and other pertinent information determined necessary by the contracting officer (upon request, potential sources not initially solicited
should be mailed or provided copies of
solicitations, if available);
(ii) Provide copies on a ‘‘first-comefirst-served’’ basis, for pickup at the
contracting office, to publishers, trade
associations, information services, and
other members of the public having a
legitimate interest (for construction,
see 36.211); and
(iii) Retain a copy of the solicitation
and other documents for review by and
duplication for those requesting copies
after the initial number of copies is exhausted; and
(2) May require payment of a fee, not
exceeding the actual cost of duplication, for a copy of the solicitation document.
(c) In addition to the methods of disseminating proposed contract information in 5.101(a) and (b), provide, upon
request to small business concerns, as
required by 15 U.S.C. 637(b)—
(1) A copy of the solicitation and
specifications. In the case of solicitations disseminated by electronic data
interchange, solicitations may be furnished directly to the electronic address of the small business concern;
(2) The name and telephone number
of an employee of the contracting office who will answer questions on the
solicitation; and
(3) Adequate citations to each applicable major Federal law or agency rule
with which small business concerns
must comply in performing the contract.
(d) When electronic commerce (see
subpart 4.5) is used in the solicitation
process, availability of the solicitation
may be limited to the electronic medium.
(e) Provide copies of a solicitation
issued under other than full and open
competition to firms requesting copies
that were not initially solicited, but
only after advising the requester of the
determination to limit the solicitation
to a specified firm or firms as authorized under part 6.
(f) This section 5.102 applies to classified contracts to the extent consistent
with agency security requirements (see
5.202(a)(1)).
[66 FR 27409, May 16, 2001]
Subpart 5.2—Synopses of
Proposed Contract Actions
5.201
General.
(a) As required by the Small Business
Act (15 U.S.C. 637(e)) and the Office of
Federal Procurement Policy Act (41
U.S.C. 416), agencies must make notices of proposed contract actions
available as specified in paragraph (b)
of this section.
(b)(1) For acquisitions of supplies and
services, other than those covered by
the exceptions in 5.202 and the special
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5.202
48 CFR Ch. 1 (10–1–03 Edition)
international agreement or treaty between the United States and a foreign
government or international organizations, has the effect of requiring that
the acquisition shall be from specified
sources;
(4) The proposed contract action is
expressly authorized or required by a
statute to be made through another
Government agency, including acquisitions from the Small Business Administration (SBA) using the authority of
section 8(a) of the Small Business Act
(but see 5.205(f)), or from a specific
source such as a workshop for the blind
under the rules of the Committee for
the Purchase from the Blind and Other
Severely Handicapped;
(5) The proposed contract action is
for utility services other than telecommunications services and only one
source is available;
(6) The proposed contract action is an
order placed under Subpart 16.5;
(7) The proposed contract action results from acceptance of a proposal
under the Small Business Innovation
Development Act of 1982 (Pub. L. 97–
219);
(8) The proposed contract action results from the acceptance of an unsolicited research proposal that demonstrates a unique and innovative concept (see 2.101) and publication of any
notice complying with 5.207 would improperly disclose the originality of
thought or innovativeness of the proposed research, or would disclose proprietary information associated with
the proposal. This exception does not
apply if the proposed contract action
results from an unsolicited research
proposal and acceptance is based solely
upon the unique capability of the
source to perform the particular research services proposed (see 6.302–
1(a)(2)(i);
(9) The proposed contract action is
made for perishable subsistence supplies, and advance notice is not appropriate or reasonable;
(10) The proposed contract action is
made under conditions described in
6.302–3, or 6.302–5 with regard to brand
name commercial items for authorized
resale, or 6.302–7, and advance notice is
not appropriate or reasonable;
(11) The proposed contract action is
made under the terms of an existing
situations in 5.205, the contracting officer must transmit a notice to the GPE,
for each proposed—
(i) Contract action meeting the
threshold in 5.101(a)(1);
(ii) Modification to an existing contract for additional supplies or services
that meets the threshold in 5.101(a)(1);
or
(iii) Contract action in any amount
when advantageous to the Government.
(2) When transmitting notices to
FACNET, contracting officers must ensure the notice is forwarded to the
GPE.
(c) The primary purposes of the notice are to improve small business access to acquisition information and enhance competition by identifying contracting and subcontracting opportunities.
(d) The GPE may be accessed via the
Internet at http://www.fedbizopps.gov.
[66 FR 27410, May 16, 2001, as amended at 68
FR 56678, Oct. 1, 2003]
5.202 Exceptions.
The contracting officer need not submit the notice required by 5.201 when—
(a) The contracting officer determines that—
(1) The synopsis cannot be worded to
preclude disclosure of an agency’s
needs and such disclosure would compromise the national security (e.g.,
would result in disclosure of classified
information). The fact that a proposed
solicitation or contract action contains
classified information, or that access
to classified matter may be necessary
to submit a proposal or perform the
contract does not, in itself, justify use
of this exception to synopsis;
(2) The proposed contract action is
made under the conditions described in
6.302–2 (or, for purchases conducted
using simplified acquisition procedures, if unusual and compelling urgency precludes competition to the
maximum extent practicable) and the
Government would be seriously injured
if the agency complies with the time
periods specified in 5.203;
(3) The proposed contract action is
one for which either the written direction of a foreign government reimbursing the agency for the cost of the acquisition of the supplies or services for
such government, or the terms of an
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Federal Acquisition Regulation
5.203
(see 5.201). All publicizing and response
times are calculated based on the date
of publication. The publication date is
the date the notice appears on the
GPE. The notice must be published at
least 15 days before issuance of a solicitation except that, for acquisitions of
commercial items, the contracting officer may—
(1) Establish a shorter period for
issuance of the solicitation; or
(2) Use the combined synopsis and solicitation procedure (see 12.603).
(b) The contracting officer must establish a solicitation response time
that will afford potential offerors a
reasonable opportunity to respond to
each proposed contract action, (including actions via FACNET or for which
the notice of proposed contract action
and solicitation information is accessible through the GPE), in an amount
estimated to be greater than $25,000,
but not greater than the simplified acquisition threshold; or each contract
action for the acquisition of commercial items in an amount estimated to
be greater than $25,000. The contracting officer should consider the circumstances of the individual acquisition,
such
as
the
complexity,
commerciality, availability, and urgency, when establishing the solicitation response time.
(c) Except for the acquisition of commercial items (see 5.203(b)), agencies
shall allow at least a 30-day response
time for receipt of bids or proposals
from the date of issuance of a solicitation, if the proposed contract action is
expected to exceed the simplified acquisition threshold.
(d) Agencies shall allow at least a 30
day response time from the date of
publication of a proper notice of intent
to contract for architect-engineer services or before issuance of an order
under a basic ordering agreement or
similar arrangement if the proposed
contract action is expected to exceed
the simplified acquisition threshold.
(e) Agencies must allow at least a 45day response time for receipt of bids or
proposals from the date of publication
of the notice required in 5.201 for proposed contract actions categorized as
contract that was previously synopsized in sufficient detail to comply
with the requirements of 5.207 with respect to the current proposed contract
action;
(12) The proposed contract action is
by a Defense agency and the proposed
contract action will be made and performed outside the United States and
its outlying areas, and only local
sources will be solicited. This exception does not apply to proposed contract actions subject to the Trade
Agreements Act (see subpart 25.4). This
exception also does not apply to North
American Free Trade Agreement proposed contract actions, which will be
synopsized in accordance with agency
regulations;
(13) The proposed contract action—
(i) Is for an amount not expected to
exceed
the
simplified
acquisition
threshold;
(ii) Will be made through a means
that provides access to the notice of
proposed contract action through the
GPE; and
(iii) Permits the public to respond to
the solicitation electronically; or
(14) The proposed contract action is
made under conditions described in
6.302–3 with respect to the services of
an expert to support the Federal Government in any current or anticipated
litigation or dispute.
(b) The head of the agency determines in writing after consultation
with the Administrator for Federal
Procurement Policy and the Administrator of the Small Business Administration, that advance notice is not appropriate or reasonable.
[50 FR 1728, Jan. 11, 1985, as amended at 50
FR 52430, Dec. 23, 1985; 51 FR 27117, July 29,
1986; 53 FR 27463, July 20, 1988; 54 FR 46004,
Oct. 31, 1989; 56 FR 15148, Apr. 15, 1991; 56 FR
41744, Aug. 22, 1991; 59 FR 545, Jan. 5, 1994; 60
FR 34746, July 3, 1995; 60 FR 42653, Aug. 16,
1995; 60 FR 49725, Sept. 26, 1995; 61 FR 39192,
July 26, 1996; 63 FR 58592, 58593, Oct. 30, 1998;
66 FR 2127, Jan. 10, 2001; 66 FR 27410, May 16,
2001; 68 FR 28080, May 22, 2003]
5.203 Publicizing and response time.
Whenever agencies are required to
publicize notice of proposed contract
actions under 5.201, they must proceed
as follows:
(a) An agency must transmit a notice
of proposed contract action to the GPE
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5.204
48 CFR Ch. 1 (10–1–03 Edition)
tices of their interest in potential R&D
programs whenever market research
does not produce a sufficient number of
concerns to obtain adequate competition. Advance notices must not be used
where security considerations prohibit
such publication. Advance notices will
enable potential sources to learn of
R&D programs and provide these
sources with an opportunity to submit
information which will permit evaluation of their capabilities. Contracting
officers
must
consider
potential
sources which respond to advance notices for a subsequent solicitation. Advance notices must be entitled ‘‘Research
and
Development
Sources
Sought,’’ cite the appropriate Numbered Note, and include the name and
telephone number of the contracting
officer or other contracting activity official from whom technical details of
the project can be obtained. This will
enable sources to submit information
for evaluation of their R&D capabilities. Contracting officers must synopsize (see 5.201) all subsequent solicitations for R&D contracts, including
those resulting from a previously synopsized advance notice, unless one of
the exceptions in 5.202 applies.
(b) Federally Funded Research and Development Centers. Before establishing a
Federally Funded Research and Development Center (FFRDC) (see Part 35)
or before changing its basic purpose
and mission, the sponsor must transmit at least three notices over a 90-day
period to the GPE and the FEDERAL
REGISTER, indicating the agency’s intention to sponsor an FFRDC or
change the basic purpose and mission
of an FFRDC. The notice must indicate
the scope and nature of the effort to be
performed and request comments. Notice is not required where the action is
required by law.
(c) Special notices. Contracting officers may transmit to the GPE special
notices of procurement matters such as
business fairs, long-range procurement
estimates, prebid or preproposal conferences, meetings, and the availability
of draft solicitations or draft specifications for review.
(d) Architect-engineering services. Contracting officers must publish notices
of intent to contract for architect-engineering services as follows:
research and development if the proposed contract action is expected to exceed the simplified acquisition threshold.
(f) Nothing in this subpart prohibits
officers or employees of agencies from
responding to requests for information.
(g) Contracting officers may, unless
they have evidence to the contrary,
presume the notice was published one
day after transmission to the GPE.
This presumption does not negate the
mandatory waiting or response times
specified in paragraphs (a) through (d)
of this section. Upon learning that a
particular notice has not in fact been
published within the presumed timeframes, contracting officers should
consider whether the date for receipt of
offers can be extended or whether circumstances have become sufficiently
compelling to justify proceeding with
the proposed contract action under the
authority of 5.202(a)(2).
(h) In addition to other requirements
set forth in this section, for acquisitions subject to NAFTA or the Trade
Agreements Act (see subpart 25.4), the
period of time between publication of
the synopsis notice and receipt of offers must be no less than 40 days. However, if the acquisition falls within a
general category identified in an annual forecast, the availability of which
is published, the contracting officer
may reduce this time period to as few
as 10 days.
[50 FR 52430, Dec. 23, 1985, as amended at 51
FR 31425, Sept. 3, 1986; 60 FR 34747, July 3,
1995; 60 FR 48236, Sept. 18, 1995; 61 FR 39192,
July 26, 1996; 62 FR 263, Jan. 2, 1997; 62 FR
10710, Mar. 10, 1997; 63 FR 58592, 58593, Oct. 30,
1998; 66 FR 27410, May 16, 2001; 68 FR 56678,
Oct. 1, 2003]
5.204 Presolicitation notices.
Contracting officers must provide access to presolicitation notices through
the GPE (see 15.201 and 36.213–2). The
contracting officer must synopsize a
proposed contract action before issuing
any resulting solicitation (see 5.201 and
5.203).
[66 FR 27411, May 16, 2001]
5.205 Special situations.
(a) Research and development (R&D)
advance notices. Contracting officers
may transmit to the GPE advance no-
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Federal Acquisition Regulation
5.207
(1) Except when exempted by 5.202,
contracting officers must transmit to
the GPE a synopsis of each proposed
contract action for which the total fee
(including phases and options) is expected to exceed $25,000.
(2) When the total fee is expected to
exceed $10,000 but not exceed $25,000,
the contracting officer must comply
with 5.101(a)(2). When the proposed contract action is not required to be synopsized under paragraph (d)(1) of this
section, the contracting officer must
display a notice of the solicitation or a
copy of the solicitation in a public
place at the contracting office. Other
optional publicizing methods are authorized in accordance with 5.101(b).
(e) Effort to locate commercial sources
under OMB Circular A–76. When determining the availability of commercial
sources under the procedures prescribed in subpart 7.3 and OMB Circular
A–76, the contracting officer must not
arrive at a conclusion that there are no
commercial sources capable of providing the required supplies or services
until publicizing the requirement
through the GPE at least three times
in a 90 calendar-day period, with a minimum of 30 calendar days between notices. When necessary to meet an urgent requirement, this may be limited
to a total of two notices through the
GPE in a 30 calendar-day period, with a
minimum of 15 calendar days between
each.
(f) Section 8(a) competitive acquisition.
When a national buy requirement is
being considered for competitive acquisition limited to eligible 8(a) concerns
under subpart 19.8, the contracting officer must transmit a synopsis of the
proposed contract action to the GPE.
The synopsis may be transmitted to
the GPE concurrent with submission of
the agency offering (see 19.804–2) to the
Small Business Administration (SBA).
The synopsis should also include information—
(1) Advising that the acquisition is
being offered for competition limited
to eligible 8(a) concerns;
(2) Specifying the North American
Industry
Classification
System
(NAICS) code;
(3) Advising that eligibility to participate may be restricted to firms in
either the developmental stage or the
developmental and transitional stages;
and
(4) Encouraging interested 8(a) firms
to request a copy of the solicitation as
expeditiously as possible since the solicitation will be issued without further notice upon SBA acceptance of the
requirement for the section 8(a) program.
[66 FR 27411, May 16, 2001, as amended at 68
FR 43856, July 24, 2003; 68 FR 56678, Oct. 1,
2003]
5.206 Notices of subcontracting opportunities.
(a) The following entities may transmit a notice to the GPE to seek competition for subcontracts, to increase
participation by qualified HUBZone
small business, small, small disadvantaged, and small women-owned business concerns, and to meet established
subcontracting plan goals:
(1) A contractor awarded a contract
exceeding $100,000 that is likely to result in the award of any subcontracts.
(2) A subcontractor or supplier, at
any tier, under a contract exceeding
$100,000, that has a subcontracting opportunity exceeding $10,000.
(b) The notices must describe—
(1) The business opportunity;
(2) Any prequalification requirements; and
(3) Where to obtain technical data
needed to respond to the requirement.
[64 FR 72442, Dec. 27, 1999, as amended at 65
FR 46054, July 26, 2000; 66 FR 27412, May 16,
2001; 68 FR 56678, Oct. 1, 2003]
5.207 Preparation and transmittal of
synopses.
(a) Content. Each synopsis transmitted to the GPE must address the
following data elements, as applicable:
(1) Action Code.
(2) Date.
(3) Year.
(4) Government Printing Office (GPO)
Billing Account Code.
(5) Contracting Office Zip Code.
(6) Classification Code.
(7) Contracting Office Address.
(8) Subject.
(9) Proposed Solicitation Number.
(10) Opening and Closing Response
Date.
(11) Contact Point or Contracting Officer.
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5.207
48 CFR Ch. 1 (10–1–03 Edition)
(12) Contract Award and Solicitation
Number.
(13) Contract Award Dollar Amount.
(14) Contract Line Item Number.
(15) Contract Award Date.
(16) Contractor.
(17) Description.
(18) Place of Contract Performance.
(19) Set-aside Status.
(b) Transmittal. Transmissions to the
GPE must be in accordance with the
interface description available via the
Internet at http://www.fedbizopps.gov.
(c) General format for ‘‘Description.’’
Prepare a clear and concise description
of the supplies or services that is not
unnecessarily restrictive of competition and will allow a prospective offeror to make an informed business judgment as to whether a copy of the solicitation should be requested including
the following, as appropriate:
(1) National Stock Number (NSN) if
assigned.
(2) Specification and whether an offeror, its product, or service must meet
a qualification requirement in order to
be eligible for award, and identification
of the office from which additional information about the qualification requirement may be obtained (see subpart 9.2).
(3) Manufacturer, including part
number, drawing number, etc.
(4) Size, dimensions, or other form,
fit or functional description.
(5) Predominant material of manufacture.
(6) Quantity, including any options
for additional quantities.
(7) Unit of issue.
(8) Destination information.
(9) Delivery schedule.
(10) Duration of the contract period.
(11) For a proposed contract action in
an amount estimated to be greater
than $25,000 but not greater than the
simplified
acquisition
threshold,
enter—
(i) A description of the procedures to
be used in awarding the contract (e.g.,
request for oral or written quotation or
solicitation); and
(ii) The anticipated award date.
(12) For Architect-Engineer projects
and other projects for which the supply
or service codes are insufficient, provide brief details with respect to: location, scope of services required, cost
range and limitations, type of contract, estimated starting and completion dates, and any significant evaluation factors.
(13) Numbered notes (see paragraph
(e) of this section), including instructions for set-asides for small businesses.
(14) In the case of noncompetitive
contract actions (including those that
do not exceed the simplified acquisition threshold), identify the intended
source (see paragraph (e) of this section) and insert a statement of the reason justifying the lack of competition.
(15) Insert a statement that all responsible sources may submit a bid,
proposal, or quotation which shall be
considered by the agency.
(16)
If
solicitations
synopsized
through the GPE will not be made
available through the GPE, provide information on how to obtain the solicitation.
(17) If the solicitation will be made
available to interested parties through
electronic data interchange, provide
any information necessary to obtain
and respond to the solicitation electronically.
(18) In the case of a very small business set-aside, identify the Designated
Region (see Subpart 19.9).
(19) If the technical data required to
respond to the solicitation will not be
furnished as part of such solicitation,
identify the source in the Government,
if any, from which the technical data
may be obtained.
(d) Set-asides. When the proposed acquisition provides for a total, partial,
or very small business set-aside or a
HUBZone small business set-aside, the
appropriate Numbered Note will be
cited.
(e) Numbered notes. Numbered Notes
are footnotes to be used by contracting
officers to eliminate the unnecessary
duplication of information that appears in various announcements. An
explanation of the numbered notes appears at http://www.fedbizopps.gov.
(f) Codes to be used in Synopses to identify services or supplies. Contracting officers must use one of the classification
codes
identified
at
http://
www.fedbizopps.gov/ to identify services
or supplies in synopses.
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Federal Acquisition Regulation
5.303
(g) Cancellation of synopsis. Contracting officers should not publish notices of solicitation cancellations (or
indefinite suspensions) of proposed contract actions in the GPE. Cancellations
of solicitations must be made in accordance with 14.209 and 14.404–1.
tract action was provided through the
GPE; and
(iii) Permitted the public to respond
to the solicitation electronically; or
(8) The award is for the services of an
expert to support the Federal Government in any current or anticipated litigation or dispute pursuant to the exception to full and open competition
authorized at 6.302–3.
(c) With respect to acquisitions subject to the Trade Agreements Act, contracting officers must submit synopses
in sufficient time to permit their publication in the GPE not later than 60
days after award.
[68 FR 56678, Oct. 1, 2003]
Subpart 5.3—Synopses of Contract
Awards
5.301
General.
(a) Except for contract actions described in paragraph (b) of this section
and as provided in 5.003, contracting officers must synopsize through the GPE
awards exceeding $25,000 that are—
(1) Subject to the Trade Agreements
Act (see Subpart 25.4); or
(2) Likely to result in the award of
any subcontracts. However, the dollar
threshold is not a prohibition against
publicizing an award of a smaller
amount when publicizing would be advantageous to industry or to the Government.
(b) A notice is not required under
paragraph (a) of this section if—
(1) The notice would disclose the executive agency’s needs and the disclosure of such needs would compromise
the national security;
(2) The award results from acceptance of an unsolicited research proposal that demonstrates a unique and
innovative research concept and publication of any notice would disclose the
originality of thought or innovativeness of the proposed research or would
disclose proprietary information associated with the proposal;
(3) The award results from a proposal
submitted under the Small Business Innovation Development Act of 1982 (Pub.
L. 97–219);
(4) The contract action is an order
placed under Subpart 16.5;
(5) The award is made for perishable
subsistence supplies;
(6) The award is for utility services,
other than telecommunications services, and only one source is available;
(7) The contract action—
(i) Is for an amount not greater than
the simplified acquisition threshold;
(ii) Was made through a means where
access to the notice of proposed con-
[52 FR 19802, May 27, 1987, as amended at 53
FR 27463, July 20, 1988; 60 FR 34747, July 3,
1995; 60 FR 42653, Aug. 16, 1995; 60 FR 49725,
Sept. 26, 1995; 63 FR 58593, Oct. 30, 1998; 64 FR
72418, Dec. 27, 1999; 66 FR 27412, May 16, 2001;
68 FR 56679, Oct. 1, 2003]
5.302 Preparation and transmittal of
synopses of awards.
Contracting officers shall transmit
synopses of contract awards in the
same manner as prescribed in 5.207.
[55 FR 52790, Dec. 21, 1990]
5.303 Announcement
awards.
of
(a) Public announcement. Contracting
officers shall make information available on awards over $3 million (unless
another dollar amount is specified in
agency acquisition regulations) in sufficient time for the agency concerned
to announce it by 5:00 p.m. Washington,
DC time on the day of award. Contracts
excluded from this reporting requirement include (1) those placed with the
Small Business Administration under
Section 8(a) of the Small Business Act,
(2) those placed with foreign firms
when the place of delivery or performance is outside the United States and
its outlying areas, and (3) those for
which synopsis was exempted under
5.202(a)(1). Agencies shall not release
information on awards before the public release time of 5:00 p.m. Washington, DC time.
(b) Local announcement. Agencies
may also release information on contract awards to the local press or other
media. When local announcements are
made for contract awards in excess of
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5.401
48 CFR Ch. 1 (10–1–03 Edition)
rectly or indirectly in any stage of the
acquisition cycle.
the simplified acquisition threshold,
they shall include—
(1) For awards after sealed bidding, a
statement that the contract was
awarded after competition by sealed
bidding, the number of offers solicited
and received, and the basis for selection (e.g., the lowest responsible bidder); or
(2) For awards after negotiation, the
information prescribed by 15.503(b), and
after competitive negotiation (either
price or design competition), a statement to this effect, and in general
terms the basis for selection.
5.402
5.403 Requests from Members of Congress.
Contracting officers shall give Members of Congress, upon their request,
detailed information regarding any
particular contract. When responsiveness would result in disclosure of classified matter, business confidential information, or information prejudicial
to competitive acquisition, the contracting officer shall refer the proposed
reply, with full documentation, to the
agency head and inform the legislative
liaison office of the action.
[48 FR 42119, Sept. 19, 1983, as amended at 50
FR 1729, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 52 FR 30076, Aug. 12, 1987; 55 FR 3881,
Feb. 5, 1990; 56 FR 67128, Dec. 27, 1991; 59 FR
67017, Dec. 28, 1994; 60 FR 34747, July 3, 1995;
60 FR 42653, Aug. 16, 1995; 61 FR 39190, July 26,
1996; 61 FR 69289, Dec. 31, 1996; 62 FR 51270,
Sept. 30, 1997; 68 FR 28080, May 22, 2003]
Subpart 5.4—Release of
Information
5.401
General public.
Contracting officers shall process requests for specific information from
the general public, including suppliers,
in accordance with subpart 24.1 or 24.2,
as appropriate.
[48 FR 42119, Sept. 19, 1983, as amended at 50
FR 1729, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 68 FR 43856, July 24, 2003]
General.
(a) A high level of business security
must be maintained in order to preserve the integrity of the acquisition
process. When it is necessary to obtain
information from potential contractors
and others outside the Government for
use in preparing Government estimates, contracting officers shall ensure
that the information is not publicized
or discussed with potential contractors.
(b) Contracting officers may make
available maximum information to the
public, except information—
(1) On plans that would provide
undue or discriminatory advantage to
private or personal interests;
(2) Received in confidence from an offeror;
(3) Otherwise requiring protection
under Freedom of Information Act (see
subpart 24.2) or Privacy Act (see subpart 24.1); or
(4) Pertaining to internal agency
communications (e.g., technical reviews, contracting authority or other
reasons, or recommendations referring
thereto).
(c) This policy applies to all Government personnel who participate di-
5.404 Release of long-range acquisition
estimates.
To assist industry planning and to locate additional sources of supply, it
may be desirable to publicize estimates
of unclassified long-range acquisition
requirements. Estimates may be publicized as far in advance as possible.
5.404–1
Release procedures.
(a) Application. The agency head, or a
designee, may release long-range acquisition estimates if the information
will—
(1) Assist industry in its planning and
facilitate meeting the acquisition requirements;
(2) Not encourage undesirable practices (e.g., attempts to corner the market or hoard industrial materials); and
(3) Not indicate the existing or potential mobilization of the industry as a
whole.
(b) Conditions. The agency head shall
ensure that—
(1) Classified information is released
through existing security channels in
accordance with agency security regulations;
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Federal Acquisition Regulation
5.502
(2) The information is publicized as
widely as practicable to all parties simultaneously by any of the means described in this part;
(3) Each release states that (i) the estimate is based on the best information
available, (ii) the information is subject to modification and is in no way
binding on the Government, and (iii)
more specific information relating to
any individual item or class of items
will not be furnished until the proposed
action is synopsized through the GPE
or the solicitation is issued;
(4) Each release contains the name
and address of the contracting officer
that will process the acquisition;
(5) Modifications to the original release are publicized as soon as possible,
in the same manner as the original;
and
(6) Each release—
(i) Is coordinated in advance with
small business, public information, and
public relations personnel, as appropriate;
(ii) Contains, if applicable, a statement that small business set-asides
may be involved, but that a determination can be made only when acquisition
action is initiated; and
(iii) Contains the name or description
of the item, and the estimated quantity to be acquired by calendar quarter,
fiscal year, or other period. It may also
contain such additional information as
the number of units last acquired, the
unit price, and the name of the last
supplier.
tracting activity within an agency, the
exchange and coordination of pertinent
information, particularly cost and pricing data, between these agencies or
contracting activities is necessary to
promote uniformity of treatment of
major issues and the resolution of particularly difficult or controversial
issues. The exchange and coordination
of information is particularly beneficial during the period of acquisition
planning, presolicitation, evaluation,
and pre-award survey.
(b) When substantial acquisitions of
major items are involved or when the
contracting activity deems it desirable, the contracting activity shall request appropriate information (on both
the end item and on major subcontracted components) from other agencies or contracting activities responsible for acquiring similar items. Each
agency or contracting activity receiving such a request shall furnish the information requested. The contracting
officer, early in a negotiation of a contract, or in connection with the review
of a subcontract, shall request the contractor to furnish information as to
the contractor’s or subcontractor’s previous Government contracts and subcontracts for the same or similar end
items and major subcontractor components.
Subpart 5.5—Paid Advertisements
5.501
Definitions.
As used in this subpart—
Advertisement, means any single message prepared for placement in communication media, regardless of the number of placements.
Publication, means (1) the placement
of an advertisement in a newspaper,
magazine, trade or professional journal, or any other printed medium, or
(2) the broadcasting of an advertisement over radio or television.
[48 FR 42119, Sept. 19, 1983, as amended at 60
FR 48259, Sept. 18, 1995; 66 FR 27412, May 16,
2001]
5.404–2 Announcements of long-range
acquisition estimates.
Further publicizing, consistent with
the needs of the individual case, may
be
accomplished
by
announcing
through the GPE that long-range acquisition estimates have been published and are obtainable, upon request, from the contracting officer.
[48 FR 42119, Sept. 19, 1983, as amended at 66
FR 2127, Jan. 10, 2001]
[66 FR 27412, May 16, 2001]
5.502
5.405 Exchange of acquisition information.
(a) When the same item or class of
items is being acquired by more than
one agency, or by more than one con-
Authority.
(a) Newspapers. Authority to approve
the publication of paid advertisements
in newspapers is vested in the head of
each agency (44 U.S.C. 3702). This approval authority may be delegated (5
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5.503
48 CFR Ch. 1 (10–1–03 Edition)
U.S.C. 302 (b)). Contracting officers
shall obtain written authorization in
accordance with agency procedures before advertising in newspapers.
(b) Other media. Unless the agency
head determines otherwise, advance
written authorization is not required
to place advertisements in media other
than newspapers.
eral publications and in national
media. Services of advertising agencies
include, but are not limited to, counseling as to selection of the media for
placement of the advertisement, contacting the media in the interest of the
Government, placing orders, selecting
and ordering typography, copywriting,
and preparing rough layouts.
(b) Use of commission-paying media.
The services of advertising agencies in
placing advertising with media often
can be obtained at no cost to the Government, over and above the space
cost, as many media give advertising
agencies a commission or discount on
the space cost that is not given to the
Government.
(c) Use of noncommission-paying media.
Some media do not grant advertising
agencies a commission or discount,
meaning the Government can obtain
the same rate as the advertising agency. If the advertising agency agrees to
place advertisements in noncommission-paying media as a no-cost service,
the basic ordering agreement shall so
provide. If the advertising agency will
not agree to place advertisements at no
cost, the agreement shall (1) provide
that the Government may place orders
directly with the media, or (2) specify
an amount that the Government will
pay if the agency places the orders.
(d) Art work, supplies, and incidentals.
The basic ordering agreement also may
provide for the furnishing by the advertising agency of art work, supplies, and
incidentals, including brochures and
pamphlets, but not their printing.
Incidentals may include telephone calls,
telegrams, and postage incurred by the
advertising agency on behalf of the
Government.
5.503 Procedures.
(a) General. (1) Orders for paid advertisements may be placed directly with
the media or through an advertising
agency. Contracting officers shall give
small,
small
disadvantaged
and
women-owned small business concerns
maximum opportunity to participate
in these acquisitions.
(2) The contracting officer shall use
the SF 1449 for paper solicitations. The
SF 1449 shall be used to make awards
or place orders unless the award/order
is made by using electronic commerce
or by using the Governmentwide commercial purchase card for micropurchases.
(b) Rates. Advertisements may be
paid for at rates not over the commercial rates charged private individuals,
with the usual discounts (44 U.S.C.
3703).
(c) Proof of advertising. Every invoice
for advertising shall be accompanied
by a copy of the advertisement or an
affidavit of publication furnished by
the publisher, radio or television station, or advertising agency concerned
(44 U.S.C. 3703). Paying offices shall retain the proof of advertising until the
General Accounting Office settles the
paying office’s account.
(d) Payment. Upon receipt of an invoice supported by proof of advertising,
the contracting officer shall attach a
copy of the written authority (see
5.502(a)) and submit the invoice for
payment under agency procedures.
Subpart 5.6—Publicizing MultiAgency Use Contracts
SOURCE: 68 FR 43862, July 24, 2003, unless
otherwise noted.
[48 FR 42119, Sept. 19, 1983, as amended at 54
FR 48982, Nov. 28, 1989; 60 FR 34747, July 3,
1995; 60 FR 48259, Sept. 18, 1995; 61 FR 39192,
July 26, 1996; 63 FR 58593, Oct. 30, 1998]
5.601 Governmentwide database of
contracts.
(a) A Governmentwide database of
contracts and other procurement instruments intended for use by multiple
agencies is available via the Internet
at http://www.contractdirectory.gov. This
searchable database is a tool that may
5.504 Use of advertising agencies.
(a) General. Basic ordering agreements may be placed with advertising
agencies for assistance in producing
and placing advertisements when a significant number will be placed in sev-
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Federal Acquisition Regulation
6.001
6.302–2 Unusual and compelling urgency.
6.302–3 Industrial mobilization; engineering,
developmental, or research capability; or
expert services.
6.302–4 International agreement.
6.302–5 Authorized or required by statute.
6.302–6 National security.
6.302–7 Public interest.
6.303 Justifications.
6.303–1 Requirements.
6.303–2 Content.
6.304 Approval of the justification.
6.305 Availability of the justification.
be used to identify existing contracts
and other procurement instruments
that may be used to fulfill Government
needs.
(b) The contracting activity shall—
(1) Enter the information specified at
http://www.contractdirectory.gov, in accordance with the instructions on that
Web site, within ten days of award of a
Governmentwide acquisition contract
(GWAC), multi-agency contract, Federal Supply Schedule contract, or any
other procurement instrument intended for use by multiple agencies, including blanket purchase agreements
(BPAs) under Federal Supply Schedule
contracts.
(2) Enter the information specified at
http://www.contractdirectory.gov in accordance with the instructions on that
Web site by October 31, 2003, for all
contracts and other procurement instruments intended for use by multiple
agencies that were awarded before July
24, 2003.
Subpart 6.4—Sealed Bidding and
Competitive Proposals
6.401 Sealed bidding and competitive proposals.
Subpart 6.5—Competition Advocates
6.501
6.502
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 50 FR 1729, Jan. 11, 1985 (interim
rule), and 50 FR 52429, Dec. 23, 1985 (final
rule), unless otherwise noted.
PART 6—COMPETITION
REQUIREMENTS
Sec.
6.000
6.001
6.002
6.003
6.000 Scope of part.
This part prescribes policies and procedures to promote full and open competition in the acquisition process and
to provide for full and open competition, full and open competition after
exclusion of sources, other than full
and open competition, and competition
advocates. This part does not deal with
the results of competition (e.g., adequate price competition), that are addressed in other parts (e.g., part 15).
Scope of part.
Applicability.
Limitations.
[Reserved]
Subpart 6.1—Full and Open Competition
6.100
6.101
6.102
Requirement.
Duties and responsibilities.
Scope of subpart.
Policy.
Use of competitive procedures.
Subpart 6.2—Full and Open Competition
After Exclusion of Sources
[66 FR 2127, Jan. 10, 2001]
6.001 Applicability.
This part applies to all acquisitions
except—
(a) Contracts awarded using the simplified acquisition procedures of part 13
(but see 13.501 for requirements pertaining to sole source acquisition of
commercial items under subpart 13.5).
(b) Contracts awarded using contracting procedures (other than those
addressed in this part) that are expressly authorized by statute;
(c) Contract modifications, that are
within the scope of the contract, including the exercise of priced options
that were evaluated as part of the
original competition (see 17.207(f));
6.200 Scope of subpart.
6.201 Policy.
6.202 Establishing or maintaining alternative sources.
6.203 Set-asides for small business concerns.
6.204 Section 8(a) competition.
6.205 Set-asides for HUBZone small business
concerns.
Subpart 6.3—Other Than Full and Open
Competition
6.300 Scope of subpart.
6.301 Policy.
6.302 Circumstances permitting other than
full and open competition.
6.302–1 Only one responsible source and no
other supplies or services will satisfy
agency requirements.
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6.002
48 CFR Ch. 1 (10–1–03 Edition)
quirements efficiently (10 U.S.C. 2304
and 41 U.S.C. 253).
(d) Orders placed under requirements
contracts or definite-quantity contracts;
(e) Orders placed under indefinitequantity contracts that were entered
into pursuant to this part when—
(1) The contract was awarded under
subpart 6.1 or 6.2 and all responsible
sources were realistically permitted to
compete for the requirements contained in the order; or
(2) The contract was awarded under
subpart 6.3 and the required justification and approval adequately covers
the requirements contained in the
order; or
(f) Orders placed against task order
and delivery order contracts entered
into pursuant to subpart 16.5.
[50 FR 1729, Jan. 11, 1985, and 50 FR 52429,
Dec. 23, 1985, as amended at 62 FR 51230, Sept.
30, 1997]
6.102
[50 FR 52431, Dec. 23, 1985, as amended at 55
FR 52790, Dec. 21, 1990; 60 FR 34747, July 3,
1995; 60 FR 49725, Sept. 26, 1995; 62 FR 263,
Jan. 2, 1997; 62 FR 64917, Dec. 9, 1997]
6.002
Limitations.
No agency shall contract for supplies
or services from another agency for the
purpose of avoiding the requirements
of this part.
6.003
[Reserved]
Subpart 6.1—Full and Open
Competition
6.100
Scope of subpart.
This subpart prescribes the policy
and procedures that are to be used to
promote and provide for full and open
competition.
6.101
Use of competitive procedures.
The competitive procedures available
for use in fulfilling the requirement for
full and open competition are as follows:
(a) Sealed bids. (See 6.401(a).)
(b)
Competitive
proposals.
(See
6.401(b).) If sealed bids are not appropriated under (a) above, contracting officers shall request competitive proposals or use the other competitive
procedures under (c) or (d) below.
(c) Combination of competitive procedures. If sealed bids are not appropriate, contracting officers may use
any combination of competitive procedures (e.g., two-step sealed bidding).
(d) Other competitive procedures. (1)
Selection of sources for architect-engineer contracts in accordance with the
provisions of Pub. L. 92–582 (40 U.S.C.
541 et seq.) is a competitive procedure
(see subpart 36.6 for procedures).
(2) Competitive selection of basic and
applied research and that part of development not related to the development
of a specific system or hardware procurement is a competitive procedure if
award results from—
(i) A broad agency announcement
that is general in nature identifying
areas of research interest, including
criteria for selecting proposals, and soliciting the participation of all offerors
capable of satisfying the Government’s
needs; and
(ii) A peer of scientific review.
(3) Use of multiple award schedules
issued under the procedures established
by the Administrator of General Services consistent with the requirement of
41 U.S.C. 259(b)(3)(A) for the multiple
award schedule program of the General
Services Administration is a competitive procedure.
Policy.
(a) 10 U.S.C. 2304 and 41 U.S.C. 253 require, with certain limited exceptions
(see subparts 6.2 and 6.3), that contracting officers shall promote and provide for full and open competition in
soliciting offers and awarding Government contracts.
(b) Contracting officers shall provide
for full and open competition through
use of the competitive procedure(s)
contained in this subpart that are best
suited to the circumstances of the contract action and consistent with the
need to fulfill the Government’s re-
[50 FR 1729, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985, as amended at 53 FR 27463, July 20, 1988;
59 FR 53716, Oct. 25, 1994]
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Federal Acquisition Regulation
6.205
necessary data to support their recommendation to exclude a particular
source.
(3) When the authority in (a)(1) above
is cited, the findings shall include a description of the estimated reduction in
overall costs and how the estimate was
derived.
Subpart 6.2—Full and Open Competition After Exclusion of
Sources
6.200 Scope of subpart.
This subpart prescribes policies and
procedures for providing for full and
open competition after excluding one
or more sources.
[50 FR 1729, Jan. 11, 1985, as amended at 60
FR 42653, Aug. 16, 1995]
6.201 Policy.
Acquisitions made under this subpart
require use of the competitive procedures prescribed in 6.102.
6.203 Set-asides
concerns.
for
small
(a) To fulfill the statutory requirements relating to small business concerns, contracting officers may set
aside solicitations to allow only such
business concerns to compete. This includes contract actions conducted
under the Small Business Innovation
Research Program established under
Pub. L. 97–219.
(b) No separate justification or determination and findings is required under
this part to set aside a contract action
for small business concerns.
(c) Subpart 19.5 prescribes policies
and procedures that shall be followed
with respect to set-asides.
[64 FR 51831, Sept. 24, 1999]
6.202 Establishing or maintaining alternative sources.
(a) Agencies may exclude a particular source from a contract action
in order to establish or maintain an alternative source or sources for the supplies or services being acquired if the
agency head determines that to do so
would—
(1) Increase or maintain competition
and likely result in reduced overall
costs for the acquisition, or for any anticipated acquisition;
(2) Be in the interest of national defense in having a facility (or a producer, manufacturer, or other supplier)
available for furnishing the supplies or
services in case of a national emergency or industrial mobilization;
(3) Be in the interest of national defense in establishing or maintaining an
essential engineering, research, or development capability to be provided by
an educational or other nonprofit institution or a federally funded research
and development center;
(4) Ensure the continuous availability of a reliable source of supplies
or services;
(5) Satisfy projected needs based on a
history of high demand; or
(6) Satisfy a critical need for medical, safety, or emergency supplies.
(b)(1) Every proposed contract action
under the authority of paragraph (a)
above shall be supported by a determination and findings (D&F) (see subpart 1.7) signed by the head of the
agency or designee. This D&F shall not
be made on a class basis.
(2) Technical and requirements personnel are responsible for providing all
[60 FR 48259, Sept. 18, 1995]
6.204
Section 8(a) competition.
(a) To fulfill statutory requirements
relating to section 8(a) of the Small
Business Act, as amended by Pub. L.
100–656, contracting officers may limit
competition to eligible 8(a) contractors
(see subpart 19.8).
(b) No separate justification or determination and findings is required under
this part to limit competition to eligible 8(a) contractors.
[54 FR 46005, Oct. 31, 1989]
6.205 Set-asides for HUBZone small
business concerns.
(a) To fulfill the statutory requirements relating to the HUBZone Act of
1997 (15 U.S.C. 631 note), contracting officers in participating agencies (see
19.1302) may set aside solicitations to
allow only qualified HUBZone small
business concerns to compete (see
19.1305).
(b) No separate justification or determination and findings is required under
this part to set aside a contract action
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6.300
48 CFR Ch. 1 (10–1–03 Edition)
for qualified HUBZone small business
concerns.
6.302 Circumstances permitting other
than full and open competition.
The following statutory authorities
(including applications and limitations) permit contracting without providing for full and open competition.
Requirements for justifications to support the use of these authorities are in
6.303.
[63 FR 70267, Dec. 18, 1998]
Subpart 6.3—Other Than Full and
Open Competition
6.300
Scope of subpart.
This subpart prescribes policies and
procedures, and identifies the statutory authorities, for contracting without providing for full and open competition.
6.301
[50 FR 52431, Dec. 23, 1985]
6.302–1 Only one responsible source
and no other supplies or services
will satisfy agency requirements.
(a) Authority. (1) Citations: 10 U.S.C.
2304(c)(1) or 41 U.S.C. 253(c)(1).
(2) When the supplies or services required by the agency are available
from only one responsible source, or,
for DoD, NASA, and the Coast Guard,
from only one or a limited number of
responsible sources, and no other type
of supplies or services will satisfy
agency requirements, full and open
competiton need not be provided for.
(i) Supplies or services may be considered to be available from only one
source if the source has submitted an
unsolicited research proposal that:
(A) Demonstrates a unique and innovative concept (see definition at 2.101),
or, demonstrates a unique capability of
the source to provide the particular research services proposed;
(B) Offers a concept or services not
otherwise available to the Government;
and
(C) Does not resemble the substance
of a pending competitive acquisition.
(See 10 U.S.C. 2304(d)(1)(A) and 41
U.S.C. 253(d)(1)(A).)
(ii) Supplies may be deemed to be
available only from the original source
in the case of a follow-on contract for
the continued development or production of a major system or highly specialized equipment, including major
components thereof, when it is likely
that award to any other source would
result in (A) substantial duplication of
cost to the Government that is not expected to be recovered through competition, or (B) unacceptable delays in
fulfilling the agency’s requirements.
(See 10 U.S.C. 2304(d)(1)(B) or 41 U.S.C.
253(d)(1)(B).)
(iii) For DoD, NASA, and the Coast
Guard, services may be deemed to be
available only from the original source
Policy.
(a) 41 U.S.C. 253(c) and 10 U.S.C.
2304(c) each authorize, under certain
conditions, contracting without providing for full and open competition.
The Department of Defense, Coast
Guard, and National Aeronautics and
Space Administration are subject to 10
U.S.C. 2304(c). Other executive agencies
are subject to 41 U.S.C. 253(c). Contracting without providing for full and
open competition or full and open competition after exclusion of sources is a
violation of statute, unless permitted
by one of the exceptions in 6.302.
(b) Each contract awarded without
providing for full and open competition
shall contain a reference to the specific
authority under which it was so awarded. Contracting officers shall use the
U.S. Code citation applicable to their
agency. (See 6.302.)
(c) Contracting without providing for
full and open competition shall not be
justified on the basis of (1) a lack of advance planning by the requiring activity or (2) concerns related to the
amount of funds available (e.g., funds
will expire) to the agency or activity
for the acquisition of supplies or services.
(d) When not providing for full and
open competition, the contracting officer shall solicit offers from as many
potential sources as is practicable
under the circumstances.
(e) For contracts under this subpart,
the contracting officer shall use the
contracting procedures prescribed in
6.102 (a) or (b), if appropriate, or any
other procedures authorized by this
regulation.
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Federal Acquisition Regulation
6.302–2
(c) Application for brand name descriptions. An acquisition that uses a brand
name description or other purchase description to specify a particular brand
name, product, or feature of a product,
peculiar to one manufacturer does not
provide for full and open competition
regardless of the number of sources solicited. It shall be justified and approved in accordance with FAR 6.303
and 6.304. The justification should indicate that the use of such descriptions
in the acquisition is essential to the
Government’s requirements, thereby
precluding consideration of a product
manufactured by another company.
(Brand-name or equal descriptions, and
other purchase descriptions that permit prospective contractors to offer
products other than those specifically
referenced by brand name, provide for
full and open competition and do not
require justifications and approvals to
support their use.)
(d) Limitations. (1) Contracts awarded
using this authority shall be supported
by the written justifications and approvals described in 6.303 and 6.304.
(2) For contracts awarded using this
authority, the notices required by 5.201
shall have been published and any bids
and proposals must have been considered. (See 15.402(g).)
in the case of follow-on contracts for
the continued provision of highly specialized services when it is likely that
award to any other source would result
in (A) substantial duplication of cost to
the Government that is not expected to
be recovered through competition, or
(B) unacceptable delays in fulfilling
the agency’s requirements. (See 10
U.S.C. 2304(d)(1)(B)).
(b) Application. This authority shall
be used, if appropriate, in preference to
the authority in 6.302–7; it shall not be
used when any of the other circumstances is applicable. Use of this
authority may be appropriate in situations such as the following (these examples are not intended to be all-inclusive and do not consitute authority in
and of themselves):
(1) When there is a reasonable basis
to conclude that the agency’s minimum needs can only be satisfied by (i)
unique supplies or services available
from only one source or only one supplier with unique capabilities; or, (ii)
for DoD, NASA, and the Coast Guard,
unique supplies or services available
from only one or a limited number of
sources or from only one or a limited
number of suppliers with unique capabilities.
(2) The existence of limited rights in
data, patent rights, copyrights, or secret processes; the control of basic raw
material; or similar circumstances,
make the supplies and services available from only one source (however,
the mere existence of such rights or
circumstances does not in and of itself
justify the use of these authorities)
(see part 27).
(3) When acquiring utility services
(see 41.101), circumstances may dictate
that only one supplier can furnish the
service (see 41.202); or when the contemplated contract is for construction
of a part of a utility system and the
utility company itself is the only
source available to work on the system.
(4) When the agency head has determined in accordance with the agency’s
standardization program that only
specified makes and models of technical equipment and parts will satisfy
the agency’s needs for additional units
or replacement items, and only one
source is available.
[50 FR 52431, Dec. 23, 1985, as amended at 52
FR 21886, June 9, 1987; 53 FR 27463, July 20,
1988; 56 FR 29127, June 25, 1991; 59 FR 67018,
Dec. 28, 1994; 66 FR 2128, Jan. 10, 2001]
6.302–2 Unusual and compelling urgency.
(a) Authority. (1) Citations: 10 U.S.C.
2304(c)(2) or 41 U.S.C. 253(c)(2).
(2) When the agency’s need for the
supplies or services is of such an unusual and compelling urgency that the
Government would be seriously injured
unless the agency is permitted to limit
the number of sources from which it
solicits bids or proposals, full and open
competition need not be provided for.
(b) Application. This authority applies
in those situations where (1) an unusual and compelling urgency precludes full and open competition, and
(2) delay in award of a contract would
result in serious injury, financial or
other, to the Government.
(c) Limitations. (1) Contracts awarded
using this authority shall be supported
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6.302–3
48 CFR Ch. 1 (10–1–03 Edition)
by the written justifications and approvals described in 6.303 and 6.304.
These justifications may be made and
approved after contract award when
preparation and approval prior to
award would unreasonably delay the
acquisition.
(2) This statutory authority requires
that agencies shall request offers from
as many potential sources as is practicable under the circumstances.
full and open competition as appropriate under this part);
(iv) Limit competition for current
acquisition of selected supplies or services approved for production planning
under the Department of Defense Industrial Preparedness Program to
planned producers with whom industrial preparedness agreements for those
items exist, or limit award to offerors
who agree to enter into industrial preparedness agreements;
(v) Create or maintain the required
domestic capability for production of
critical supplies by limiting competition to items manufactured in—
(A) The United States or its outlying
areas; or
(B) The United States, its outlying
areas, or Canada.
(vi) Continue in production, contractors that are manufacturing critical
items, where there would otherwise be
a break in production; or
(vii) Divide current production requirements among two or more contractors to provide for an adequate industrial mobilization base.
(2) Use of the authority in paragraph
(a)(2)(ii) above may be appropriate
when it is necessary to—
(i) Establish or maintain an essential
capability for theoretical analyses, exploratory studies, or experiments in
any field of science or technology;
(ii) Establish or maintain an essential capability for engineering or developmental work calling for the practical
application of investigative findings
and theories of a scientific or technical
nature; or
(iii) Contract for supplies or services
as are necessary incident to paragraphs
(b)(2)(i) or (ii) above.
(3) Use of the authority in paragraph
(a)(2)(iii) of this section may be appropriate when it is necessary to acquire
the services of either—
(i) An expert to use, in any litigation
or dispute (including any reasonably
foreseeable litigation or dispute) involving the Government in any trial,
hearing, or proceeding before any
court, administrative tribunal, or
agency, whether or not the expert is
expected to testify. Examples of such
services include, but are not limited to:
(A) Assisting the Government in the
analysis, presentation, or defense of
[50 FR 52431, Dec. 23, 1985]
6.302–3 Industrial mobilization; engineering, developmental, or research
capability; or expert services.
(a) Authority. (1) Citations: 10 U.S.C.
2304(c)(3) or 41 U.S.C. 253(c)(3).
(2) Full and open competition need
not to be provided for when it is necessary to award the contract to a particular source or sources in order—
(i) To maintain a facility, producer,
manufacturer, or other supplier available for furnishing supplies or services
in case of a national emergency or to
achieve industrial mobilization,
(ii) To establish or maintain an essential engineering, research, or development capability to be provided by an
educational or other nonprofit institution or a federally funded research and
development center, or
(iii) To acquire the services of an expert or neutral person for any current
or anticipated litigation or dispute.
(b) Application. (1) Use of the authority in paragraph (a)(2)(i) above may be
appropriate when it is necessary to—
(i) Keep vital facilities or suppliers in
business or make them available in the
event of a national emergency;
(ii) Train a selected supplier in the
furnishing of critical supplies or services, prevent the loss of a supplier’s
ability and employees’ skills, or maintain active engineering, research, or
development work;
(iii) Maintain properly balanced
sources of supply for meeting the requirements of acquisition programs in
the interest of industrial mobilization
(when the quantity required is substantially larger than the quantity that
must be awarded in order to meet the
objectives of this authority, that portion not required to meet such objectives will be acquired by providing for
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Federal Acquisition Regulation
6.302–5
any claim or request for adjustment to
contract terms and conditions, whether
asserted by a contractor or the Government, which is in litigation or dispute,
or is anticipated to result in dispute or
litigation before any court, administrative tribunal, or agency, or
(B) Participating in any part of an alternative dispute resolution process,
including but not limited to evaluators, fact finders, or witnesses, regardless of whether the expert is expected to testify; or
(ii) A neutral person, e.g., mediators
or arbitrators, to facilitate the resolution of issues in an alternative dispute
resolution process.
(c) Limitations. Contracts awarded
using this authority shall be supported
by the written justifications and approvals described in 6.303 and 6.304.
supported by written justifications and
approvals described in 6.303 and 6.304.
[50 FR 52432, Dec. 23, 1985, as amended at 55
FR 52790, Dec. 21, 1990]
6.302–5 Authorized or required by
statute.
(a) Authority. (1) Citations: 10 U.S.C.
2304(c)(5) or 41 U.S.C. 253(c)(5).
(2) Full and open competition need
not be provided for when (i) a statute
expressly authorizes or requires that
the acquisition be made through another agency or from a specified
source, or (ii) the agency’s need is for a
brand name commercial item for authorized resale.
(b) Application. This authority may
be used when statutes, such as the following, expressly authorize or require
that acquisition be made from a specified source or through another agency:
(1)
Federal
Prison
Industries
(UNICOR)—18 U.S.C. 4124 (see subpart
8.6);
(2) Qualified Nonprofit Agencies for
the Blind or other Severely Disabled—
41 U.S.C. 46–48c (see subpart 8.7);
(3) Government Printing and Binding—44 U.S.C. 501–504, 1121 (see subpart
8.8);
(4) Sole source awards under the 8(a)
Program—15 U.S.C. 637 (see subpart
19.8); or
(5) The Robert T. Stafford Disaster
Relief and Emergency Assistance Act—
42 U.S.C. 5150 (see subpart 26.2).
(6) Sole source awards under the
HUBZone Act of 1997—15 U.S.C. 657a
(see 19.1306).
(c) Limitations. (1) This authority
shall not be used when a provision of
law requires an agency to award a new
contract to a specified non-Federal
Government entity unless the provision of law specifically—
(i) Identifies the entity involved;
(ii) Refers to 10 U.S.C. 2304(j) for
armed services acquisitions or section
303(h) of the Federal Property and Administrative Services Act of 1949 for civilian agency acquisitions; and
(iii) States that award to that entity
shall be made in contravention of the
merit-based selection procedures in 10
U.S.C. 2304(j) or section 303(h) of the
Federal Property and Administrative
Services Act, as appropriate. However,
this limitation does not apply—
[50 FR 52431, Dec. 23, 1985, as amended at 60
FR 42654, Aug. 16, 1995; 60 FR 44548, Aug. 28,
1995; 62 FR 235, Jan. 2, 1997; 63 FR 58594, 58602,
Oct. 30, 1998; 66 FR 2128, Jan. 10, 2001; 68 FR
28080, May 22, 2003]
6.302–4
International agreement.
(a) Authority. (1) Citations: 10 U.S.C.
2304(c)(4) or 41 U.S.C. 253(c)(4).
(2) Full and open competition need
not be provided for when precluded by
the terms of an international agreement or a treaty between the United
States and a foreign government or
international organization, or the written directions of a foreign government
reimbursing the agency for the cost of
the acquisition of the supplies or services for such government.
(b) Application. This authority may
be used in circumstances such as—
(1) When a contemplated acquisition
is to be reimbursed by a foreign country that requires that the product be
obtained from a particular firm as
specified in official written direction
such as a Letter of Offer and Acceptance; or
(2) When a contemplated acquisition
is for services to be performed, or supplies to be used, in the sovereign territory of another country and the terms
of a treaty or agreement specify or
limit the sources to be solicited.
(c) Limitations. Except for DoD,
NASA, and the Coast Guard, contracts
awarded using this authority shall be
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6.302–6
48 CFR Ch. 1 (10–1–03 Edition)
(A) When the work provided for in
the contract is a continuation of the
work performed by the specified entity
under a preceding contract; or
(B) To any contract requiring the National Academy of Sciences to investigate, examine, or experiment upon
any subject of science or art of significance to an executive agency and to report on those matters to the Congress
or any agency of the Federal Government.
(2) Contracts awarded using this authority shall be supported by the written justifications and approvals described in 6.303 and 6.304, except for—
(i) Contracts awarded under (a)(2)(ii),
(b)(2), or (b)(4) of this subsection; or
(ii) Contracts awarded under (a)(2)(i)
of this subsection when the statute expressly requires that the procurement
be made from a specified source. (Justification and approval requirements
apply when the statute authorizes, but
does not require, that the procurement
be made from a specified source.)
(3) The authority in (a)(2)(ii) of this
subsection may be used only for purchases of brand-name commercial
items for resale through commissaries
or other similar facilities. Ordinarily,
these purchases will involve articles
desired or preferred by customers of
the selling activities (but see 6.301(d)).
[50 FR 52432, Dec. 23, 1985, as amended at 51
FR 36971, Oct. 16, 1986; 54 FR 46005, Oct. 31,
1989; 60 FR 42654, Aug. 16, 1995; 61 FR 39200,
July 26, 1996; 63 FR 70267, Dec. 18, 1998; 67 FR
13068, Mar. 20, 2002]
6.302–6
National security.
(a) Authority. (1) Citations: 10 U.S.C.
2304(c)(6) or 41 U.S.C. 253(c)(6).
(2) Full and open competition need
not be provided for when the disclosure
of the agency’s needs would compromise the national security unless
the agency is permitted to limit the
number of sources from which it solicits bids or proposals.
(b) Application. This authority may
be used for any acquisition when disclosure of the Government’s needs
would compromise the national security (e.g., would violate security requirements); it shall not be used merely because the acquisition is classified,
or merely because access to classified
matter will be necessary to submit a
proposal or to perform the contract.
(c) Limitations. (1) Contracts awarded
using this authority shall be supported
by the written justifications and approvals described in 6.303 and 6.304.
(2) See 5.202(a)(1) for synopsis requirements.
(3) This statutory authority requires
that agencies shall request offers from
as many potential sources as is practicable under the circumstances.
[50 FR 52432, Dec. 23, 1985]
6.302–7
Public interest.
(a) Authority. (1) Citations: 10 U.S.C.
2304(c)(7) or 41 U.S.C. 253(c)(7).
(2) Full and open competition need
not be provided for when the agency
head determines that it is not in the
public interest in the particular acquisition concerned.
(b) Application. This authority may
be used when none of the other authorities in 6.302 apply.
(c) Limitations. (1) A written determination to use this authority shall be
made in accordance with subpart 1.7,
by (i) the Secretary of Defense, the
Secretary of the Army, the Secretary
of the Navy, the Secretary of the Air
Force, the Secretary of Transportation
for the Coast Guard, or the Administrator of the National Aeronautics and
Space Administration; or (ii) the head
of any other executive agency. This authority may not be delegated.
(2) The Congress shall be notified in
writing of such determination not less
than 30 days before award of the contract.
(3) If required by the head of the
agency, the contracting officer shall
prepare a justification to support the
determination under paragraph (c)(1)
above.
(4) This Determination and Finding
(D & F) shall not be made on a class
basis.
[50 FR 52432, Dec. 23, 1985]
6.303
Justifications.
6.303–1 Requirements.
(a) A contracting officer shall not
commence negotiations for a sole
source contract, commence negotiations for a contract resulting from an
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Federal Acquisition Regulation
6.303–2
unsolicited proposal, or award any
other contract without providing for
full and open competition unless the
contracting officer—
(1) Justifies, if required in 6.302, the
use of such actions in writing;
(2) Certifies the accuracy and completeness of the justification; and
(3) Obtains the approval required by
6.304.
(b) Technical and requirements personnel are responsible for providing
and certifying as accurate and complete necessary data to support their
recommendation for other than full
and open competition.
(c) Justifications required by paragraph (a) above may be made on an individual or class basis. Any justification for contracts awarded under the
authority of 6.302–7 shall only be made
on an individual basis. Whenever a justification is made and approved on a
class basis, the contracting officer
must ensure that each contract action
taken pursuant to the authority of the
class justification and approval is within the scope of the class justification
and approval and shall document the
contract file for each contract action
accordingly.
(d) If the authority of 6.302–3(a)(2)(i)
or 6.302–7 is being cited as a basis for
not providing for full and open competition in an acquisition that would
otherwise be subject to the Trade
Agreements Act (see Subpart 25.4), the
contracting officer must forward a
copy of the justification, in accordance
with agency procedures, to the agencys
point of contact with the Office of the
United States Trade Representative.
(e) The justifications for contracts
awarded under the authority cited in
6.302–2 may be prepared and approved
within a reasonable time after contract
award when preparation and approval
prior to award would unreasonably
delay the acquisitions.
[50 FR 1729, Jan. 11, 1985, as amended at 50
FR 52433, Dec. 23, 1985; 55 FR 25526, June 21,
1990; 64 FR 72418, Dec. 27, 1999]
6.303–2 Content.
(a) Each justification shall contain
sufficient facts and rationale to justify
the use of the specific authority cited.
As a minimum, each justification shall
include the following information:
(1) Identification of the agency and
the contracting activity, and specific
identification of the document as a
‘‘Justification for other than full and
open competition.’’
(2) Nature and/or description of the
action being approved.
(3) A description of the supplies or
services required to meet the agency’s
needs (including the estimated value).
(4) An identification of the statutory
authority permitting other than full
and open competition.
(5) A demonstration that the proposed contractor’s unique qualifications or the nature of the acquisition
requires use of the authority cited.
(6) A description of efforts made to
ensure that offers are solicited from as
many potential sources as is practicable, including whether a notice was
or will be publicized as required by subpart 5.2 and, if not, which exception
under 5.202 applies.
(7) A determination by the contracting officer that the anticipated
cost to the Government will be fair and
reasonable.
(8) A description of the market research conducted (see part 10) and the
results or a statement of the reason
market research was not conducted.
(9) Any other facts supporting the
use of other than full and open competition, such as:
(i) Explanation of why technical data
packages, specifications, engineering
descriptions, statements of work, or
purchase descriptions suitable for full
and open competition have not been developed or are not available.
(ii) When 6.302–1 is cited for follow-on
acquisitions as described in 6.302–
1(a)(2)(ii), an estimate of the cost to
the Government that would be duplicated and how the estimate was derived.
(iii) When 6.302–2 is cited, data, estimated cost, or other rationale as to the
extent and nature of the harm to the
Government.
(10) A listing of the sources, if any,
that expressed, in writing, an interest
in the acquisition.
(11) A statement of the actions, if
any, the agency may take to remove or
overcome any barriers to competition
before any subsequent acquisition for
the supplies or services required.
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6.304
48 CFR Ch. 1 (10–1–03 Edition)
(12) Contracting officer certification
that the justification is accurate and
complete to the best of the contracting
officer’s knowledge and belief.
(b) Each justification shall include
evidence that any supporting data that
is the responsibility of technical or requirements personnel (e.g., verifying
the Government’s minimum needs or
schedule requirements or other rationale for other than full and open competition) and which form a basis for the
justification have been certified as
complete and accurate by the technical
or requirements personnel.
[50 FR 1729, Jan. 11, 1985, as amended at 50
FR 52433, Dec. 23, 1985; 60 FR 48236, Sept. 18,
1995; 66 FR 27412, May 16, 2001]
6.304 Approval of the justification.
(a) Except for paragraph (b) of this
section, the justification for other than
full and open competition shall be approved in writing—
(1) For a proposed contract not exceeding $500,000, the contracting officer’s certification required by 6.303–
2(a)(12) will serve as approval unless a
higher approving level is established in
agency procedures.
(2) For a proposed contract over
$500,000 but not exceeding $10,000,000, by
the competition advocate for the procuring activity designated pursuant to
6.501 or an official described in paragraph (a)(3) or (a)(4) of this section.
This authority is not delegable.
(3) For a proposed contract over
$10,000,000,
but
not
exceeding
$50,000,000, by the head of the procuring
activity, or a designee who—
(i) If a member of the armed forces, is
a general or flag officer; or
(ii) If a civilian, is serving in a position in grade GS 16 or above under the
General Schedule (or in a comparable
or higher position under another schedule).
(4) For a proposed contract over
$50,000,000, by the senior procurement
executive of the agency designated pursuant to the OFPP Act (41 U.S.C. 414(3))
in accordance with agency procedures.
This authority is not delegable except
in the case of the Under Secretary of
Defense for Acquisition, Technology,
and Logistics, acting as the senior procurement executive for the Department of Defense.
(b) Any justification for a contract
awarded under the authority of 6.302–7,
regardless of dollar amount, shall be
considered approved when the determination required by 6.302–7(c)(1) is
made.
(c) A class justification for other
than full and open competition shall be
approved in writing in accordance with
agency procedures. The approval level
shall be determined by the estimated
total value of the class.
(d) The estimated dollar value of all
options shall be included in determining the approval level of a justification.
[50 FR 1729, Jan. 11, 1985, as amended at 50
FR 52433, Dec. 23, 1985; 54 FR 13023, Mar. 29,
1989; 55 FR 3881, Feb. 5, 1990; 55 FR 52790, Dec.
21, 1990; 60 FR 42654, 42665, Aug. 16, 1995; 61 FR
31618, June 20, 1996; 65 FR 24325, Apr. 25, 2000]
6.305 Availability of the justification.
(a) The justification required by
6.303–1 and any related information
shall be made available for public inspection as required by 10 U.S.C.
2304(f)(4) and 41 U.S.C. 253(f)(4). Contracting officers shall carefully screen
all justifications for contractor proprietary data and remove all such data,
and such references and citations as
are necessary to protect the proprietary data, before making the justifications available for public inspection. Contracting officers shall also be
guided by the exemptions to disclosure
of information contained in the Freedom of Information Act (5 U.S.C. 552)
and the prohibitions against disclosure
in 24.202 in determining whether other
data should be removed.
(b) If a Freedom of Information request is received, contracting officers
shall comply with subpart 24.2.
[50 FR 1729, Jan. 11, 1985 and 50 FR 52429, Dec.
23, 1985, as amended at 62 FR 257, Jan. 2, 1997;
65 FR 16286, Mar. 27, 2000]
Subpart 6.4—Sealed Bidding and
Competitive Proposals
6.401 Sealed bidding and competitive
proposals.
Sealed bidding and competitive proposals, as described in Parts 14 and 15,
are both acceptable procedures for use
under Subparts 6.1, 6.2; and, when appropriate, under Subpart 6.3.
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6.502
(a) Sealed bids. (See part 14 for procedures.) Contracting officers shall solicit sealed bids if—
(1) Time permits the solicitation,
submission, and evaluation of sealed
bids;
(2) The award will be made on the
basis of price and other price-related
factors;
(3) It is not necessary to conduct discussions with the responding offerors
about their bids; and
(4) There is reasonable expectation of
receiving more than one sealed bid.
(b) Competitive proposals. (See part 15
for procedures.)
(1) Contracting officers may request
competitive proposals if sealed bids are
not appropriate under paragraph (a)
above.
(2) Because of differences in areas
such as law, regulations, and business
practices, it is generally necessary to
conduct discussions with offerors relative to proposed contracts to be made
and performed outside the United
States and its outlying areas. Competitive proposals will therefore be used for
these contracts unless discussions are
not required and the use of sealed bids
is otherwise appropriate.
[50 FR 1729, Jan. 11, 1985; 50 FR 4221, Jan. 30,
1985; 50 FR 52429, Dec. 23, 1985; 54 FR 5054,
Jan. 31, 1989; 64 FR 51833, Sept. 24, 1999; 68 FR
28080, May 22, 2003]
Subpart 6.5—Competition
Advocates
6.501 Requirement.
As required by section 20 of the Office
of Federal Procurement Policy Act, the
head of each executive agency shall
designate a competition advocate for
the agency and for each procuring activity of the agency. The competition
advocates shall—
(a) Be in positions other than that of
the agency senior procurement executive;
(b) Not be assigned any duties or responsibilities that are inconsistent
with 6.502 below; and
(c) Be provided with staff or assistance (e.g., specialists in engineering,
technical operations, contract administration, financial management, supply
management, and utilization of small
business concerns), as may be nec-
essary to carry out the advocate’s duties and responsibilities.
[50 FR 1729, Jan. 11, 1985, and 50 FR 52429,
Dec. 23, 1985, as amended at 60 FR 48259, Sept.
18, 1995]
6.502
Duties and responsibilities.
(a) Agency and procuring activity
competition advocates are responsible
for promoting the acquisition of commercial items, promoting full and open
competition, challenging requirements
that are not stated in terms of functions to be performed, performance required or essential physical characteristics, and challenging barriers to the
acquisition of commercial items and
full and open competition such as unnecessarily restrictive statements of
work, unnecessarily detailed specifications, and unnecessarily burdensome
contract clauses.
(b) Agency competition advocates
shall—
(1) Review the contracting operations
of the agency and identify and report
to the agency senior procurement executive—
(i) Opportunities and actions taken
to acquire commercial items to meet
the needs of the agency;
(ii) Opportunities and actions taken
to achieve full and open competition in
the contracting operations of the agency;
(iii) Actions taken to challenge requirements that are not stated in
terms of functions to be performed,
performance required or essential physical characteristics;
(iv) Any condition or action that has
the effect of unnecessarily restricting
the acquisition of commercial items or
competition in the contract actions of
the agency;
(2) Prepare and submit an annual report to the agency senior procurement
executive, in accordance with agency
procedures, describing—
(i) Such advocate’s activities under
this subpart;
(ii) New initiatives required to increase the acquisition of commercial
items;
(iii) New initiatives required to increase competition;
(iv) New initiatives to ensure requirements are stated in terms of functions
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48 CFR Ch. 1 (10–1–03 Edition)
to be performed, performance required
or essential physical characteristics;
(v) Any barriers to the acquisition of
commercial items or competition that
remain; and
(vi) Other ways in which the agency
has emphasized the acquisition of commercial items and competition in areas
such as acquisition training and research;
(3) Recommend to the senior procurement executive of the agency goals and
plans for increasing competition on a
fiscal year basis; and
(4) Recommend to the senior procurement executive of the agency a system
of personal and organizational accountability for competition, which may include the use of recognition and awards
to motivate program managers, contracting officers, and others in authority to promote competition in acquisition.
[60 FR 48236, Sept. 18, 1995, as amended at 67
FR 13053, Mar. 20, 2002]
PART 7—ACQUISITION PLANNING
Sec.
7.000
Scope of part.
Subpart 7.1—Acquisition Plans
7.101 Definitions.
7.102 Policy.
7.103 Agency-head responsibilities.
7.104 General procedures.
7.105 Contents of written acquisition plans.
7.106 Additional requirements for major
systems.
7.107 Additional requirements for acquisitions involving bundling.
7.305 Solicitation provisions and contract
clause.
7.306 Evaluation.
7.307 Appeals.
Subpart 7.4—Equipment Lease or Purchase
7.400 Scope of subpart.
7.401 Acquisition considerations.
7.402 Acquisition methods.
7.403 General Services Administration assistance.
7.404 Contract clause.
Subpart 7.5—Inherently Governmental
Functions
7.500
7.501
7.502
7.503
Scope of subpart.
[Reserved]
Applicability.
Policy.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42124, Sept. 19, 1983, unless
otherwise noted.
7.000
Scope of part.
This part prescribes policies and procedures for—
(a) Developing acquisition plans;
(b) Determining whether to use commercial or Government resources for
acquisition of supplies or services;
(c) Deciding whether it is more economical to lease equipment rather
than purchase it; and
(d) Determining whether functions
are inherently governmental.
[48 FR 42124, Sept. 19, 1983, as amended at 61
FR 2628, Jan. 26, 1996]
Subpart 7.1—Acquisition Plans
Subpart 7.2—Planning for the Purchase of
Supplies in Economic Quantities
7.101
7.200 Scope of subpart.
7.201 [Reserved]
7.202 Policy.
7.203 Solicitation provision.
7.204 Responsibilities of contracting officers.
Subpart 7.3—Contractor Versus
Government Performance
7.300 Scope of subpart.
7.301 Policy.
7.302 General.
7.303 Determining availability of private
commercial sources.
7.304 Procedures.
Definitions.
As used in this subpart—
Acquisition streamlining, means any
effort that results in more efficient and
effective use of resources to design and
develop, or produce quality systems.
This includes ensuring that only necessary and cost-effective requirements
are included, at the most appropriate
time in the acquisition cycle, in solicitations and resulting contracts for the
design, development, and production of
new systems, or for modifications to
existing systems that involve redesign
of systems or subsystems.
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7.103
Life-cycle cost means the total cost to
the Government of acquiring, operating, supporting, and (if applicable)
disposing of the items being acquired.
Order means an order placed under
a—
(1) Federal Supply Schedule contract;
or
(2) Task-order contract or deliveryorder contract awarded by another
agency, (i.e., Governmentwide acquisition contract or multi-agency contract).
Planner, means the designated person
or office responsible for developing and
maintaining a written plan, or for the
planning function in those acquisitions
not requiring a written plan.
[48 FR 42124, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 53 FR 34226, Sept. 2, 1988; 60 FR 48236,
Sept. 18, 1995; 66 FR 2128, Jan. 10, 2001; 67 FR
56118, Aug. 30, 2002]
7.102
Policy.
(a) Agencies shall perform acquisition planning and conduct market research (see part 10) for all acquisitions
in order to promote and provide for—
(1) Acquisition of commercial items
or, to the extent that commercial
items suitable to meet the agency’s
needs are not available, nondevelopmental items, to the maximum extent
practicable (10 U.S.C. 2377 and 41 U.S.C.
251, et seq.); and
(2) Full and open competition (see
part 6) or, when full and open competition is not required in accordance with
part 6, to obtain competition to the
maximum extent practicable, with due
regard to the nature of the supplies or
services to be acquired (10 U.S.C.
2301(a)(5) and 41 U.S.C. 253a(a)(1)).
(b) This planning shall integrate the
efforts of all personnel responsible for
significant aspects of the acquisition.
The purpose of this planning is to ensure that the Government meets its
needs in the most effective, economical, and timely manner. Agencies that
have a detailed acquisition planning
system in place that generally meets
the requirements of 7.104 and 7.105 need
not revise their system to specifically
meet all of these requirements.
[60 FR 48236, Sept. 18, 1995]
7.103
Agency-head responsibilities.
The agency head or a designee shall
prescribe procedures for—
(a) Promoting and providing for full
and open competition (see part 6) or,
when full and open competition is not
required in accordance with part 6, for
obtaining competition to the maximum extent practicable, with due regard to the nature of the supplies and
services to be acquired (41 U.S.C.
253a(a)(1)).
(b) Encouraging offerors to supply
commercial items, or to the extent
that commercial items suitable to
meet the agency needs are not available, nondevelopmental items in response to agency solicitations (10
U.S.C. 2377 and 41 U.S.C. 251, et seq.);
and
(c) Ensuring that acquisition planners address the requirement to specify
needs, develop specifications, and to
solicit offers in such a manner to promote and provide for full and open
competition with due regard to the nature of the supplies and services to be
acquired (10 U.S.C. 2305(a)(1)(A) and 41
U.S.C. 253A(a)(1)). (See part 6 and
10.002.)
(d) Establishing criteria and thresholds at which increasingly greater detail and formality in the planning process is required as the acquisition becomes more complex and costly, specifying those cases in which a written
plan shall be prepared;
(e) Writing plans either on a systems
basis, on an individual contract basis,
or on an individual order basis, depending upon the acquisition.
(f) Ensuring that the principles of
this subpart are used, as appropriate,
for those acquisitions that do not require a written plan as well as for
those that do;
(g) Designating planners for acquisitions;
(h) Reviewing and approving acquisition plans and revisions to these plans;
(i) Establishing criteria and thresholds at which design-to-cost and lifecycle-cost techniques will be used;
(j) Establishing standard acquisition
plan formats, if desired, suitable to
agency needs; and
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7.104
48 CFR Ch. 1 (10–1–03 Edition)
(k) Waiving requirements of detail
and formality, as necessary, in planning for acquisitions having compressed delivery or performance schedules because of the urgency of the need.
(l) Assuring that the contracting officer, prior to contracting, reviews:
(1) The acquisition history of the supplies and services; and
(2) A description of the supplies, including, when necessary for adequate
description, a picture, drawing, diagram, or other graphic representation.
(m) Ensuring that agency planners
include use of the metric system of
measurement in proposed acquisitions
in accordance with 15 U.S.C. 205b (see
11.002(b)) and agency metric plans and
guidelines.
(n) Ensuring that agency planners—
(1) Specify needs for printing and
writing paper consistent with the minimum content standards specified in
section 505 of Executive Order 13101 of
September 14, 1998, Greening the Government through Waste Prevention,
Recycling, and Federal Acquisition
(see 11.303); and
(2) Comply with the policy in 11.002(d)
regarding procurement of products containing recovered materials, and environmentally preferable and energy-efficient products and services.
(o) Ensuring that acquisition planners specify needs and develop plans,
drawings, work statements, specifications, or other product descriptions
that address Electronic and Information Technology Accessibility Standards (see 36 CFR part 1194) in proposed
acquisitions (see 11.002(e)) and that
these standards are included in requirements planning, as appropriate (see
subpart 39.2).
(p) Making a determination, prior to
issuance of a solicitation for advisory
and assistance services involving the
analysis and evaluation of proposals
submitted in response to a solicitation,
that a sufficient number of covered
personnel with the training and capability to perform an evaluation and
analysis of proposals submitted in response to a solicitation are not readily
available within the agency or from another Federal agency in accordance
with the guidelines at 37.204.
(q) Ensuring that no purchase request is initiated or contract entered
into that would result in the performance of an inherently governmental
function by a contractor and that all
contracts or orders are adequately
managed so as to ensure effective official control over contract or order performance.
(r) Ensuring that knowledge gained
from prior acquisitions is used to further refine requirements and acquisition strategies. For services, greater
use of performance-based contracting
methods and, therefore, fixed-price
contracts (see 37.602–5) should occur for
follow-on acquisitions.
(s) Ensuring that acquisition planners, to the maximum extent practicable—
(1) Structure contract requirements
to facilitate competition by and among
small business concerns; and
(2) Avoid unnecessary and unjustified
bundling that precludes small business
participation as contractors (see 7.107)
(15 U.S.C. 631(j)).
(t) Ensuring that agency planners on
information technology acquisitions
comply with the capital planning and
investment control requirements in 40
U.S.C. 1422 and OMB Circular A–130.
[48 FR 42124, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 27561, July 3,
1985; 50 FR 52429, Dec. 23, 1985; 51 FR 27116,
July 29, 1986; 57 FR 60574, Dec. 21, 1992; 60 FR
28495, May 31, 1995; 60 FR 48236, Sept. 18, 1995;
60 FR 49721, Sept. 26, 1995; 61 FR 2628, Jan. 26,
1996; 62 FR 40236, July 25, 1997; 62 FR 44814,
Aug. 22, 1997; 64 FR 72442, Dec. 27, 1999; 65 FR
36017, June 6, 2000; 66 FR 20896, Apr. 25, 2001;
67 FR 56118, Aug. 30, 2002]
7.104
General procedures.
(a) Acquisition planning should begin
as soon as the agency need is identified, preferably well in advance of the
fiscal year in which contract award or
order placement is necessary. In developing the plan, the planner shall form
a team consisting of all those who will
be responsible for significant aspects of
the acquisition, such as contracting,
fiscal, legal, and technical personnel.
The planner should review previous
plans for similar acquisitions and discuss them with the key personnel involved in those acquisitions. At key
dates specified in the plan or whenever
significant changes occur, and no less
often than annually, the planner shall
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review the plan and, if appropriate, revise it.
(b) Requirements and logistics personnel should avoid issuing requirements on an urgent basis or with unrealistic delivery or performance schedules, since it generally restricts competition and increases prices. Early in
the planning process, the planner
should consult with requirements and
logistics personnel who determine
type, quality, quantity, and delivery
requirements.
(c) The planner shall coordinate with
and secure the concurrence of the contracting officer in all acquisition planning. If the plan proposes using other
than full and open competition when
awarding a contract, the plan shall
also be coordinated with the cognizant
competition advocate.
[48 FR 42124, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 52433, Dec. 23,
1985; 67 FR 56118, Aug. 30, 2002]
7.105 Contents of written acquisition
plans.
In order to facilitate attainment of
the acquisition objectives, the plan
must identify those milestones at
which decisions should be made (see
paragraph (b)(19) below). The plan must
address all the technical, business,
management, and other significant
considerations that will control the acquisition. The specific content of plans
will vary, depending on the nature, circumstances, and stage of the acquisition. In preparing the plan, the planner
must follow the applicable instructions
in paragraphs (a) and (b) below, together with the agency’s implementing
procedures. Acquisition plans for service contracts or orders must describe
the strategies for implementing performance-based contracting methods
or must provide rationale for not using
those methods (see subpart 37.6).
(a) Acquisition background and objectives—(1) Statement of need. Introduce
the plan by a brief statement of need.
Summarize the technical and contractual history of the acquisition. Discuss
feasible acquisition alternatives, the
impact of prior acquisitions on those
alternatives, and any related in-house
effort.
(2) Applicable conditions. State all significant conditions affecting the acqui-
sition, such as (i) requirements for
compatibility with existing or future
systems or programs and (ii) any
known cost, schedule, and capability or
performance constraints.
(3) Cost. Set forth the established
cost goals for the acquisition and the
rationale supporting them, and discuss
related cost concepts to be employed,
including, as appropriate, the following
items:
(i) Life-cycle cost. Discuss how lifecycle cost will be considered. If it is
not used, explain why. If appropriate,
discuss the cost model used to develop
life-cycle-cost estimates.
(ii) Design-to-cost. Describe the design-to-cost objective(s) and underlying assumptions, including the rationale for quantity, learning-curve,
and economic adjustment factors. Describe how objectives are to be applied,
tracked, and enforced. Indicate specific
related solicitation and contractual requirements to be imposed.
(iii) Application of should-cost. Describe the application of should-cost
analysis to the acquisition (see 15.407–
4).
(4) Capability or performance. Specify
the required capabilities or performance characteristics of the supplies or
the performance standards of the services being acquired and state how they
are related to the need.
(5) Delivery or performance-period requirements. Describe the basis for establishing delivery or performance-period
requirements (see subpart 11.4). Explain and provide reasons for any urgency if it results in concurrency of development and production or constitutes justification for not providing
for full and open competition.
(6) Trade-offs. Discuss the expected
consequences of trade-offs among the
various cost, capability or performance, and schedule goals.
(7) Risks. Discuss technical, cost, and
schedule risks and describe what efforts are planned or underway to reduce risk and the consequences of failure to achieve goals. If concurrency of
development
and
production
is
planned, discuss its effects on cost and
schedule risks.
(8) Acquisition streamlining. If specifically designated by the requiring agency as a program subject to acquisition
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7.105
48 CFR Ch. 1 (10–1–03 Edition)
streamlining, discuss plans and procedures to:
(i) Encourage industry participation
by
using
draft
solicitations,
presolicitation conferences, and other
means of stimulating industry involvement during design and development in
recommending the most appropriate
application and tailoring of contract
requirements;
(ii) Select and tailor only the necessary and cost-effective requirements;
and
(iii) State the timeframe for identifying which of those specifications and
standards, originally provided for guidance only, shall become mandatory.
(b) Plan of action—(1) Sources. Indicate the prospective sources of supplies
or services that can meet the need.
Consider required sources of supplies or
services (see Part 8) and sources identifiable through databases including the
Governmentwide database of contracts
and other procurement instruments intended for use by multiple agencies
available
at
http://
www.contractdirectory.gov. Include consideration of small business, veteranowned small business, service-disabled
veteran-owned
small
business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns (see
part 19), and the impact of any bundling that might affect their participation in the acquisition (see 7.107) (15
U.S.C. 644(e)). Address the extent and
results of the market research and indicate their impact on the various elements of the plan (see part 10).
(2) Competition. (i) Describe how competition will be sought, promoted, and
sustained throughout the course of the
acquisition. If full and open competition is not contemplated cite the authority in 6.302, discuss the basis for
the application of that authority, identify the source(s), and discuss why full
and open competition cannot be obtained.
(ii) Identify the major components or
subsystems. Discuss component breakout plans relative to these major components or subsystems. Describe how
competition will be sought, promoted,
and sustained for these components or
subsystems.
(iii) Describe how competition will be
sought, promoted, and sustained for
spares and repair parts. Identify the
key logistic milestones, such as technical data delivery schedules and acquisition method coding conferences,
that affect competition.
(iv) When effective subcontract competition is both feasible and desirable,
describe how such subcontract competition will be sought, promoted, and
sustained throughout the course of the
acquisition. Identify any known barriers to increasing subcontract competition and address how to overcome
them.
(3) Source-selection procedures. Discuss
the source-selection procedures for the
acquisition, including the timing for
submission and evaluation of proposals, and the relationship of evaluation factors to the attainment of the
acquisition objectives (see subpart
15.3).
(4) Acquisition considerations. (i) For
each contract contemplated, discuss
contract type selection (see part 16);
use of multiyear contracting, options,
or other special contracting methods
(see part 17); any special clauses, special solicitation provisions, or FAR deviations required (see subpart 1.4);
whether sealed bidding or negotiation
will be used and why; whether equipment will be acquired by lease or purchase (see subpart 7.4) and why; and
any other contracting considerations.
Provide rationale if a performancebased contract will not be used or if a
performance-based contract for services is contemplated on other than a
firm-fixed-price basis (see 37.102(a) and
16.505(a)(3)).
(ii) For each order contemplated, discuss—
(A) For information technology acquisitions, how the capital planning
and investment control requirements
of 40 U.S.C. 1422 and OMB Circular A–
130 will be met (see 7.103(t) and part 39);
and
(B) Why this action benefits the Government, such as when—
(1) The agency can accomplish its
mission more efficiently and effectively (e.g., take advantage of the servicing agency’s specialized expertise; or
gain access to contractors with needed
expertise); or
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(2) Ordering through an indefinite delivery contract facilitates access to
small business concerns, including
small disadvantaged business concerns,
8(a) contractors, women-owned small
business concerns, HUBZone small
business concerns, veteran-owned small
business concerns, or service-disabled
veteran-owned small business concerns.
(5) Budgeting and funding. Include
budget estimates, explain how they
were derived, and discuss the schedule
for obtaining adequate funds at the
time they are required (see subpart
32.7).
(6) Product or service descriptions. Explain the choice of product or service
description types (including performance-based contracting descriptions) to
be used in the acquisition.
(7) Priorities, allocations, and allotments. When urgency of the requirement dictates a particularly short delivery or performance schedule, certain
priorities may apply. If so, specify the
method for obtaining and using priorities, allocations, and allotments, and
the reasons for them (see subpart 11.6).
(8) Contractor versus Government performance. Address the consideration
given to OMB Circular No. A–76 (see
subpart 7.3).
(9) Inherently governmental functions.
Address the consideration given to
OFPP Policy Letter 92–1 (see subpart
7.5).
(10) Management information requirements. Discuss, as appropriate, what
management system will be used by
the Government to monitor the contractor’s effort.
(11) Make or buy. Discuss any consideration given to make-or-buy programs
(see subpart 15.407–2).
(12) Test and evaluation. To the extent
applicable, describe the test program of
the contractor and the Government.
Describe the test program for each
major phase of a major system acquisition. If concurrency is planned, discuss
the extent of testing to be accomplished before production release.
(13)
Logistics
considerations.
Describe—
(i) The assumptions determining contractor or agency support, both initially and over the life of the acquisition, including consideration of contractor or agency maintenance and
servicing (see subpart 7.3) and distribution of commercial items;
(ii) The reliability, maintainability,
and quality assurance requirements,
including any planned use of warranties (see part 46);
(iii) The requirements for contractor
data (including repurchase data) and
data rights, their estimated cost, and
the use to be made of the data (see part
27); and
(iv) Standardization concepts, including the necessity to designate, in accordance with agency procedures, technical equipment as standard so that future purchases of the equipment can be
made from the same manufacturing
source.
(14) Government-furnished property. Indicate any property to be furnished to
contractors, including material and facilities, and discuss any associated considerations, such as its availability or
the schedule for its acquisition (see
part 45).
(15) Government-furnished information.
Discuss any Government information,
such as manuals, drawings, and test
data, to be provided to prospective
offerors and contractors.
(16) Environmental and energy conservation objectives. Discuss all applicable environmental and energy conservation objectives associated with
the acquisition (see part 23), the applicability of an environmental assessment or environmental impact statement (see 40 CFR part 1502), the proposed resolution of environmental
issues, and any environmentally-related requirements to be included in
solicitations and contracts.
(17) Security considerations. For acquisitions dealing with classified matters,
discuss how adequate security will be
established, maintained, and monitored (see subpart 4.4).
(18) Contract administration. Describe
how the contract will be administered.
In contracts for services, include how
inspection
and
acceptance
corresponding to the work statement’s
performance criteria will be enforced.
(19) Other considerations. Discuss, as
applicable, standardization concepts,
the industrial readiness program, the
Defense Production Act, the Occupational Safety and Health Act, foreign
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7.106
48 CFR Ch. 1 (10–1–03 Edition)
sales implications, and any other matters germane to the plan not covered
elsewhere.
(20) Milestones for the acquisition cycle.
Address the following steps and any
others appropriate:
Acquisition plan approval.
Statement of work.
Specifications.
Data requirements.
Completion of acquisition-package preparation.
Purchase request.
Justification and approval for other than
full and open competition where applicable
and/or any required D&F approval.
Issuance of synopsis.
Issuance of solicitation.
Evaluations of proposals, audits, and field
reports.
Beginning and completion of negotiations.
Contract preparation, review, and clearance.
Contract award.
(21) Identification of participants in acquisition plan preparation. List the individuals who participated in preparing
the acquisition plan, giving contact information for each.
[48 FR 42124, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985, and 51 FR 27116, July 29, 1986; 53 FR
17856, May 18, 1988; 53 FR 34226, Sept. 2, 1988;
60 FR 28495, May 31, 1995; 60 FR 48237, Sept.
18, 1995; 61 FR 2628, Jan. 26, 1996; 62 FR 40236,
July 25, 1997; 62 FR 44814, Aug. 22, 1997; 62 FR
51230, 51270, Sept. 30, 1997; 63 FR 70267, Dec.
18, 1998; 64 FR 72442, Dec. 27, 1999; 65 FR 60544,
Oct. 11, 2000; 67 FR 56118, Aug. 30, 2002; 67 FR
70522, Nov. 22, 2002; 68 FR 43862, July 24, 2003]
7.106 Additional
requirements
for
major systems.
(a) In planning for the solicitation of
a major system (see part 34) development contract, planners shall consider
requiring offerors to include, in their
offers, proposals to incorporate in the
design of a major system—
(1) Items which are currently available within the supply system of the
agency responsible for the major system, available elsewhere in the national supply system, or commercially
available from more than one source;
and
(2) Items which the Government will
be able to acquire competitively in the
future if they are likely to be needed in
substantial quantities during the system’s service life.
(b) In planning for the solicitation of
a major system (see part 34) production
contract, planners shall consider requiring offerors to include, in their offers, proposals identifying opportunities to assure that the Government will
be able to obtain, on a competitive
basis, items acquired in connection
with the system that are likely to be
acquired in substantial quantities during the service life of the system. Proposals submitted in response to such
requirements may include the following:
(1) Proposals to provide the Government the right to use technical data to
be provided under the contract for
competitive future acquisitions, together with the cost to the Government, if any, of acquiring such technical data and the right to use such
data.
(2) Proposals for the qualification or
development of multiple sources of
supply for competitive future acquisitions.
(c) In determining whether to apply
paragraphs (a) and (b) above, planners
shall consider the purposes for which
the system is being acquired and the
technology necessary to meet the system’s required capabilities. If such proposals are required, the contracting officer shall consider them in evaluating
competing offers. In noncompetitive
awards, the factors in paragraphs (a)
and (b) above, may be considered by
the contracting officer as objectives in
negotiating the contract.
[50 FR 27561, July 3, 1985 and 51 FR 27116,
July 29, 1986]
7.107 Additional requirements for acquisitions involving bundling.
(a) Bundling may provide substantial
benefits to the Government. However,
because of the potential impact on
small business participation, the head
of the agency must conduct market research to determine whether bundling
is necessary and justified (15 U.S.C.
644(e)(2)). Market research may indicate that bundling is necessary and
justified if an agency would derive
measurably substantial benefits (see
10.001(a)(2)(iv) and (a)(3)(vi)).
(b) Measurably substantial benefits
may include, individually or in any
combination or aggregate, cost savings
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7.202
or price reduction, quality improvements that will save time or improve
or enhance performance or efficiency,
reduction in acquisition cycle times,
better terms and conditions, and any
other benefits. The agency must quantify the identified benefits and explain
how their impact would be measurably
substantial. Except as provided in
paragraph (d) of this section, the agency may determine bundling to be necessary and justified if, as compared to
the benefits that it would derive from
contracting to meet those requirements if not bundled, it would derive
measurably substantial benefits equivalent to—
(1) Ten percent of the estimated contract value (including options) if the
value is $75 million or less; or
(2) Five percent of the estimated contract value (including options) or $7.5
million, whichever is greater, if the
value exceeds $75 million.
(c) Without power of delegation, the
service acquisition executive for the
military departments, the Under Secretary of Defense for Acquisition,
Technology and Logistics for the defense agencies, or the Deputy Secretary or equivalent for the civilian
agencies may determine that bundling
is necessary and justified when—
(1) The expected benefits do not meet
the thresholds in paragraphs (b)(1) and
(b)(2) of this section but are critical to
the agency’s mission success; and
(2) The acquisition strategy provides
for maximum practicable participation
by small business concerns.
(d) Reduction of administrative or
personnel costs alone is not sufficient
justification for bundling unless the
cost savings are expected to be at least
10 percent of the estimated contract
value (including options) of the bundled requirements.
(e) Substantial bundling is any bundling that results in a contract with an
average annual value of $10 million or
more. When the proposed acquisition
strategy involves substantial bundling,
the acquisition strategy must—
(1) Identify the specific benefits anticipated to be derived from bundling;
(2) Include an assessment of the specific impediments to participation by
small business concerns as contractors
that result from bundling;
(3) Specify actions designed to maximize small business participation as
contractors, including provisions that
encourage small business teaming;
(4) Specify actions designed to maximize small business participation as
subcontractors (including suppliers) at
any tier under the contract or contracts that may be awarded to meet
the requirements; and
(5) Include a specific determination
that the anticipated benefits of the
proposed bundled contract justify its
use.
(f) The contracting officer must justify bundling in acquisition strategy
documentation.
(g) In assessing whether cost savings
would be achieved through bundling,
the contracting officer must consider
the cost that has been charged or,
where data is available, could be
charged by small business concerns for
the same or similar work.
(h) The requirements of this section,
except for paragraph (e), do not apply if
a cost comparison analysis will be performed in accordance with OMB Circular A–76.
[64 FR 72443, Dec. 27, 1999, as amended at 65
FR 46054, July 26, 2000]
Subpart 7.2—Planning for the Purchase of Supplies in Economic Quantities
SOURCE: 50 FR 35475, Aug. 30, 1985, unless
otherwise noted.
7.200
Scope of subpart.
This subpart prescribes policies and
procedures for gathering information
from offerors to assist the Government
in planning the most advantageous
quantities in which supplies should be
purchased.
7.201
[Reserved]
7.202 Policy.
(a) Agencies are required by 10 U.S.C.
2384(a) and 41 U.S.C. 253(f) to procure
supplies in such quantity as (1) will result in the total cost and unit cost
most advantageous to the Government,
where practicable, and (2) does not exceed the quantity reasonably expected
to be required by the agency.
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7.203
48 CFR Ch. 1 (10–1–03 Edition)
(b) Each solicitation for a contract
for supplies is required, if practicable,
to include a provision inviting each offeror responding to the solicitation (1)
to state an opinion on whether the
quantity of the supplies proposed to be
acquired is economically advantageous
to the Government, and (2) if applicable, to recommend a quantity or quantities which would be more economically advantageous to the Government.
Each such recommendation is required
to include a quotation of the total
price and the unit price for supplies
procured in each recommended quantity.
7.203 Solicitation provision.
Contracting officers shall insert the
provision at 52.207–4, Economic Purchase Quantity—Supplies, in solicitations for supplies. The provision need
not be inserted if the solicitation is for
a contract under the General Services
Administration’s
multiple
award
schedule contract program, or if the
contracting officer determines that (a)
the Government already has the data,
(b) the data is otherwise readily available, or (c) it is impracticable for the
Government to vary its future requirements.
[52 FR 30076, Aug. 12, 1987]
7.204 Responsibilities of contracting
officers.
(a) Contracting officers are responsible for transmitting offeror responses
to the solicitation provision at 52.207–4
to appropriate inventory management/
requirements development activities in
accordance with agency procedures.
The economic purchase quantity data
so obtained are intended to assist inventory managers in establishing and
evaluating economic order quantities
for supplies under their cognizance.
(b) In recognition of the fact that
economic purchase quantity data furnished by offerors are only one of many
data inputs required for determining
the most economical order quantities,
contracting officers should generally
take no action to revise quantities to
be acquired in connection with the instant procurement. However, if a significant price variation is evident from
offeror responses, and the potential for
significant savings is apparent, the
contracting officer shall consult with
the cognizant inventory manager or requirements development activity before proceeding with an award or negotiations. If this consultation discloses
that the Government should be ordering an item of supply in different quantities and the inventory manager/requirements development activity concurs, the solicitation for the item
should be amended or canceled and a
new requisition should be obtained.
Subpart 7.3—Contractor Versus
Government Performance
7.300 Scope of subpart.
This subpart prescribes policies and
procedures for use in acquisitions of
commercial or industrial products and
services subject to (a) OMB Circular
No. A–76 (Revised) (the Circular), Performance of Commercial Activities,
and (b) the Supplement to the Circular.
[57 FR 60575, Dec. 21, 1992]
7.301 Policy.
The Circular provides that it is the
policy of the Government to (a) rely
generally
on
private
commercial
sources for supplies and services, if certain criteria are met, while recognizing
that some functions are inherently
Governmental and must be performed
by Government personnel, and (b) give
appropriate consideration to relative
cost in deciding between Government
performance and performance under
contract. In comparing the costs of
Government and contractor performance, the Circular provides that agencies shall base the contractor’s cost of
performance on firm offers.
7.302 General.
The Circular and the Supplement—
(a) Prescribe the overall policies and
detailed procedures required of all
agencies in making cost comparisons
between contractor and Government
performance. In making cost comparisons, agencies shall—
(1) Prepare an estimate of the cost of
Government performance based on the
same work statement and level of performance as apply to offerors; and
(2) Compare the total cost of Government performance to the total cost of
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contracting with the potentially successful offeror.
(b) Provide that solicitations and
synopses of the solicitations issued to
obtain offers for comparison purposes
shall state that they will not result in
a contract if Government performance
is determined to be more advantageous
(see the solicitation provisions at
52.207–1 and 52.207–2);
(c) Provide that each cost comparison shall be reviewed by an activity
independent of the activity which prepared the cost analysis to ensure conformance with the instructions in the
Supplement; and
(d) Provide that, ordinarily, agencies
should not incur the delay and expense
of conducting cost comparison studies
when the full-time equivalent Government employees involved are fewer
than those specified by law, the Circular, and implementing agency guidance. Cost comparisons may be conducted in these instances if there is
reason to believe that commercial
prices are unreasonable.
[50 FR 35475, Aug. 30, 1985, as amended at 53
FR 17856, May 18, 1988; 55 FR 25526, June 21,
1990; 57 FR 60575, Dec. 21, 1992]
7.303 Determining availability of private commercial sources.
(a) During acquisition planning reviews, contracting officers must assist
in identifying private commercial
sources.
(b) In making all reasonable efforts
to identify such sources, the contracting officer must assist in—
(1) Synopsizing the requirement
through the Governmentwide point of
entry (GPE) in accordance with 5.205(e)
until a reasonable number of potential
sources are identified. If necessary, a
synopsis must be submitted up to three
times in a 90-day period with a minimum of 30 days between notices (but,
when necessary to meet an urgent requirement, this notification may be
limited to a total of two notices in a
30-day period with a minimum of 15
days between them); and
(2) Requesting assistance from the
Small Business Administration, the
Department of Commerce, and the General Services Administration.
(3) If sufficient sources are not identified through synopses or from sub-
paragraph (b)(2) of this section, a finding that no commercial source is available may be made and the cost comparison canceled.
[48 FR 42124, Sept. 19, 1983, as amended at 55
FR 25526, June 21, 1990; 57 FR 60575, Dec. 21,
1992; 66 FR 27412, May 16, 2001]
7.304 Procedures.
(a) Work statement. When private
commercial sources are available and a
cost comparison is required, the Government’s functional managers responsible for the comparison or another
group shall prepare a comprehensive,
performance work statement. The
work statement must—
(1) Accurately reflect the actual Government requirement, stating adequately what is to be done without prescribing how it is to be done;
(2) Include performance standards
that can be used to ensure a comparable level of performance for both
Government and contractor and a common basis for evaluation; and
(3) Be reviewed by the contracting officer to ensure that it is adequate and
appropriate to serve as a basis for solicitation and award.
(b) Cost estimate. The agency personnel who develop the cost estimate
for Government performance—
(1) Enter on a cost comparison form
(see Part IV of the Supplement) the
cost estimate and the other elements
required to accomplish a cost comparison;
(2) Review the estimate for completeness and accuracy and have the estimate audited; and
(3) Submit to the contracting officer
the completed form and all necessary
detailed supporting data in a sealed,
dated envelope, or electronic equivalent, not later than the time established for receipt of initial proposals or
bid opening. If more time is needed to
develop the Government’s cost estimate, the contracting officer shall
amend the opening date of the solicitation.
(c) Solicitation. (1) The contracting officer shall issue a solicitation based on
the performance work statement prepared in accordance with paragraph (a)
of this section. Prepriced option prices
in existing contracts will not be used
instead of issuing a new solicitation
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7.305
48 CFR Ch. 1 (10–1–03 Edition)
when conducting a cost comparison
under a new start.
(2) Firm offers shall be required for
the period covered by the cost comparison, by using (i) a base contract period
and any applicable priced options to
total the amount of time represented
by the cost estimate for Government
performance (see subpart 17.2), or (ii) a
multiyear contract when appropriate
(see subpart 17.1).
(3) Solicitations shall not, unless a
proper determination to the contrary
is made, limit award to U.S. offerors.
(d) Integrity of cost comparison. (1) The
confidentiality of (i) the cost estimate
for Government performance and (ii)
the bids in sealed bid cost comparisons
shall be maintained until the time of
bid opening, to ensure that they are
completely independent.
(2) For cost comparisons conducted
using the results of negotiation procedures, confidentiality and independence shall be maintained until after negotiations are completed and the most
advantageous offer has been selected.
(3) Personnel who have knowledge of
the cost figures in the cost estimate for
Government performance shall not participate in the offer-evaluation process
unless the contract file is adequately
documented to show that no other
qualified personnel were available.
[48 FR 42124, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 55 FR 25526, June 21, 1990; 57 FR 60575,
Dec. 21, 1992; 60 FR 34737, July 3, 1995]
7.305 Solicitation provisions and contract clause.
(a) The contracting officer shall,
when contracting by sealed bidding, insert in solicitations issued for the purpose of comparing the costs of contractor and Government performance
the provision at 52.207–1, Notice of Cost
Comparison (Sealed-Bid).
(b) The contracting officer shall,
when contracting by negotiation, insert in requests for proposals issued for
the purpose of comparing the costs of
contractor and Government performance the provision at 52.207–2, Notice of
Cost Comparison (Negotiated).
(c) The contracting officer shall insert the clause at 52.207–3, Right of
First Refusal of Employment, in all solicitations which may result in a con-
version from in-house performance to
contract performance of work currently being performed by the Government and in contracts that result from
the solicitations, whether or not a cost
comparison is conducted. The 10–day
period in the clause may be varied by
the contracting officer up to a period of
90 days.
[48 FR 42124, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 52 FR 9037, Mar. 20, 1987; 56 FR 55372,
Oct. 25, 1991]
7.306 Evaluation.
The evaluation procedure to be followed after the contracting officer receives the cost estimate for Government performance (see 7.304(b)) and the
responses to the solicitation differs
from conventional contracting procedures as follows:
(a) Sealed bidding. (1) At the public
bid opening, after recording of bids, the
contracting officer shall—
(i) Open the sealed cost comparison
on which the cost estimate for Government performance has been entered;
(ii) Enter on the cost comparison
form the price of the apparent low bidder;
(iii) Announce the result, based on
the initial cost comparison form, stating that this result is subject to required agency processing, including
evaluation for responsiveness and responsibility, completion and audit of
the cost comparison form (see Supplement, Part IV, Illustration 1), and resolution of any requests for review under
the appeals procedure (see 7.307);
(iv) State that no final determination
for performance by the Government or
under contract will be made during the
public review period specified in the solicitation (at least 15 working days, up
to a maximum of 30 working days if the
contracting officer considers the action
to be complex; the public review period
begins when the documents identified
in (v) below are available to interested
parties), plus any additional time required for the appeals procedure; and
(v) Make available for this public review by interested parties the abstract
of bids, completed cost comparison
form, and detailed data supporting the
cost estimate for Government performance.
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7.307
(2) After evaluation of bids (see subpart 14.4) and determinations of responsibility, the contracting officer shall
provide the price of the low responsive,
responsible bidder to the preparer of
the cost estimate for Government performance, for final Government review
of the cost comparison form.
(3) Upon completion of the review
process, including resolution of any request under 7.307, the responsible agency official shall make the final determination for performance by the Government or under contract and provide
written notification to the contracting
officer, who shall either award a contract or cancel the solicitation as required.
(4) The contracting officer shall
make the completed and approved cost
comparison analysis available to interested parties upon request.
(b) Negotiation. The contracting officer shall receive proposals, evaluate
them (see subpart 15.3), conduct negotiations, and select the most advantageous proposal in accordance with
normal contracting procedures (see
part 15). The contracting officer shall,
before public announcement, open the
sealed estimate in the presence of the
preparer, enter the amount of the most
advantageous proposal on the cost
comparison form, and return the form
to the preparer of the cost estimate for
Government performance for completion. The preparer shall give due consideration to all types of costs which
could add or subtract from the cost of
either mode of performance.
(1) If the result of the cost comparison favors performance under contract
and the responsible agency official approves the result, the contracting officer shall award a contract in accordance with agency procedures. Concurrently with the award, the contracting
officer shall publicly—
(i) Notify interested parties of the result of the cost comparison;
(ii) Inform interested parties that the
completed cost comparison form and
detailed supporting data are available
for review;
(iii) Announce the contractor’s name;
and
(iv) Advise interested parties that
contractor preparations for performance are conditioned upon completion
of the public review period specified in
the solicitation plus any additional period required by the appeals procedure.
(2) If the result of the cost comparison favors Government performance,
the contracting officer shall—
(i) Notify interested parties of the result of the cost comparison;
(ii) Inform interested parties that the
completed cost comparison form and
detailed supporting data relative to the
Government cost estimate are available for public review (see subparagraph (3) below); and
(iii) Announce the price of the offer
most advantageous to the Government.
(3) The public review period shall
begin with the contracting officer’s announcement of the cost comparison result and availability of the cost comparison forms and detailed supporting
data to interested parties. The review
period shall last for the period specified in the solicitation (at least 15
working days, up to a maximum of 30
working days if the contracting officer
considers the action to be complex).
Upon completion of the public review
period and resolution of any questions
raised under 7.307, the responsible
agency official shall provide the contracting officer written notification of
the final cost comparison decision. The
contracting officer shall then, in the
case of subparagraph (b)(1) of this section, give the contractor notice to
commence or cancel the contract as
appropriate or, in the case of subparagraph (b)(2) of this section, cancel the
solicitation or award the contract, as
appropriate.
[48 FR 42124, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 34125, Sept. 3, 1986; 53 FR 661, Jan.
11, 1988; 55 FR 25526, June 21, 1990; 56 FR
41744, Aug. 22, 1991; 57 FR 60575, Dec. 21, 1992;
60 FR 34737, July 3, 1995; 62 FR 51270, Sept. 30,
1997]
7.307
Appeals.
(a) The Circular provides that each
agency shall establish an appeals procedure for informal administrative review of the initial cost comparison result. The appeals procedure shall provide for an independent, objective review of the initial result by an official
at a higher level than the official who
approved that result. The purpose is to
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7.400
48 CFR Ch. 1 (10–1–03 Edition)
protect the rights of affected parties
and to ensure that final agency determinations are fair, equitable, and in
accordance with established policy.
(b) The Circular provides that the appeals procedure shall be used only to
resolve questions concerning the calculation of the cost comparison and
shall not apply to questions concerning
selection of one contractor in preference to another, which shall be treated as prescribed in subpart 33.1, Protests. Directly affected parties may request review of any discrepancy in the
cost comparison. Any such requests
shall be made in writing to the contracting officer, who shall forward
them in accordance with agency procedures. Such requests shall be considered only if based on specific objections
and received within the public review
period stated in the solicitation.
[48 FR 42124, Sept. 19, 1983, as amended at 55
FR 25527, June 21, 1990; 57 FR 60575, Dec. 21,
1992; 60 FR 34737, July 3, 1995; 62 FR 40236,
July 25, 1997]
Subpart 7.4—Equipment Lease or
Purchase
7.400
Scope of subpart.
This subpart provides guidance pertaining to the decision to acquire
equipment by lease or purchase. It applies to both the initial acquisition of
equipment and the renewal or extension of existing equipment leases.
7.401
Acquisition considerations.
(a) Agencies should consider whether
to lease or purchase equipment based
on a case-by-case evaluation of comparative costs and other factors. The
following factors are the minimum
that should be considered:
(1) Estimated length of the period the
equipment is to be used and the extent
of use within that period.
(2) Financial and operating advantages of alternative types and makes of
equipment.
(3) Cumulative rental payments for
the estimated period of use.
(4) Net purchase price.
(5) Transportation and installation
costs.
(6) Maintenance and other service
costs.
(7) Potential obsolescence of the
equipment because of imminent technological improvements.
(b) The following additional factors
should be considered, as appropriate,
depending on the type, cost, complexity, and estimated period of use of
the equipment:
(1) Availability of purchase options.
(2) Potential for use of the equipment
by other agencies after its use by the
acquiring agency is ended.
(3) Trade-in or salvage value.
(4) Imputed interest.
(5) Availability of a servicing capability, especially for highly complex
equipment; e.g., can the equipment be
serviced by the Government or other
sources if it is purchased?
7.402
Acquisition methods.
(a) Purchase method. (1) Generally,
the purchase method is appropriate if
the equipment will be used beyond the
point in time when cumulative leasing
costs exceed the purchase costs.
(2) Agencies should not rule out the
purchase method of equipment acquisition in favor of leasing merely because
of the possibility that future technological advances might make the selected equipment less desirable.
(b) Lease method. (1) The lease method
is appropriate if it is to the Government’s advantage under the circumstances. The lease method may
also serve as an interim measure when
the circumstances—
(i) Require immediate use of equipment to meet program or system goals;
but
(ii) Do not currently support acquisition by purchase.
(2) If a lease is justified, a lease with
option to purchase is preferable.
(3) Generally, a long term lease
should be avoided, but may be appropriate if an option to purchase or other
favorable terms are included.
(4) If a lease with option to purchase
is used, the contract shall state the
purchase price or provide a formula
which shows how the purchase price
will be established at the time of purchase.
[50 FR 35475, Aug. 30, 1985, as amended at 59
FR 67026, Dec. 28, 1994]
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7.503
7.403 General Services Administration
assistance.
(a) When requested by an agency, the
General Services Administration (GSA)
will assist in lease or purchase decisions by providing information such
as—
(1) Pending price adjustments to Federal Supply Schedule contracts;
(2) Recent or imminent technological
developments;
(3) New techniques; and
(4) Industry or market trends.
(b) Agencies may request information
from the following GSA offices:
(1) Center for Strategic IT Analysis
(MKS), Washington, DC 20405, for information on acquisition of information
technology.
(2) Federal Supply Service, Office of
Acquisition (FC), Washington, DC
20406, for information on other types of
equipment.
[48 FR 42124, Sept. 19, 1983, as amended at 54
FR 29280, July 11, 1989; 61 FR 41468, Aug. 8,
1996; 62 FR 40236, July 25, 1997]
7.404 Contract clause.
The contracting officer shall insert a
clause substantially the same as the
clause in 52.207–5, Option to Purchase
Equipment, in solicitations and contracts involving a lease with option to
purchase.
[59 FR 67026, Dec. 28, 1994]
Subpart 7.5—Inherently
Governmental Functions
SOURCE: 61 FR 2628, Jan. 26, 1996, unless
otherwise noted.
7.500 Scope of subpart.
The purpose of this subpart is to prescribe policies and procedures to ensure
that inherently governmental functions are not performed by contractors.
It implements the policies of Office of
Federal Procurement Policy (OFPP)
Policy Letter 92–1, Inherently Governmental Functions.
7.501
[Reserved]
7.502 Applicability.
The requirements of this subpart
apply to all contracts for services. This
subpart does not apply to services ob-
tained through either personnel appointments, advisory committees, or
personal services contracts issued
under statutory authority.
7.503
Policy.
(a) Contracts shall not be used for
the performance of inherently governmental functions.
(b) Agency decisions which determine
whether a function is or is not an inherently governmental function may
be reviewed and modified by appropriate Office of Management and Budget officials.
(c) The following is a list of examples
of functions considered to be inherently governmental functions or which
shall be treated as such. This list is not
all inclusive:
(1) The direct conduct of criminal investigations.
(2) The control of prosecutions and
performance of adjudicatory functions
other than those relating to arbitration or other methods of alternative
dispute resolution.
(3) The command of military forces,
especially the leadership of military
personnel who are members of the combat, combat support, or combat service
support role.
(4) The conduct of foreign relations
and the determination of foreign policy.
(5) The determination of agency policy, such as determining the content
and application of regulations, among
other things.
(6) The determination of Federal program priorities for budget requests.
(7) The direction and control of Federal employees.
(8) The direction and control of intelligence and counter-intelligence operations.
(9) The selection or non-selection of
individuals for Federal Government
employment, including the interviewing of individuals for employment.
(10) The approval of position descriptions and performance standards for
Federal employees.
(11) The determination of what Government property is to be disposed of
and on what terms (although an agency
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7.503
48 CFR Ch. 1 (10–1–03 Edition)
may give contractors authority to dispose of property at prices within specified ranges and subject to other reasonable conditions deemed appropriate by
the agency).
(12) In Federal procurement activities with respect to prime contracts—
(i) Determining what supplies or
services are to be acquired by the Government (although an agency may give
contractors authority to acquire supplies at prices within specified ranges
and subject to other reasonable conditions deemed appropriate by the agency);
(ii) Participating as a voting member
on any source selection boards;
(iii) Approving any contractual documents, to include documents defining
requirements, incentive plans, and
evaluation criteria;
(iv) Awarding contracts;
(v) Administering contracts (including ordering changes in contract performance or contract quantities, taking action based on evaluations of contractor performance, and accepting or
rejecting contractor products or services);
(vi) Terminating contracts;
(vii) Determining whether contract
costs are reasonable, allocable, and allowable; and
(viii) Participating as a voting member on performance evaluation boards.
(13) The approval of agency responses
to Freedom of Information Act requests (other than routine responses
that, because of statute, regulation, or
agency policy, do not require the exercise of judgment in determining whether documents are to be released or
withheld), and the approval of agency
responses to the administrative appeals
of denials of Freedom of Information
Act requests.
(14) The conduct of Administrative
hearings to determine the eligibility of
any person for a security clearance, or
involving actions that affect matters of
personal reputation or eligibility to
participate in Government programs.
(15) The approval of Federal licensing
actions and inspections.
(16) The determination of budget policy, guidance, and strategy.
(17) The collection, control, and disbursement of fees, royalties, duties,
fines, taxes, and other public funds, un-
less authorized by statute, such as 31
U.S.C. 952 (relating to private collection contractors) and 31 U.S.C. 3718 (relating to private attorney collection
services), but not including—
(i) Collection of fees, fines, penalties,
costs, or other charges from visitors to
or patrons of mess halls, post or base
exchange concessions, national parks,
and similar entities or activities, or
from other persons, where the amount
to be collected is easily calculated or
predetermined and the funds collected
can be easily controlled using standard
case management techniques; and
(ii) Routine voucher and invoice examination.
(18) The control of the treasury accounts.
(19) The administration of public
trusts.
(20) The drafting of Congressional
testimony, responses to Congressional
correspondence, or agency responses to
audit reports from the Inspector General, the General Accounting Office, or
other Federal audit entity.
(d) The following is a list of examples
of functions generally not considered
to be inherently governmental functions. However, certain services and actions that are not considered to be inherently governmental functions may
approach being in that category because of the nature of the function, the
manner in which the contractor performs the contract, or the manner in
which the Government administers
contractor performance. This list is
not all inclusive:
(1) Services that involve or relate to
budget preparation, including workload
modeling, fact finding, efficiency studies, and should-cost analyses, etc.
(2) Services that involve or relate to
reorganization and planning activities.
(3) Services that involve or relate to
analysis, feasibility studies, and strategy options to be used by agency personnel in developing policy.
(4) Services that involve or relate to
the development of regulations.
(5) Services that involve or relate to
the evaluation of another contractor’s
performance.
(6) Services in support of acquisition
planning.
(7) Contractors providing assistance
in contract management (such as
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Pt. 8
where the contractor might influence
official evaluations of other contractors).
(8) Contractors providing technical
evaluation of contract proposals.
(9) Contractors providing assistance
in the development of statements of
work.
(10) Contractors providing support in
preparing responses to Freedom of Information Act requests.
(11) Contractors working in any situation that permits or might permit
them to gain access to confidential
business information and/or any other
sensitive information (other than situations covered by the National Industrial Security Program described in
4.402(b)).
(12) Contractors providing information regarding agency policies or regulations, such as attending conferences
on behalf of an agency, conducting
community relations campaigns, or
conducting agency training courses.
(13) Contractors participating in any
situation where it might be assumed
that they are agency employees or representatives.
(14) Contractors participating as
technical advisors to a source selection
board or participating as voting or
nonvoting members of a source evaluation board.
(15) Contractors serving as arbitrators or providing alternative methods
of dispute resolution.
(16) Contractors constructing buildings or structures intended to be secure
from electronic eavesdropping or other
penetration by foreign governments.
(17) Contractors providing inspection
services.
(18) Contractors providing legal advice and interpretations of regulations
and statutes to Government officials.
(19) Contractors providing special
non-law enforcement, security activities that do not directly involve criminal investigations, such as prisoner detention or transport and non-military
national security details.
(e) Agency implementation shall include procedures requiring the agency
head or designated requirements official to provide the contracting officer,
concurrent with transmittal of the
statement of work (or any modification
thereof), a written determination that
none of the functions to be performed
are inherently governmental. This assessment should place emphasis on the
degree to which conditions and facts
restrict the discretionary authority,
decision-making responsibility, or accountability of Government officials
using contractor services or work products. Disagreements regarding the determination will be resolved in accordance with agency procedures before
issuance of a solicitation.
[61 FR 2628, Jan. 26, 1996, as amended at 62
FR 40236, July 25, 1997]
PART 8—REQUIRED SOURCES OF
SUPPLIES AND SERVICES
Sec.
8.000 Scope of part.
8.001 General.
8.002 Priorities for use of Government supply sources.
8.003 Use of other Government supply
sources.
8.004 Contract clause.
Subpart 8.1—Excess Personal Property
8.101 Definition.
8.102 Policy.
8.103 Information on available excess personal property.
8.104 Obtaining nonreportable property.
Subparts 8.2–8.3 [Reserved]
Subpart 8.4—Federal Supply Schedules
8.401 General.
8.402 Applicability.
8.402—8.403–4 [Reserved]
8.404 Using schedules.
8.404–1—8.404–2 [Reserved]
8.404–3 Requests for waivers.
8.405 Ordering office responsibilities.
8.405–1 [Reserved]
8.405–2 Order placement.
8.405–3 Inspection and acceptance.
8.405–4 Delinquent performance.
8.405–5 Termination for default.
8.405–6 Termination for convenience.
8.405–7 Disputes.
Subpart 8.5—Acquisition of Helium
8.500
8.501
8.502
8.503
8.504
8.505
Scope of subpart.
Definitions.
Policy.
Exception.
Procedures.
Contract clause.
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8.000
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 8.6—Acquisition From Federal
Prison Industries, Inc.
8.001
8.601 General.
8.602 Policy.
8.603 Purchase priorities.
8.604 Ordering procedures.
8.605 Clearances.
8.606 Exceptions.
8.607 Evaluating FPI performance.
[67 FR 56119, Aug. 30, 2002]
Subpart 8.7—Acquisition From Nonprofit
Agencies Employing People Who Are
Blind or Severely Disabled
8.700 Scope of subpart.
8.701 Definitions.
8.702 General.
8.703 Procurement list.
8.704 Purchase priorities.
8.705 Procedures.
8.705–1 General.
8.705–2 Direct-order process.
8.705–3 Allocation process.
8.705–4 Compliance with orders.
8.706 Purchase exceptions.
8.707 Prices.
8.708 Shipping.
8.709 Payments.
8.710 Quality of merchandise.
8.711 Quality complaints.
8.712 Specification changes.
8.713 Optional acquisition of supplies and
services.
8.714 Communications with the central nonprofit agencies and the Committee.
8.715 Replacement commodities.
8.716 Change-of-name and successor in interest procedures.
Subpart 8.8—Acquisition of Printing and
Related Supplies
8.800
8.801
8.802
Scope of subpart.
Definitions.
Policy.
Subparts 8.9–8.10 [Reserved]
Subpart 8.11—Leasing of Motor Vehicles
8.1100
8.1101
8.1102
8.1103
8.1104
General.
Regardless of the source of supplies
or services to be acquired, information
technology acquisitions shall comply
with capital planning and investment
control requirements in 40 U.S.C. 1422
and OMB Circular A–130.
Scope of subpart.
Definitions.
Presolicitation requirements.
Contract requirements.
Contract clauses.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42129, Sept. 19, 1983, unless
otherwise noted.
8.000 Scope of part.
This part deals with the acquisition
of supplies and services from or
through Government supply sources.
8.002 Priorities for use of Government
supply sources.
(a) Except as required by 8.003, or as
otherwise provided by law, agencies
shall satisfy requirements for supplies
and services from or through the
sources and publications listed below
in descending order of priority—
(1) Supplies. (i) Agency inventories;
(ii) Excess from other agencies (see
subpart 8.1);
(iii) Federal Prison Industries, Inc.
(see subpart 8.6);
(iv) Products available from the
Committee for Purchase from People
Who Are Blind or Severely Disabled
(see subpart 8.7);
(v) Wholesale supply sources, such as
stock programs of the General Services
Administration (GSA) (see 41 CFR 101–
26.3), the Defense Logistics Agency (see
41 CFR 101–26.6), the Department of
Veterans Affairs (see 41 CFR 101–26.704),
and military inventory control points;
(vi)
Mandatory
Federal
Supply
Schedules (see subpart 8.4);
(vii) Optional use Federal Supply
Schedules (see subpart 8.4); and
(viii) Commercial sources (including
educational and nonprofit institutions).
(2) Services. (i) Services available
from the Committee for Purchase from
People Who Are Blind or Severely Disabled (see subpart 8.7);
(ii) Mandatory Federal Supply Schedules (see subpart 8.4);
(iii) Optional use Federal Supply
Schedules (see subpart 8.4); and
(iv) Federal Prison Industries, Inc.
(see subpart 8.6), or commercial sources
(including educational and nonprofit
institutions).
(b) Sources other than those listed in
paragraph (a) may be used as prescribed in 41 CFR 101–26.301 and in an
unusual and compelling urgency as prescribed in 6.302–2 and in 41 CFR 101–
25.101–5.
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Federal Acquisition Regulation
8.104
(c) The statutory obligation for Government agencies to satisfy their requirements for supplies available from
the Committee for Purchase From People Who Are Blind or Severely Disabled
also applies when contractors purchase
the supply items for Government use.
[48 FR 42129, Sept. 19, 1983, as amended at 50
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 54 FR 29280, July 11, 1989; 56 FR 15148,
Apr. 15, 1991; 59 FR 53716, Oct. 25, 1994; 59 FR
67027, Dec. 28, 1994; 61 FR 2630, Jan. 26, 1996;
66 FR 65367, Dec. 1, 2001. Redesignated and
amended at 67 FR 56119, Aug. 30, 2002]
8.003 Use of other Government supply
sources.
Agencies shall satisfy requirements
for the following supplies or services
from or through specified sources, as
applicable:
(a) Public utility services (see part
41);
(b) Printing and related supplies (see
subpart 8.8);
(c) Leased motor vehicles (see subpart 8.11);
(d) Strategic and critical materials
(e.g., metals and ores) from inventories
exceeding National Defense Stockpile
requirements (detailed information is
available from the Defense National
Stockpile Center, 8725 John J. Kingman Rd., Suite 4528, Fort Belvior, VA
22060–6223; and
(e) Helium (see subpart 8.5—Acquisition of Helium).
[48 FR 42129, Sept. 19, 1983, as amended at 57
FR 60576, Dec. 21, 1992; 59 FR 67018, Dec. 28,
1994; 59 FR 67030, Dec. 28, 1994; 61 FR 41468,
Aug. 8, 1996; 62 FR 235, Jan. 2, 1997. Redesignated at 67 FR 56119, Aug. 30, 2002]
8.004 Contract clause.
Insert the clause at 52.208–9, Contractor Use of Mandatory Sources of
Supply and Services, in solicitations
and contracts that require a contractor
to provide supplies or services for Government use that are available from
the Committee for Purchase from People Who Are Blind or Severely Disabled. The contracting officer shall
identify in the contract schedule the
supplies or services that must be purchased from a mandatory source and
the specific source.
Subpart 8.1—Excess Personal
Property
8.101
Definition.
Excess personal property means any
personal property (see 45.601) under the
control of a Federal agency that the
agency head or a designee determines
is not required for its needs and for the
discharge of its responsibilities.
8.102
Policy.
When practicable, agencies must use
excess personal property as the first
source of supply for agency and cost-reimbursement contractor requirements.
Agency personnel must make positive
efforts to satisfy agency requirements
by obtaining and using excess personal
property (including that suitable for
adaptation or substitution) before initiating a contract action.
[67 FR 13053, Mar. 20, 2002]
8.103 Information on available excess
personal property.
Information regarding the availability of excess personal property can
be obtained through—
(a) Review of excess personal property catalogs and bulletins issued by
the General Services Administration
(GSA);
(b) Personal contact with GSA or the
activity holding the property;
(c) Submission of supply requirements to the regional offices of GSA
(GSA Form 1539, Request for Excess
Personal Property, is available for this
purpose); and
(d) Examination and inspection of reports and samples of excess personal
property in GSA regional offices.
8.104 Obtaining nonreportable property.
GSA will assist agencies in meeting
their requirements for supplies of the
types excepted from reporting as excess
by the Federal Property Management
Regulations (41 CFR 101–43.312). Federal agencies requiring such supplies
should contact the appropriate GSA regional office.
[66 FR 65368, Dec. 18, 2001.. Redesignated and
amended at 67 FR 56119, Aug. 30, 2002]
Subparts 8.2–8.3 [Reserved]
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8.401
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 8.4—Federal Supply
Schedules
8.401
General.
(a) The Federal Supply Schedule program, directed and managed by the
General
Services
Administration
(GSA), provides Federal agencies with
a simplified process for obtaining commonly used commercial supplies and
services at prices associated with volume buying (also see 8.002). Indefinite
delivery contracts (including requirements contracts) are established with
commercial firms to provide supplies
and services at stated prices for given
periods of time. Similar systems of
schedule-type contracting are used for
military items managed by the Department of Defense. These systems are not
included in the Federal Supply Schedule program covered by this subpart.
(b) The GSA schedule contracting office issues publications, entitled Federal Supply Schedules, containing the
information necessary for placing delivery orders with schedule contractors. Ordering offices issue delivery orders directly to the schedule contractors for the required supplies and services. Ordering offices may request copies of schedules by completing GSA
Form 457, FSS Publications Mailing
List Application, and mailing it to the
GSA Centralized Mailing List Service
(7CAFL), P.O. Box 6477, Fort Worth, TX
76115. Copies of GSA Form 457 also may
be obtained from this address.
(c) GSA offers an on-line shopping
service called ‘‘GSA Advantage!’’ that
enables ordering offices to search product specific information (i.e., national
stock number, part number, common
name), review delivery options, place
orders directly with contractors (or
ask GSA to place orders on the agency’s behalf), and pay contractors for orders using the Governmentwide commercial purchase card (or pay GSA).
Ordering offices may access the ‘‘GSA
Advantage!’’ shopping service by connecting to the Internet and using a web
browser to connect to the Acquisition
Reform Network (http://www.arnet.gov)
or the GSA, Federal Supply Service
(FSS)
Home
Page
(http://
www.fss.gsa.gov). For more information or assistance, contact GSA at
Internet
e-mail
address:
[email protected].
(d) For administrative convenience,
an ordering office contracting officer
may add items not on the Federal Supply Schedule (also referred to as open
market items) to a Federal Supply
Schedule blanket purchase agreement
(BPA) or an individual task or delivery
order only if—
(1) All applicable acquisition regulations pertaining to the purchase of the
items not on the Federal Supply Schedule have been followed (e.g., publicizing
(Part 5), competition requirements
(Part 6), acquisition of commercial
items (Part 12), contracting methods
(Parts 13, 14, and 15), and small business programs (Part 19));
(2) The ordering office contracting officer has determined the price for the
items not on the Federal Supply Schedule is fair and reasonable;
(3) The items are clearly labeled on
the order as items not on the Federal
Supply Schedule; and
(4) All clauses applicable to items not
on the Federal Supply Schedule are included in the order.
[62 FR 44817, Aug. 22, 1997, as amended at 67
FR 43515, June 27, 2002; 67 FR 56119, Aug. 30,
2002]
8.402 Applicability.
Procedures in this subpart apply to
orders placed against Federal Supply
Schedules. Occasionally, GSA may establish special ordering procedures.
The affected Federal Supply Schedules
will outline these procedures.
[65 FR 36024, June 6, 2000]
8.402—8.403–4
[Reserved]
8.404 Using schedules.
(a) General. (1) Parts 13 and 19 do not
apply to orders placed against Federal
Supply Schedules, except for the provision at 13.303–2(c)(3). Orders placed
against a Multiple Award Schedule
(MAS), using the procedures in this
subpart, are considered to be issued
using full and open competition (see
6.102(d)(3)).
(i) Ordering offices need not seek further competition, synopsize the requirement, make a separate determination of fair and reasonable pricing, or
consider small business programs.
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Federal Acquisition Regulation
8.404
(ii) GSA has already determined the
prices of items under schedule contracts to be fair and reasonable. By
placing an order against a schedule
using the procedures in this section,
the ordering office has concluded that
the order represents the best value and
results in the lowest overall cost alternative (considering price, special features, administrative costs, etc.) to
meet the Government’s needs.
(2) Orders placed under a Federal
Supply Schedule contract are not exempt from the development of acquisition plans (see subpart 7.1), and an information
technology
acquisition
strategy (see part 39).
(b) Ordering procedures for optional use
schedules—(1) Orders at or below the
micro-purchase threshold. Place orders
at or below the micro-purchase threshold with any Federal Supply Schedule
contractor.
(2) Orders exceeding the micro-purchase
threshold but not exceeding the maximum
order threshold. Place orders with the
schedule contractor that can provide
the supply or service that represents
the best value. Before placing an order,
consider reasonably available information about the supply or service offered
under MAS contracts by using the
‘‘GSA Advantage!’’ on-line shopping
service, or by reviewing the catalogs or
pricelists of at least three schedule
contractors (see 8.404(b)(6)). Select the
delivery and other options available
under the schedule that meet the agency’s needs. When selecting the supply
or service representing the best value,
the ordering office may consider—
(i) Special features of the supply or
service required for effective program
performance;
(ii) Trade-in considerations;
(iii) Probable life of the item selected
as compared with that of a comparable
item;
(iv) Warranty considerations;
(v) Maintenance availability;
(vi) Past performance; and
(vii) Environmental and energy efficiency considerations.
(3) Orders exceeding the maximum order
threshold. Each schedule contract has
an established maximum order threshold. This threshold represents the point
where it is advantageous for the ordering office to seek a price reduction. In
addition to following the procedures in
paragraph (b)(2) of this section and before placing an order that exceeds the
maximum order threshold—
(i) Review additional schedule contractors’ catalogs or pricelists, or use
the ‘‘GSA Advantage!’’ on-line shopping service;
(ii) Based upon the initial evaluation,
generally seek price reductions from
the schedule contractor(s) appearing to
provide the best value (considering
price and other factors); and
(iii) After seeking price reductions,
place the order with the schedule contractor that provides the best value
and results in the lowest overall cost
alternative (see 8.404(a)). If further
price reductions are not offered, an
order may still be placed, if the ordering office determines that it is appropriate.
(4)
Blanket
purchase
agreements
(BPAs). Agencies may establish BPAs
(see 13.303–2(c)(3)) when following the
ordering procedures in this subpart. All
schedule contracts contain BPA provisions. Ordering offices may use BPAs
to establish accounts with contractors
to fill recurring requirements. BPAs
should address ordering frequency,
invoicing, discounts, and delivery locations and times.
(5) Price reductions. In addition to the
circumstances in paragraph (b)(3) of
this section, there may be other reasons to request a price reduction. For
example, seek a price reduction when
the supply or service is available elsewhere at a lower price or when establishing a BPA to fill recurring requirements. The potential volume of orders
under BPAs, regardless of the size of
the individual order, offer the opportunity to secure greater discounts.
Schedule contractors are not required
to pass on to all schedule users a price
reduction extended only to an individual agency for a specific order.
(6) Small business. When conducting
evaluations and before placing an
order, consider including, if available,
one or more small business, veteranowned small business, service-disabled
veteran-owned
small
business,
HUBZone small business, womanowned small business, and/or small disadvantaged business schedule contractor(s). Orders placed against the
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8.404–1—8.404–2
48 CFR Ch. 1 (10–1–03 Edition)
schedules may be credited toward the
ordering agency’s small business goals.
For orders exceeding the micro-purchase threshold, ordering offices should
give preference to the items of small
business concerns when two or more
items at the same delivered price will
satisfy the requirement.
(7) Documentation. Orders should be
documented, at a minimum, by identifying the contractor the item was purchased from, the item purchased, and
the amount paid. If an agency requirement in excess of the micro-purchase
threshold is defined so as to require a
particular brand name, product, or a
feature of a product peculiar to one
manufacturer, thereby precluding consideration of a product manufactured
by another company, the ordering office shall include an explanation in the
file as to why the particular brand
name, product, or feature is essential
to satisfy the agency’s needs.
(c) Ordering procedures for mandatory
use schedules. (1) This paragraph (c) applies only to orders against schedule
contracts with mandatory users. When
ordering from multiple-award schedules, mandatory users shall also follow
the procedures in paragraphs (a) and
(b) of this section.
(2) In the case of mandatory schedules, ordering offices shall not solicit
bids, proposals, quotations, or otherwise test the market solely for the purpose of seeking alternative sources to
Federal Supply Schedules.
(3) Schedules identify executive agencies required to use them as mandatory
sources of supply. The single-award
schedule shall be used as a primary
source and the multiple-award schedule
as a secondary source. Mandatory use
of schedules is not a requirement if—
(i) The schedule contractor is unable
to satisfy the ordering office’s urgent
delivery requirement;
(ii) The order is below the minimum
order thresholds;
(iii) The order is above the maximum
order limitation;
(iv) The consignee is located outside
the area of geographic coverage stated
in the schedule; or
(v) A lower price for an identical
item (i.e., same make and model) is
available from another source.
(4) Absence of follow-on award. Ordering offices, after any consultation required by the schedule, are not required to forego or postpone their legitimate needs pending the award or
renewal of any schedule contract.
[59 FR 53716, Oct. 25, 1994, as amended at 59
FR 60319, Nov. 23, 1994; 60 FR 34747, July 3,
1995; 62 FR 44818, Aug. 22, 1997; 62 FR 64917,
Dec. 9, 1997; 63 FR 34079, June 22, 1998; 64 FR
10536, Mar. 4, 1999; 65 FR 36024, June 6, 2000;
67 FR 56119, Aug. 30, 2002; 68 FR 56689, Oct. 1,
2003]
8.404–1—8.404–2
8.404–3
[Reserved]
Requests for waivers.
(a) When an ordering office that is a
mandatory user under a schedule determines that items available from the
schedule will not meet its specific
needs, but similar items from another
source will, it shall submit a request
for waiver to the Commissioner, Federal Supply Service (F), GSA, Washington, DC 20406, except as provided in
(b) below. Requests shall contain the
following information:
(1) A complete description of the required items, whenever possible; e.g.,
descriptive literature such as cuts, illustrations, drawings, and brochures
that explain the characteristics and/or
construction.
(2) A comparison of prices and the
technical differences between the requested item and the schedule item,
identifying as a minimum the—
(i) Inadequacies of the schedule item
to perform required functions; and
(ii) Technical, economic, or other advantages of the item requested.
(3) Quantity required.
(4) Estimated annual usage or a
statement that the requirement is nonrecurrent or unpredictable.
(b) Ordering offices shall not initiate
action to acquire similar items from
nonschedule sources until a request for
waiver is approved, except as otherwise
provided in interagency agreements.
[48 FR 42129, Sept. 19, 1983, as amended at 54
FR 29280, July 11, 1989]
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Federal Acquisition Regulation
8.405
8.405–5
Ordering office responsibilities.
8.405–1
[Reserved]
8.405–2 Order placement.
Ordering offices may use Optional
Form 347, an agency-prescribed form,
or an established electronic communications format to order items from
schedules and shall place orders directly with the contractor within the
limitations specified in each schedule.
Orders shall include, at a minimum,
the following information in addition
to any information required by the
schedule:
(a) Complete shipping and billing addresses.
(b) Contract number and date.
(c) Agency order number.
(d) F.o.b. delivery point; i.e., origin
or destination.
(e) Discount terms.
(f) Delivery time.
(g) Special item number or national
stock number.
(h) Brief, complete description of
each item (when ordering by model
number, features and options such as
color, finish, and electrical characteristics, if available, must be specified).
(i) Quantity and any variation in
quantity.
(j) Number of units.
(k) Unit price.
(l) Total price of order.
(m) Points of inspection and acceptance.
(n) Other pertinent data; e.g., delivery instructions or receiving hours and
size-of-truck limitation.
(o) Marking requirements.
(p) Level of preservation, packaging,
and packing.
[48 FR 42129, Sept. 19, 1983, as amended at 60
FR 34737, July 3, 1995]
8.405–3 Inspection and acceptance.
(a) Consignees shall inspect supplies
at destination except when—
(1) The schedule provides for the
schedule contracting agency to perform source inspection (in this case,
the schedule will indicate that mandatory source inspection is required); or
(2) A schedule item is covered by a
product description, and the ordering
office determines that the schedule
contracting agency’s inspection assist-
ance is needed (inspection assistance
may be based on the ordering volume,
the complexity of items, or the past
performance of the supplier).
(b) When the schedule contracting
agency performs the inspection, as
specified in the schedule, the ordering
office will provide two copies of the
order specifying source inspection to
the schedule contracting agency. The
schedule contracting agency will notify the ordering office of acceptance
or rejection of the supplies.
(c) Material inspected at source by
the schedule contracting agency, and
determined to conform with the product description of the schedule, shall
not be reinspected for the same purpose. The consignee shall limit inspection to quantity and condition on receipt.
(d) Unless otherwise provided in the
schedule, acceptance shall be conclusive except as regards latent defects,
fraud, or such gross mistakes as
amount to fraud.
8.405–4
Delinquent performance.
If the contractor fails to perform on
the order, the ordering office may terminate the order for default or give the
contractor further opportunity to perform by modifying the order to establish a new delivery date (obtaining consideration as necessary).
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 53717, Oct. 25, 1994]
8.405–5
Termination for default.
(a)(1) An ordering office may terminate any one or more orders for default
in accordance with part 49, Termination of Contracts. The schedule contracting office shall be notified of all
cases where an ordering office has declared a Federal Supply Schedule contractor in default or fraud is suspected.
(2) Should the contractor claim that
the failure was excusable, the ordering
office shall promptly refer the matter
to the schedule contracting office. In
the absence of a decision by the schedule contracting office (or by the head
of the schedule contracting agency, on
appeal) excusing the failure, the ordering office may charge the contractor
with excess costs resulting from repurchase.
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8.405–6
48 CFR Ch. 1 (10–1–03 Edition)
(3) Any repurchase shall be made at
as reasonable a price as possible considering the quality required by the
Government, delivery requirement, and
administrative expenses. Copies of all
repurchase orders, except the copy furnished to the contractor or any other
commercial concern, shall include the
notation ‘‘Repurchase against the account of llllll [insert contractor’s name] under Delivery Order
llllll [insert number] under Contract llllll [insert number]’’.
(4) When excess costs are anticipated,
the ordering office may withhold funds
due the contractor as offset security.
Ordering offices shall minimize excess
costs to be charged against the contractor and collect or setoff any excess
costs owed.
(5) If an ordering office is unable to
collect excess costs, it shall take the
following actions:
(i) Notify the schedule contracting
office within 60 days after final payment to the replacement contractor.
The notice shall include the following
information about the defaulted order:
(A) Name and address of the contractor.
(B) Schedule, contract, and order
number.
(C) National stock or special item
number(s), and a brief description of
the item(s).
(D) Cost of schedule items involved.
(E) Excess costs to be collected.
(F) Other pertinent data.
(ii) In addition to the above, the notice shall include the following information about the replacement contract:
(A) Name and address of the contractor.
(B) Item repurchase cost.
(C) Repurchase order number and
date of payment.
(D) Contract number, if any.
(E) Other pertinent data.
(b) Only the schedule contracting officer may terminate for default any or
all items covered by the schedule contract. When notified of default action
by the schedule contracting officer
with respect to defaulted items, ordering offices shall—
(1) Refuse to accept further performance by the contractor;
(2) Not place further orders with the
contractor;
(3) Repurchase against the contractor
in default from sources designated by
the schedule contracting officer; or
(4) Proceed as otherwise directed by
the schedule contracting officer.
(c) All actions taken regarding terminations for default shall comply
with the applicable requirements in
part 49.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 53717, Oct. 25, 1994]
8.405–6 Termination for convenience.
(a) Ordering offices may terminate
individual orders for the convenience
of the Government. Only the schedule
contracting officer may terminate any
or all items covered by the schedule
contract for the convenience of the
Government.
(b) Before terminating orders for convenience, the ordering office shall endeavor to enter into a ‘‘no cost’’ cancellation agreement with the contractor.
(c) All actions taken regarding terminations for convenience shall comply with the applicable requirements in
part 49.
8.405–7 Disputes.
(a) Disputes pertaining to the performance of orders under a schedule contract.
(1) Under the Disputes clause of the
schedule contract, the ordering office
contracting officer may—
(i) Issue final decisions on disputes
arising from performance of the order
(but see paragraph (b) of this section);
or
(ii) Refer the dispute to the schedule
contracting officer.
(2) The ordering office contracting officer shall notify the schedule contracting officer promptly of any final
decision.
(b) Disputes pertaining to the terms and
conditions of schedule contracts. The ordering office contracting officer shall
refer all disputes that relate to the
contract terms and conditions to the
schedule contracting officer for resolution under the Disputes clause of the
contract and notify the schedule contractor of the referral.
(c) Appeals. Contractors may appeal
final decisions to either the Board of
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Federal Acquisition Regulation
8.602
Contract Appeals servicing the agency
that issued the final decision or the
U.S. Court of Federal Claims.
(d) Alternative dispute resolution. The
contracting officer should use the alternative dispute resolution (ADR) procedures, to the maximum extent practicable (see 33.204 and 33.214).
[67 FR 43515, June 27, 2002]
Subpart 8.5—Acquisition of Helium
SOURCE: 67 FR 13064, Mar. 20, 2002, unless
otherwise noted.
8.500 Scope of subpart.
This subpart implements the requirements of the Helium Act (50 U.S.C. 167,
et seq.) concerning the acquisition of
liquid or gaseous helium by Federal
agencies or by Government contractors
or subcontractors for use in the performance of a Government contract
(also see 43 CFR part 3195).
8.501 Definitions.
As used in this subpart—
Bureau of Land Management means
the Department of the Interior, Bureau
of Land Management, Amarillo Field
Office, Helium Operations, 801 South
Fillmore Street, Suite 500, Amarillo,
TX 79101–3545.
Federal helium supplier means a private helium vendor that has an in-kind
crude helium sales contract with the
Bureau of Land Management (BLM)
and that is on the BLM Amarillo Field
Office’s Authorized List of Federal Helium Suppliers available via the Internet at http://www.nm.blm.gov/www/
amfo/amfolhome.html.
Major helium requirement means an estimated refined helium requirement
greater than 200,000 standard cubic feet
(scf) (measured at 14.7 pounds per
square inch absolute pressure and 70
degrees Fahrenheit temperature) of
gaseous helium or 7510 liters of liquid
helium delivered to a helium use location per year.
8.502 Policy.
Agencies and their contractors and
subcontractors must purchase major
helium requirements from Federal helium suppliers, to the extent that supplies are available.
8.503 Exception.
The requirements of this subpart do
not apply to contracts or subcontracts
in which the helium was acquired by
the contractor prior to award of the
contract or subcontract.
8.504 Procedures.
The contracting officer must forward
the following information to the Bureau of Land Management within 45
days of the close of each fiscal quarter:
(a) The name of any company that
supplied a major helium requirement.
(b) The amount of helium purchased.
(c) The delivery date(s).
(d) The location where the helium
was used.
8.505 Contract clause.
Insert the clause at 52.208–8, Required
Sources for Helium and Helium Usage
Data, in solicitations and contracts if
it is anticipated that performance of
the contract involves a major helium
requirement.
Subpart 8.6—Acquisition From
Federal Prison Industries, Inc.
8.601 General.
(a) Federal Prison Industries, Inc.
(FPI), also referred to as UNICOR, is a
self-supporting, wholly owned Government corporation of the District of Columbia.
(b) FPI provides training and employment for prisoners confined in Federal
penal and correctional institutions
through the sale of its supplies and
services to Government agencies (18
U.S.C. 4121–4128).
(c) FPI diversifies its supplies and
services to prevent private industry
from experiencing unfair competition
from prison workshops or activities.
[48 FR 42129, Sept. 19, 1983, as amended at 56
FR 15148, Apr. 15, 1991]
8.602 Policy.
(a) Agencies shall purchase required
supplies of the classes listed in the
Schedule of Products made in Federal
Penal and Correctional Institutions
(referred to in this subpart as the
Schedule) at prices not to exceed current market prices, using the procedures in this subpart.
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8.603
48 CFR Ch. 1 (10–1–03 Edition)
(b) Subject to the priorities in 8.002
and 8.603, agencies are encouraged to
use the facilities of FPI to the maximum extent practicable in purchasing
(1) supplies that are not listed in the
Schedule, but that are of a type manufactured in Federal penal and correctional institutions, and (2) services
that are listed in the Schedule.
(c) If a supply not listed in the Schedule is of a type normally produced by
Federal penal and correctional institutions, agencies are encouraged to suggest that FPI consider the feasibility
of adding the item to its Schedule.
[48 FR 42129, Sept. 19, 1983, as amended at 56
FR 15148, Apr. 15, 1991; 67 FR 56119, Aug. 30,
2002]
8.603
Purchase priorities.
(a) FPI and nonprofit agencies participating in the Javits-Wagner-O’Day
(JWOD) Program (see subpart 8.7) may
produce identical supplies or services.
When this occurs, ordering offices shall
purchase supplies and services in the
following priorities:
(1) Supplies:
(i) Federal Prison Industries, Inc. (41
U.S.C. 48).
(ii) JWOD participating nonprofit
agencies.
(iii) Commercial sources.
(2) Services:
(i) JWOD participating nonprofit
agencies.
(ii) Federal Prison Industries, Inc., or
commercial sources.
(b) Supplies and services manufactured or performed by FPI are in strict
conformity with Federal Specifications. These supplies and services are
listed in the Schedule. Copies of the
Schedule are available from Federal
Prison Industries, Inc., Department of
Justice, Washington, DC 20534.
[48 FR 42129, Sept. 19, 1983, as amended at 56
FR 15149, Apr. 15, 1991; 59 FR 67027, Dec. 28,
1994]
8.604
Ordering procedures.
(a) Contracting officers shall order
(1) less-than-carload lots of commonuse items (Schedule A of the Schedule)
from the regional warehouses of GSA,
unless it is more practical and economical to purchase directly from FPI,
and (2) carload lots of common-use
items, and other items listed in the
Schedule, from FPI.
(b) Contracting officers shall prepare
orders to FPI using the procedures in
the Schedule.
(c) When the contracting officer believes that the FPI price exceeds the
market price, the matter may be referred to the cognizant product division identified in the Schedule or to
the FPI Washington office for resolution.
8.605 Clearances.
(a) Clearance is required from FPI
before supplies on the Schedule are acquired from other sources, except when
the conditions in 8.606 apply. FPI clearances ordinarily are of the following
types:
(1) General or blanket clearances
issued when classes of articles or services are not available from FPI.
(2) Formal clearances issued in response to requests from offices desiring
to acquire, from other sources, supplies
listed in the Schedule and not covered
by a general clearance. Requests
should be addressed to Federal Prison
Industries, Inc., Department of Justice,
Washington, DC 20534.
(b) Purchases from other sources because of a lower price are not normally
authorized, and clearances will not be
issued on this basis except as a result
of action taken to resolve questions of
price under 8.604(c).
(c) Disputes regarding price, quality,
character, or suitability of supplies
produced by FPI are subject to arbitration as specified in 18 U.S.C. 4124. The
statute provides that the arbitration
shall be conducted by a board consisting of the Comptroller General of
the United States, the Administrator
of General Services, and the President,
or their representatives. The decisions
of the board are final and binding on
all parties.
[48 FR 42129, Sept. 19, 1983, as amended at 56
FR 15149, Apr. 15, 1991]
8.606 Exceptions.
FPI clearances are not required
when—
(a) Public exigency requires immediate delivery or performance;
(b) Suitable used or excess supplies
are available;
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(c) Purchases are made from GSA of
less-than-carload lots of common-use
items stocked by GSA (see Schedule A
of the Schedule);
(d) The supplies are acquired and
used outside the United States; or
(e) Orders are for listed items totaling $2,500 or less.
[48 FR 42129, Sept. 19, 1983, as amended at 56
FR 15149, Apr. 15, 1991; 68 FR 28095, May 22,
2003]
8.607
Evaluating FPI performance.
Agencies shall evaluate FPI contract
performance in accordance with subpart 42.15. Performance evaluations do
not negate the requirements of 8.602
and 8.605, but they may be used to support a clearance request in accordance
with 8.605.
[68 FR 28096, May 22, 2003]
Subpart 8.7—Acquisition From
Nonprofit Agencies Employing
People Who Are Blind or Severely Disabled
8.700
Scope of subpart.
This subpart prescribes the policies
and procedures for implementing the
Javits-Wagner-O’Day Act (41 U.S.C. 46–
48c), referred to in this subpart as ‘‘the
JWOD Act,’’ and the rules of the Committee for Purchase from People Who
Are Blind or Severely Disabled (41 CFR
chapter 51).
[59 FR 67027, Dec. 28, 1994]
8.701
Definitions.
As used in this subpart—
Allocation, means an action taken by
a central nonprofit agency to designate
the JWOD participating nonprofit
agencies that will furnish definite
quantities of supplies or perform specific services upon receipt of orders
from ordering offices.
Central nonprofit agency, means National Industries for the Blind (NIB),
which has been designated to represent
people who are blind; or NISH, which
has been designated to represent JWOD
participating nonprofit agencies serving people with severe disabilities
other than blindness.
Committee, means the Committee for
Purchase from People Who Are Blind
or Severely Disabled.
Government or entity of the Government means any entity of the legislative or judicial branch, any executive
agency, military department, Government corporation, or independent establishment, the U.S. Postal Service,
or any nonappropriated-fund instrumentality of the Armed Forces.
Ordering office means any activity in
an entity of the Government that
places orders for the purchase of supplies or services under the JWOD Program.
Procurement List, means a list of supplies (including military resale commodities) and services that the Committee has determined are suitable for
purchase by the Government under the
Javits-Wagner-O’Day Act.
Nonprofit agency serving people who
are blind or nonprofit agency serving people with other severe disabilities (referred
to jointly as JWOD participating nonprofit agencies) means a qualified nonprofit agency employing people who
are blind or have other severe disabilities approved by the Committee to
furnish a commodity or a service to the
Government under the Act.
[59 FR 67027, Dec. 28, 1994, as amended at 66
FR 2128, Jan. 10, 2001]
8.702
General.
The Committee is an independent
Government activity with members appointed by the President of the United
States. It is responsible for—
(a) Determining those supplies and
services to be purchased by all entities
of the Government from JWOD participating nonprofit agencies;
(b) Establishing prices for the supplies and services; and
(c) Establishing rules and regulations
to implement the JWOD Act.
[59 FR 67028, Dec. 28, 1994]
8.703
Procurement list.
The Committee maintains a Procurement List of all supplies and services
required to be purchased from JWOD
participating nonprofit agencies. Questions concerning whether a supply item
or service is on the Procurement List
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8.704
48 CFR Ch. 1 (10–1–03 Edition)
should be referred to the Committee offices at the following address and telephone number: Committee for Purchase from People Who Are Blind or
Severely Disabled, Crystal Square 3,
Room 403, 1735 Jefferson Davis Highway, Arlington, VA 22202–3461, (703) 603–
7740.
Many items on the Procurement List
are identified in the General Services
Administration (GSA) Supply Catalog
and GSA’s Customer Service Center
Catalogs with a black square and the
words ‘‘NIB/NISH Mandatory Source,’’
and in similar catalogs issued by the
Defense Logistics Agency (DLA) and
the Department of Veterans Affairs
(VA). GSA, DLA, and VA are central
supply agencies from which other Federal agencies are required to purchase
certain supply items on the Procurement List.
[59 FR 67028, Dec. 28, 1994]
8.704
Purchase priorities.
(a) The JWOD Act requires the Government to purchase supplies or services on the Procurement List, at prices
established by the Committee, from
JWOD participating nonprofit agencies
if they are available within the period
required. When identical supplies or
services are on the Procurement List
and the Schedule of Products issued by
Federal Prison Industries, Inc., ordering offices shall purchase supplies and
services in the following priorities:
(1) Supplies:
(i) Federal Prison Industries, Inc. (41
U.S.C. 48).
(ii) JWOD participating nonprofit
agencies.
(iii) Commercial sources.
(2) Services:
(i) JWOD participating nonprofit
agencies.
(ii) Federal Prison Industries, Inc., or
commercial sources.
(b) No other provision of the FAR
shall be construed as permitting an exception to the mandatory purchase of
items on the Procurement List.
(c) The Procurement List identifies
those supplies for which the ordering
office must obtain a formal clearance
(8.605) from Federal Prison Industries,
Inc., before making any purchases from
JWOD participating nonprofit agencies.
[48 FR 42129, Sept. 19, 1983, as amended at 51
FR 19713, May 30, 1986; 56 FR 15149, Apr. 15,
1991; 59 FR 67028, Dec. 28, 1994]
8.705
Procedures.
8.705–1
General.
(a) Ordering offices shall obtain supplies and services on the Procurement
List from the central nonprofit agency
or its designated JWOD participating
nonprofit agencies, except that supplies identified on the Procurement
List as available from DLA, GSA, or
VA supply distribution facilities shall
be obtained through DLA, GSA, or VA
procedures. If a distribution facility
cannot provide the supplies, it shall inform the ordering office, which shall
then order from the JWOD participating nonprofit agency designated by
the Committee.
(b) Supply distribution facilities in
DLA and GSA shall obtain supplies on
the Procurement List from the central
nonprofit agency identified or its designated JWOD participating nonprofit
agency.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67028, 67029, Dec. 28, 1994]
8.705–2
Direct-order process.
Central nonprofit agencies may authorize ordering offices to transmit orders for specific supplies or services directly to a JWOD participating nonprofit agency. The written authorization remains valid until it is revoked
by the central nonprofit agency or the
Committee. The central nonprofit
agency shall specify the normal delivery or performance lead time required
by the nonprofit agency. The ordering
office shall reflect this lead time in its
orders.
[48 FR 42129, Sept. 19, 1983, as amended at 56
FR 67136, Dec. 27, 1991; 59 FR 67029, Dec. 28,
1994]
8.705–3
Allocation process.
(a) When the direct order process has
not been authorized, the ordering office
shall submit a written request for allocation (requesting the designation of
the JWOD participating nonprofit
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agency to produce the supplies or perform the service) to the central nonprofit agency designated in the Procurement List. Ordering offices shall
request allocations in sufficient time
for a reply, for orders to be placed, and
for the nonprofit agency to produce the
supplies or provide the service within
the required delivery or performance
schedule.
(b) The ordering office’s request to
the central nonprofit agency for allocation shall include the following information:
(1) For supplies—Item name, stock
number, latest specification, quantity,
unit price, date delivery is required,
and destination to which delivery is to
be made.
(2) For services—Type and location of
service required, latest specification,
work to be performed, estimated volume, and required date or dates for
completion.
(3) Other requirements; e.g., packing,
marking, as necessary.
(c) When an allocation is received,
the ordering office shall promptly issue
an order to the specified JWOD participating nonprofit agency or to the central nonprofit agency, as instructed by
the allocation. If the issuance of an
order is to be delayed for more than 15
days beyond receipt of the allocation,
or canceled, the ordering office shall
advise the central nonprofit agency immediately.
(d) Ordering offices may issue orders
without limitation as to dollar amount
and shall record them upon issuance as
obligations. Each order shall include,
as a minimum, the information contained in the request for allocation. Ordering offices shall also include additional instructions necessary for performance under the order; e.g., on the
handling
of
Government-furnished
property, reports required, and notification of shipment.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67029, Dec. 28, 1994; 60 FR 34737, July 3,
1995]
8.705–4 Compliance with orders.
(a) The central nonprofit agency
shall inform the ordering office of
changes in lead time experienced by its
JWOD participating nonprofit agencies
to minimize requests for extensions
once the ordering office places an
order.
(b) The ordering office shall grant a
request by a central nonprofit agency
or JWOD participating nonprofit agency for revision in the delivery or completion schedule, if feasible. If extension of the delivery or completion date
is not feasible, the ordering office shall
notify the appropriate central nonprofit agency and request that it reallocate the order, or grant a purchase
exception authorizing acquisition from
commercial sources.
(c) When a JWOD participating nonprofit agency fails to perform under
the terms of an order, the ordering office shall make every effort to resolve
the noncompliance with the nonprofit
agency involved and to negotiate an
adjustment before taking action to
cancel the order. If the problem cannot
be resolved with the nonprofit agency,
the ordering office shall refer the matter for resolution first to the central
nonprofit agency and then, if necessary, to the Committee.
(d) When, after complying with 8.705–
4(c), the ordering office determines
that it must cancel an order, it shall
notify the central nonprofit agency
and, if practical, request a reallocation
of the order. When the central nonprofit agency cannot reallocate the
order, it shall grant a purchase exception permitting use of commercial
sources, subject to approval by the
Committee when the value of the purchase exception is $25,000 or more.
[48 FR 42129, Sept. 19, 1983, as amended at 56
FR 67136, Dec. 27, 1991; 59 FR 67028, 67029, Dec.
28, 1994]
8.706
Purchase exceptions.
(a) Ordering offices may acquire supplies or services on the Procurement
List from commercial sources only if
the acquisition is specifically authorized in a purchase exception granted by
the designated central nonprofit agency.
(b) The central nonprofit agency
shall promptly grant purchase exceptions when—
(1) The JWOD participating nonprofit
agencies cannot provide the supplies or
services within the time required, and
commercial sources can provide them
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8.707
48 CFR Ch. 1 (10–1–03 Edition)
significantly sooner in the quantities
required; or
(2) The quantity required cannot be
produced or provided economically by
the JWOD participating nonprofit
agencies.
(c) The central nonprofit agency
granting the exception shall specify
the quantity and delivery or performance period covered by the exception.
(d) When a purchase exception is
granted, the contracting officer shall—
(1) Initiate purchase action within 15
days following the date of the exception or any extension granted by the
central nonprofit agency; and
(2) Provide a copy of the solicitation
to the central nonprofit agency when it
is issued.
(e) The Committee may also grant a
purchase exception, under any circumstances it considers appropriate.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67028, 67029, Dec. 28, 1994]
8.707 Prices.
(a) The prices of items on the Procurement List are fair market prices
established by the Committee. All
prices for supplies ordered under this
subpart are f.o.b. origin.
(b) Prices for supplies are normally
adjusted semiannually. Prices for services are normally adjusted annually.
(c) The Committee may request the
agency responsible for acquiring the
supplies or service to assist it in establishing or revising the fair market
price. The Committee has the authority to establish prices without prior coordination with the responsible contracting office.
(d) Price changes shall normally
apply to all orders received by the
JWOD participating nonprofit agency
on or after the effective date of the
change. In special cases, after considering the views of the ordering office,
the Committee may make price
changes applicable to orders received
by the JWOD participating nonprofit
agency prior to the effective date of
the change.
(e) If an ordering office desires packing, packaging, or marking of supplies
other than the standard pack as provided on the Procurement List, any difference in costs shall be included as a
separate item on the nonprofit agen-
cy’s invoice. The ordering office shall
reimburse the nonprofit agency for
these costs.
(f) Ordering offices may make recommendations to the Committee at
any time for price revisions for supplies and services on the Procurement
List.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67028, 67029, Dec. 28, 1994]
8.708
Shipping.
(a) Delivery is accomplished when a
shipment is placed aboard the vehicle
of the initial carrier. The time of delivery is the date shipment is released to
and accepted by the initial carrier.
(b) Shipment is normally under Government bills of lading. However, for
small orders, ordering offices may
specify other shipment methods.
(c) When shipments are under Government bills of lading, the bills of lading may accompany orders or be otherwise furnished promptly. Failure of an
ordering office to furnish bills of lading
or to designate a method of transportation may result in an excusable delay
in delivery.
(d) JWOD participating nonprofit
agencies shall include transportation
costs for small shipments paid by the
nonprofit agencies as an item on the
invoice. The ordering office shall reimburse the nonprofit agencies for these
costs.
[48 FR 42129, Sept. 19, 1983, as amended at 51
FR 19713, May 30, 1986; 59 FR 67028, Dec. 28,
1994]
8.709
Payments.
The ordering office shall make payments for supplies or services on the
Procurement List within 30 days after
shipment or after receipt of a proper
invoice or voucher.
[59 FR 67028, Dec. 28, 1994]
8.710
Quality of merchandise.
Supplies and services provided by
JWOD participating nonprofit agencies
shall comply with the applicable Government specifications and standards
cited in the order. When no specifications or standards exist—
(a) Supplies shall be of the highest
quality and equal to similar items
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available on the commercial market;
and
(b) Services shall conform to good
commercial practices.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67029, Dec. 28, 1994]
8.711
Quality complaints.
(a) When the quality of supplies or
services received is unsatisfactory, the
using activity shall take the following
actions:
(1) For supplies received from DLA
supply centers, GSA supply distribution facilities, or Department of Veterans Affairs distribution division, notify the supplying agency.
(2) For supplies or services received
from JWOD participating nonprofit
agencies, address complaints to the individual nonprofit agency involved,
with a copy to the appropriate central
nonprofit agency.
(b) When quality problems cannot be
resolved by the JWOD participating
nonprofit agency and the ordering office, the ordering office shall first contact the central nonprofit agency and
then, if necessary, the Committee for
resolution.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67029, Dec. 28, 1994]
8.712
Specification changes.
(a) The contracting activity shall notify the JWOD participating nonprofit
agency and appropriate central nonprofit agency of any change in specifications or descriptions. In the absence of such written notification, the
JWOD participating nonprofit agency
shall furnish the supplies or services
under the specification or description
cited in the order.
(b) The contracting activity shall
provide 90-days advance notification to
the Committee and the central nonprofit agency on actions that affect
supplies on the Procurement List and
shall permit them to comment before
action is taken, particularly when it
involves—
(1) Changes that require new national
stock numbers or item designations;
(2) Deleting items from the supply
system;
(3) Standardization; or
(4) Developing new items to replace
items on the Procurement List.
(c) For services, the contracting activity shall notify the JWOD participating nonprofit agency and central
nonprofit agency concerned at least 90
days prior to the date that any changes
in the scope of work or other conditions will be required.
(d) When, in order to meet its emergency needs, a contracting activity is
unable to give the 90-day notification
required in paragraphs (b) and (c) of
this section, the contracting activity
shall, at the time it places the order or
change notice, inform the JWOD participating nonprofit agency and the
central nonprofit agency in writing of
the reasons that it cannot meet the 90day notification requirement.
[48 FR 42129, Sept. 19, 1983, as amended at 51
FR 19714, May 30, 1986; 59 FR 67029, Dec. 28,
1994]
8.713 Optional acquisition of supplies
and services.
(a) Ordering offices may acquire supplies and services not included on the
Procurement List from a JWOD participating nonprofit agency that is the
low responsive, responsible offeror
under a solicitation issued by other authorized acquisition methods.
(b) Ordering offices should forward
solicitations to JWOD participating
nonprofit agencies that may be qualified to provide the supplies or services
required.
[48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67029, Dec. 28, 1994]
8.714 Communications with the central nonprofit agencies and the
Committee.
(a) The addresses of the central nonprofit agencies are:
(1) National Industries for the Blind,
1901 N. Beauregard St., Suite 200, Alexandria, VA 22311–1727, (703) 998–0770; and
(2) NISH, 2235 Cedar Lane, Vienna,
VA 22182–5200, (703) 560–6800.
(b) Any matter requiring referral to
the Committee shall be addressed to
the Executive Director of the Committee at 1735 Jefferson-Davis Highway, Crystal Square 3, Suite 403, Arlington, VA 22202–3461.
[59 FR 67029, Dec. 28, 1994]
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8.715
8.715
48 CFR Ch. 1 (10–1–03 Edition)
Replacement commodities.
When a commodity on the Procurement List is replaced by another commodity which has not been previously
acquired, and a qualified JWOD participating nonprofit agency can furnish
the replacement commodity in accordance with the Government’s quality
standards and delivery schedules and
at a fair market price, the replacement
commodity is automatically on the
Procurement List and shall be acquired
from the JWOD participating nonprofit
agency designated by the Committee.
The commodity being replaced shall
continue to be included on the Procurement List until there is no longer a requirement for that commodity.
[51 FR 19714, May 30, 1986, as amended at 59
FR 67029, Dec. 28, 1994]
8.716 Change-of-name and
in interest procedures.
successor
When the Committee recognizes a
name change or a successor in interest
for a JWOD participating nonprofit
agency providing supplies or services
on the Procurement List—
(a) The Committee will provide a notice of a change to the Procurement
List to the cognizant contracting officers; and
(b) Upon receipt of a notice of a
change to the Procurement List from
the Committee, the contracting officer
must—
(1) Prepare a Standard Form (SF) 30,
Amendment of Solicitation/Modification of Contract, incorporating a summary of the notice and attaching a list
of contracts affected; and
(2) Distribute the SF 30, including a
copy to the Committee.
[64 FR 51834, Sept. 24, 1999]
Subpart 8.8—Acquisition of
Printing and Related Supplies
8.800
Scope of subpart.
This subpart provides policy for the
acquisition of Government printing
and related supplies.
[52 FR 9037, Mar. 20, 1987]
8.801
Definitions.
As used in this subpart—
Government printing means printing,
binding, and blankbook work for the
use of an executive department, independent agency, or establishment of
the Government.
Related supplies, means supplies that
are used and equipment that is usable
in printing and binding operations.
[48 FR 42129, Sept. 19, 1983, as amended at 52
FR 9037, Mar. 20, 1987; 66 FR 2128, Jan. 10,
2001]
8.802
Policy.
(a) Government printing must be
done by or through the Government
Printing Office (GPO) (44 U.S.C. 501),
unless—
(1) The GPO cannot provide the
printing service (44 U.S.C. 504);
(2) The printing is done in field printing plants operated by an executive
agency (44 U.S.C. 501(2));
(3) The printing is acquired by an executive agency from allotments for
contract field printing (44 U.S.C.
501(2)); or
(4) The printing is specifically authorized by statute to be done other
than by the GPO.
(b) The head of each agency shall designate a central printing authority;
that central printing authority may
serve as the liaison with the Congressional Joint Committee on Printing
(JCP) and the Public Printer on matters related to printing. Contracting
officers shall obtain approval from
their designated central printing authority before contracting in any manner, whether directly or through contracts for other supplies or services, for
the items defined in 8.801 and for composition,
platemaking,
presswork,
binding, and micrographics (when used
as a substitute for printing).
(c)(1) Further, 44 U.S.C. 1121 provides
that the Public Printer may acquire
and furnish paper and envelopes (excluding envelopes printed in the course
of manufacture) in common use by two
or more Government departments, establishments, or services within the
District of Columbia, and provides for
reimbursement of the Public Printer
from available appropriations or funds.
Paper and envelopes that are furnished
by the Public Printer may not be acquired in any other manner.
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(2) Paper and envelopes for use by Executive agencies outside the District of
Columbia and stocked by GSA shall be
requisitioned from GSA in accordance
with the procedures listed in Federal
Property
Management
Regulations
(FPMR) 41 CFR part 101, subpart 101–
26.3.
[48 FR 42129, Sept. 19, 1983, as amended at 52
FR 9037, Mar. 20, 1987; 54 FR 48982, Nov. 28,
1989; 59 FR 67032, Dec. 28, 1994]
Subparts 8.9–8.10 [Reserved]
Subpart 8.11—Leasing of Motor
Vehicles
8.1100
Scope of subpart.
This subpart covers the procedures
for the leasing, from commercial concerns, of motor vehicles that comply
with Federal Motor Vehicle Safety
Standards and applicable State motor
vehicle safety regulations. It does not
apply to motor vehicles leased outside
the United States and its outlying
areas.
[48 FR 42129, Sept. 19, 1983, as amended at 68
FR 28080, May 22, 2003]
8.1101
Definitions.
As used in this subpart—
Leasing, means the acquisition of
motor vehicles, other than by purchase
from private or commercial sources,
and includes the synonyms hire and
rent.
Motor vehicle means an item of equipment, mounted on wheels and designed
for highway and/or land use, that (1)
derives power from a self-contained
power unit or (2) is designed to be
towed by and used in conjunction with
self-propelled equipment.
[48 FR 42129, Sept. 19, 1983, as amended at 66
FR 2128, Jan. 10, 2001]
8.1102
Presolicitation requirements.
(a) Except as specified in 8.1102(b), before preparing solicitations for leasing
of motor vehicles, contracting officers
shall obtain from the requiring activity a written certification that—
(1) The vehicles requested are of maximum fuel efficiency and minimum
body size, engine size, and equipment
(if any) necessary to fulfill operational
needs, and meet prescribed fuel economy standards;
(2) The head of the requiring agency,
or a designee, has certified that the requested passenger automobiles (sedans
and station wagons) larger than Type
IA, IB, or II (small, subcompact, or
compact) are essential to the agency’s
mission;
(3) Internal approvals have been received; and
(4) The General Services Administration has advised that it cannot furnish
the vehicles.
(b) With respect to requirements for
leasing motor vehicles for a period of
less than 60 days, the contracting officer need not obtain the certification
specified in 8.1102(a)—
(1) If the requirement is for type 1A,
1B, or II vehicles, which are by definition fuel efficient; or
(2) If the requirement is for passenger
vehicles larger than 1A, 1B, or II, and
the agency has established procedures
for advance approval, on a case-by-case
basis, of such requirements.
(c) Generally, solicitations shall not
be limited to current-year production
models. However, with the prior approval of the head of the contracting
office, solicitations may be limited to
current models on the basis of overall
economy.
[48 FR 42129, Sept. 19, 1983, as amended at 55
FR 25527, June 21, 1990]
8.1103 Contract requirements.
Contracting officers shall include the
following items in each contract for
leasing motor vehicles:
(a) Scope of contract.
(b) Method of computing payments.
(c) A listing of the number and type
of vehicles required, and the equipment
and accessories to be provided with
each vehicle.
(d) Responsibilities of the contractor
or the Government for furnishing gasoline, motor oil, antifreeze, and similar
items.
(e) Unless it is determined that it
will be more economical for the Government to perform the work, a statement that the contractor shall perform
all maintenance on the vehicles.
(f) A statement as to the applicability of pertinent State and local laws
and regulations, and the responsibility
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8.1104
48 CFR Ch. 1 (10–1–03 Edition)
of each party for compliance with
them.
(g) Responsibilities of the contractor
or the Government for emergency repairs and services.
8.1104 Contract clauses.
Insert the following clauses in solicitations and contracts for leasing of
motor vehicles, unless the motor vehicles are leased in foreign countries:
(a) The clause at 52.208–4, Vehicle
Lease Payments.
(b) The clause at 52.208–5, Condition
of Leased Vehicles.
(c) The clause at 52.208–6, Marking of
Leased Vehicles.
(d) A clause substantially the same
as the clause at 52.208–7, Tagging of
Leased Vehicles, for vehicles leased
over 60 days (see subpart B of 41 CFR
102–34).
(e) The provisions and clauses prescribed elsewhere in the FAR for solicitations and contracts for supplies when
a fixed-price contract is contemplated,
but excluding—
(1) The clause at 52.211–16, Variation
in Quantity;
(2) The clause at 52.232–1, Payments;
(3) The clause at 52.222–20, WalshHealey Public Contracts Act; and
(4) The clause at 52.246–16, Responsibility for Supplies.
[48 FR 42129, Sept. 19, 1983, as amended at 51
FR 19714, May 30, 1986; 60 FR 48237, Sept. 18,
1995; 68 FR 28080, May 22, 2003]
PART 9—CONTRACTOR
QUALIFICATIONS
Sec.
9.000
9.106–1 Conditions for preaward surveys.
9.106–2 Requests for preaward surveys.
9.106–3 Interagency preaward surveys.
9.106–4 Reports.
9.107 Surveys of nonprofit agencies serving
people who are blind or have other severe
disabilities under the Javits-WagnerO’Day (JWOD) Program.
Subpart 9.2—Qualifications Requirements
9.200 Scope of subpart.
9.201 Definitions.
9.202 Policy.
9.203 QPL’s, QML’s, and QBL’s.
9.204 Responsibilities for establishment of a
qualification requirement.
9.205 Opportunity for qualification before
award.
9.206 Acquisitions subject to qualification
requirements.
9.206–1 General.
9.206–2 Contract clause.
9.206–3 Competition.
9.207 Changes in status regarding qualification requirements.
Subpart 9.3—First Article Testing and
Approval
9.301 Definition.
9.302 General.
9.303 Use.
9.304 Exceptions.
9.305 Risk.
9.306 Solicitation requirements.
9.307 Government administration procedures.
9.308 Contract clauses.
9.308–1 Testing performed by the contractor.
9.308–2 Testing performed by the Government.
Subpart 9.4—Debarment, Suspension, and
Ineligibility
Scope of part.
Subpart 9.1—Responsible Prospective
Contractors
9.100 Scope of subpart.
9.101 Definition.
9.102 Applicability.
9.103 Policy.
9.104 Standards.
9.104–1 General standards.
9.104–2 Special standards.
9.104–3 Application of standards.
9.104–4 Subcontractor responsibility.
9.105 Procedures.
9.105–1 Obtaining information.
9.105–2 Determinations and documentation.
9.105–3 Disclosure of preaward information.
9.106 Preaward surveys.
9.400 Scope of subpart.
9.401 Applicability.
9.402 Policy.
9.403 Definitions.
9.404 List of Parties Excluded from Federal
Procurement and Nonprocurement Programs.
9.405 Effect of listing.
9.405–1 Continuation of current contracts.
9.405–2 Restrictions on subcontracting.
9.406 Debarment.
9.406–1 General.
9.406–2 Causes for debarment.
9.406–3 Procedures.
9.406–4 Period of debarment.
9.406–5 Scope of debarment.
9.407 Suspension.
9.407–1 General.
9.407–2 Causes for suspension.
9.407–3 Procedures.
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Federal Acquisition Regulation
9.103
9.407–4 Period of suspension.
9.407–5 Scope of suspension.
9.408 Certification regarding debarment,
suspension, proposed debarment, and
other responsibility matters.
9.409 Solicitation provision and contract
clause.
Subpart 9.5—Organizational and
Consultant Conflicts of Interest
9.500 Scope of subpart.
9.501 Definition.
9.502 Applicability.
9.503 Waiver.
9.504 Contracting officer responsibilities.
9.505 General rules.
9.505–1 Providing systems engineering and
technical direction.
9.505–2 Preparing specifications or work
statements.
9.505–3 Providing evaluation services.
9.505–4 Obtaining access to proprietary information.
9.506 Procedures.
9.507 Solicitation provisions and contract
clause.
9.507–1 Solicitation provisions.
9.507–2 Contract clause.
9.508 Examples.
Subpart 9.6—Contractor Team
Arrangements
9.601
9.602
9.603
9.604
Definition.
General.
Policy.
Limitations.
Subpart 9.7—Defense Production Pools
and Research and Development Pools
9.701 Definition.
9.702 Contracting with pools.
9.703 Contracting with individual pool members.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42142, Sept. 19, 1983, unless
otherwise noted.
9.000
Scope of part.
This part prescribes policies, standards, and procedures pertaining to prospective contractors’ responsibility;
debarment, suspension, and ineligibility; qualified products; first article
testing and approval; contractor team
arrangements; defense production pools
and research and development pools;
and organizational conflicts of interest.
Subpart 9.1—Responsible
Prospective Contractors
9.100
Scope of subpart.
This subpart prescribes policies,
standards, and procedures for determining whether prospective contractors and subcontractors are responsible.
9.101
Definition.
Surveying activity, as used in this subpart, means the cognizant contract administration office or, if there is no
such office, another organization designated by the agency to conduct
preaward surveys.
[48 FR 42142, Sept. 19, 1983, as amended at 66
FR 2128, Jan. 10, 2001]
9.102
Applicability.
(a) This subpart applies to all proposed contracts with any prospective
contractor that is located—
(1) In the United States or its outlying areas; or
(2) Elsewhere, unless application of
the subpart would be inconsistent with
the laws or customs where the contractor is located.
(b) This subpart does not apply to
proposed contracts with (1) foreign,
State, or local governments; (2) other
U.S. Government agencies or their instrumentalities; or (3) agencies for the
blind or other severely handicapped
(see subpart 8.7).
[48 FR 42142, Sept. 19, 1983, as amended at 68
FR 28080, May 22, 2003]
9.103
Policy.
(a) Purchases shall be made from,
and contracts shall be awarded to, responsible prospective contractors only.
(b) No purchase or award shall be
made unless the contracting officer
makes an affirmative determination of
responsibility. In the absence of information clearly indicating that the prospective contractor is responsible, the
contracting officer shall make a determination of nonresponsibility. If the
prospective contractor is a small business concern, the contracting officer
shall comply with subpart 19.6, Certificates of Competency and Determinations of Responsibility. (If Section 8(a)
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9.104
48 CFR Ch. 1 (10–1–03 Edition)
of the Small Business Act (15 U.S.C.
637) applies, see subpart 19.8.)
(c) The award of a contract to a supplier based on lowest evaluated price
alone can be false economy if there is
subsequent default, late deliveries, or
other unsatisfactory performance resulting in additional contractual or administrative costs. While it is important that Government purchases be
made at the lowest price, this does not
require an award to a supplier solely
because that supplier submits the lowest offer. A prospective contractor
must affirmatively demonstrate its responsibility, including, when necessary, the responsibility of its proposed subcontractors.
[48 FR 42142, Sept. 19, 1983, as amended at 61
FR 67410, Dec. 20, 1996; 62 FR 44819, Aug. 22,
1997; 62 FR 48921, Sept. 17, 1997; 65 FR 80264,
Dec. 20, 2000; 66 FR 17755, Apr. 3, 2001; 66 FR
66986, 66989, Dec. 27, 2001]
9.104
Standards.
9.104–1
General standards.
To be determined responsible, a prospective contractor must—
(a) Have adequate financial resources
to perform the contract, or the ability
to obtain them (see 9.104–3(a));
(b) Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments;
(c) Have a satisfactory performance
record (see 48 CFR 9.104–3(b) and part
42, subpart 42.15). A prospective contractor shall not be determined responsible or nonresponsible solely on the
basis of a lack of relevant performance
history, except as provided in 9.104–2;
(d) Have a satisfactory record of integrity and business ethics;
(e) Have the necessary organization,
experience, accounting and operational
controls, and technical skills, or the
ability to obtain them (including, as
appropriate, such elements as production control procedures, property control systems, quality assurance measures, and safety programs applicable to
materials to be produced or services to
be performed by the prospective contractor and subcontractors) (see 9.104–
3(a));
(f) Have the necessary production,
construction, and technical equipment
and facilities, or the ability to obtain
them (see 9.104–3(a)); and
(g) Be otherwise qualified and eligible to receive an award under applicable laws and regulations.
[48 FR 42142, Sept. 19, 1983, as amended at 51
FR 27119, July 29, 1986; 56 FR 55374, Oct. 25,
1991; 60 FR 16718, Mar. 31, 1995; 61 FR 67410,
Dec. 20, 1996; 65 FR 80264, Dec. 20, 2000; 66 FR
17756, Apr. 3, 2001; 66 FR 66986, 66989, Dec. 27,
2001]
9.104–2
Special standards.
(a) When it is necessary for a particular acquisition or class of acquisitions, the contracting officer shall develop, with the assistance of appropriate specialists, special standards of
responsibility. Special standards may
be particularly desirable when experience has demonstrated that unusual
expertise or specialized facilities are
needed for adequate contract performance. The special standards shall be set
forth in the solicitation (and so identified) and shall apply to all offerors.
(b) Contracting officers shall award
contracts for subsistence only to those
prospective contractors that meet the
general standards in 9.104–1 and are approved in accordance with agency sanitation standards and procedures.
9.104–3
Application of standards.
(a) Ability to obtain resources. Except
to the extent that a prospective contractor has sufficient resources or proposes to perform the contract by subcontracting, the contracting officer
shall require acceptable evidence of the
prospective contractor’s ability to obtain required resources (see 9.104–1(a),
(e), and (f)). Acceptable evidence normally consists of a commitment or explicit arrangement, that will be in existence at the time of contract award,
to rent, purchase, or otherwise acquire
the needed facilities, equipment, other
resources, or personnel. Consideration
of a prime contractor’s compliance
with limitations on subcontracting
shall take into account the time period
covered by the contract base period or
quantites plus option periods or quantities, if such options are considered
when evaluating offers for award.
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Federal Acquisition Regulation
9.105–1
(b) Satisfactory performance record. A
prospective contractor that is or recently has been seriously deficient in
contract performance shall be presumed to be nonresponsible, unless the
contracting officer determines that the
circumstances were properly beyond
the contractor’s control, or that the
contractor has taken appropriate corrective action. Past failure to apply
sufficient tenacity and perseverance to
perform acceptably is strong evidence
of nonresponsibility. Failure to meet
the quality requirements of the contract is a significant factor to consider
in determining satisfactory performance. The contracting officer shall consider the number of contracts involved
and the extent of deficient performance
in each contract when making this determination. If the pending contract
requires a subcontracting plan pursuant to Subpart 19.7, The Small Business Subcontracting Program, the contracting officer shall also consider the
prospective contractor’s compliance
with subcontracting plans under recent
contracts.
(c) Affiliated concerns. Affiliated concerns (see Concern in 19.001 and Affiliates in 19.101) are normally considered
separate
entities
in
determining
whether the concern that is to perform
the contract meets the applicable
standards for responsibility. However,
the contracting officer shall consider
the affiliate’s past performance and integrity when they may adversely affect
the prospective contractor’s responsibility.
(d)(1) Small business concerns. If a
small business concern’s offer that
would otherwise be accepted is to be rejected because of a determination of
nonresponsibility, the contracting officer shall refer the matter to the Small
Business Administration, which will
decide whether or not to issue a Certificate of Competency (see subpart
19.6).
(2) A small business that is unable to
comply with the limitations on subcon-
tracting at 52.219–14 may be considered
nonresponsible.
[48 FR 42142, Sept. 19, 1983, as amended at 53
FR 27463, July 20, 1988; 53 FR 34226, Sept. 2,
1988; 56 FR 55378, Oct. 25, 1991; 60 FR 48260,
Sept. 18, 1995; 61 FR 67410, Dec. 20, 1996; 62 FR
44820, Aug. 22, 1997; 63 FR 70267, Dec. 18, 1998;
65 FR 80264, Dec. 20, 2000; 66 FR 66989, Dec. 27,
2001; 67 FR 13068, Mar. 20, 2002]
9.104–4
Subcontractor responsibility.
(a) Generally, prospective prime contractors are responsible for determining the responsibility of their prospective subcontractors (but see 9.405
and 9.405–2 regarding debarred, ineligible, or suspended firms). Determinations of prospective subcontractor responsibility may affect the Government’s determination of the prospective prime contractor’s responsibility.
A prospective contractor may be required to provide written evidence of a
proposed
subcontractor’s
responsibility.
(b) When it is in the Government’s
interest to do so, the contracting officer may directly determine a prospective
subcontractor’s
responsibility
(e.g., when the prospective contract involves medical supplies, urgent requirements, or substantial subcontracting). In this case, the same standards used to determine a prime contractor’s responsibility shall be used by
the Government to determine subcontractor responsibility.
9.105
Procedures.
9.105–1
Obtaining information.
(a) Before making a determination of
responsibility, the contracting officer
shall possess or obtain information sufficient to be satisfied that a prospective contractor currently meets the applicable standards in 9.104.
(b)(1) Generally, the contracting officer shall obtain information regarding
the responsibility of prospective contractors,
including
requesting
preaward surveys when necessary (see
9.106), promptly after a bid opening or
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9.105–2
48 CFR Ch. 1 (10–1–03 Edition)
receipt of offers. However, in negotiated contracting, especially when research and development is involved,
the contracting officer may obtain this
information before issuing the request
for proposals. Requests for information
shall ordinarily be limited to information concerning (i) the low bidder or
(ii) those offerors in range for award.
(2) Preaward surveys shall be managed and conducted by the surveying
activity.
(i) If the surveying activity is a contract administration office—
(A) That office shall advise the contracting officer on prospective contractors’ financial competence and credit
needs; and
(B) The administrative contracting
officer shall obtain from the auditor
any information required concerning
the adequacy of prospective contractors’ accounting systems and these systems’ suitability for use in administering the proposed type of contract.
(ii) If the surveying activity is not a
contract administration office, the
contracting officer shall obtain from
the auditor any information required
concerning prospective contractors’ financial competence and credit needs,
the adequacy of their accounting systems, and these systems’ suitability for
use in administering the proposed type
of contract.
(3) Information on financial resources
and performance capability shall be obtained or updated on as current a basis
as is feasible up to the date of award.
(c) In making the determination of
responsibility (see 9.104–1(c)), the contracting officer shall consider relevant
past performance information (see subpart 42.15). In addition, the contracting
officer should use the following sources
of information to support such determinations:
(1) The List of Parties Excluded from
Federal Procurement and Nonprocurement Programs maintained in accordance with subpart 9.4.
(2) Records and experience data, including verifiable knowledge of personnel within the contracting office,
audit offices, contract administration
offices, and other contracting offices.
(3) The prospective contractor—including bid or proposal information,
questionnaire replies, financial data,
information on production equipment,
and personnel information.
(4) Commercial sources of supplier information of a type offered to buyers in
the private sector.
(5) Preaward survey reports (see
9.106).
(6) Other sources such as publications; suppliers, subcontractors, and
customers of the prospective contractor; financial institutions; Government agencies; and business and trade
associations.
(7) If the contract is for construction,
the contracting officer may consider
performance evaluation reports (see
36.201(c)(2)).
(d) Contracting offices and cognizant
contract administration offices that
become aware of circumstances casting
doubt on a contractor’s ability to perform
contracts
successfully
shall
promptly exchange relevant information.
[48 FR 42142, Sept. 19, 1983, as amended at 51
FR 27119, July 29, 1986; 52 FR 9038, Mar. 20,
1987; 54 FR 19813, May 8, 1989; 60 FR 16718,
Mar. 31, 1995; 60 FR 33065, June 26, 1995; 61 FR
39201, July 26, 1996]
9.105–2 Determinations
and
documentation.
(a) Determinations. (1) The contracting officer’s signing of a contract
constitutes a determination that the
prospective contractor is responsible
with respect to that contract. When an
offer on which an award would otherwise be made is rejected because the
prospective contractor is found to be
nonresponsible, the contracting officer
shall make, sign, and place in the contract file a determination of nonresponsibility, which shall state the
basis for the determination.
(2) If the contracting officer determines and documents that a responsive
small business lacks certain elements
of responsibility, the contracting officer shall comply with the procedures in
subpart 19.6. When a certificate of competency is issued for a small business
concern (see subpart 19.6), the contracting officer may accept the factors
covered by the certificate without further inquiry.
(b) Support documentation. Documents
and reports supporting a determination
of responsibility or nonresponsibility,
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Federal Acquisition Regulation
9.106–4
including any preaward survey reports
and any applicable Certificate of Competency, must be included in the contract file.
9.105–3 Disclosure of preaward information.
(a) Except as provided in subpart 24.2,
Freedom of Information Act, information (including the preaward survey report) accumulated for purposes of determining the responsibility of a prospective contractor shall not be released or disclosed outside the Government.
(b) The contracting officer may discuss preaward survey information with
the prospective contractor before determining responsibility. After award,
the contracting officer or, if it is appropriate, the head of the surveying activity or a designee may discuss the
findings of the preaward survey with
the company surveyed.
(c) Preaward survey information may
contain proprietary or source selection
information and should be marked with
the appropriate legend and protected
accordingly (see 3.104–4).
[48 FR 42142, Sept. 19, 1983, as amended by 54
FR 20496, May 11, 1989; 62 FR 232, Jan. 2, 1997;
67 FR 13063, Mar. 20, 2002]
9.106
Preaward surveys.
9.106–1 Conditions for preaward surveys.
(a) A preaward survey is normally required only when the information on
hand or readily available to the contracting officer, including information
from commercial sources, is not sufficient to make a determination regarding responsibility. In addition, if the
contemplated contract will have a
fixed price at or below the simplified
acquisition threshold or will involve
the acquisition of commercial items
(see part 12), the contracting officer
should not request a preaward survey
unless circumstances justify its cost.
(b) When a cognizant contract administration office becomes aware of a prospective award to a contractor about
which unfavorable information exists
and no preaward survey has been requested, it shall promptly obtain and
transmit details to the contracting officer.
(c) Before beginning a preaward survey, the surveying activity shall ascertain whether the prospective contractor is debarred, suspended, or ineligible (see subpart 9.4). If the prospective contractor is debarred, suspended,
or ineligible, the surveying activity
shall advise the contracting officer
promptly and not proceed with the
preaward survey unless specifically requested to do so by the contracting officer.
[48 FR 42142, Sept. 19, 1983, as amended at 51
FR 27489, July 31, 1986; 60 FR 48237, Sept. 18,
1995; 61 FR 39201, July 26, 1996]
9.106–2 Requests for preaward surveys.
The contracting officer’s request to
the surveying activity (Preaward Survey of Prospective Contractor (General), SF 1403) shall—
(a) Identify additional factors about
which information is needed;
(b) Include the complete solicitation
package (unless it has previously been
furnished), and any information indicating prior unsatisfactory performance by the prospective contractor;
(c) State whether the contracting office will participate in the survey;
(d) Specify the date by which the report is required. This date should be
consistent with the scope of the survey
requested and normally shall allow at
least 7 working days to conduct the
survey; and
(e) When appropriate, limit the scope
of the survey.
9.106–3 Interagency preaward surveys.
When the contracting office and the
surveying activity are in different
agencies, the procedures of this section
9.106 and subpart 42.1 shall be followed
along with the regulations of the agency in which the surveying activity is
located, except that reasonable special
requests by the contracting office shall
be accommodated.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 20496, May 11, 1989; 55 FR 36795, Sept. 6,
1990; 62 FR 232, Jan. 2, 1997]
9.106–4 Reports.
(a) The surveying activity shall complete the applicable parts of SF 1403,
Preaward Survey of Prospective Contractor (General); SF 1404, Preaward
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9.107
48 CFR Ch. 1 (10–1–03 Edition)
Survey of Prospective Contractor—
Technical; SF 1405, Preaward Survey of
Prospective
Contractor—Production;
SF 1406, Preaward Survey of Prospective Contractor—Quality Assurance;
SF 1407, Preaward Survey of Prospective Contractor—Financial Capability;
and SF 1408, Preaward Survey of Prospective Contractor—Accounting System; and provide a narrative discussion
sufficient to support both the evaluation ratings and the recommendations.
(b) When the contractor surveyed is a
small business that has received preferential treatment on an ongoing contract under Section 8(a) of the Small
Business Act (15 U.S.C. 637) or has received a Certificate of Competency during the last 12 months, the surveying
activity shall consult the appropriate
Small Business Administration field
office before making an affirmative
recommendation regarding the contractor’s responsibility or nonresponsibility.
(c) When a preaward survey discloses
previous unsatisfactory performance,
the surveying activity shall specify the
extent to which the prospective contractor plans, or has taken, corrective
action. Lack of evidence that past failure to meet contractual requirements
was the prospective contractor’s fault
does not necessarily indicate satisfactory performance. The narrative shall
report any persistent pattern of need
for costly and burdensome Government
assistance (e.g., engineering, inspection, or testing) provided in the Government’s interest but not contractually required.
(d) When the surveying activity possesses information that supports a recommendation of complete award without an on-site survey and no special
areas for investigation have been requested, the surveying activity may
provide a short-form preaward survey
report. The short-form report shall
consist solely of the Preaward Survey
of Prospective Contractor (General),
SF 1403. Sections III and IV of this
form shall be completed and block 21
shall be checked to show that the report is a short-form preaward report.
9.107 Surveys of nonprofit agencies
serving people who are blind or
have other severe disabilities under
the Javits-Wagner-O’Day (JWOD)
Program.
(a) The Committee for Purchase
From People Who Are Blind or Severely Disabled (Committee), as authorized by 41 U.S.C. 46–48c, determines
what supplies and services Federal
agencies are required to purchase from
JWOD participating nonprofit agencies
serving people who are blind or have
other severe disabilities (see subpart
8.7). The Committee is required to find
a JWOD participating nonprofit agency
capable of furnishing the supplies or
services before the nonprofit agency
can be designated as a mandatory
source under the JWOD Program. The
Committee may request a contracting
office to assist in assessing the capabilities of a nonprofit agency.
(b) The contracting office, upon request from the Committee, shall request a capability survey from the activity
responsible
for
performing
preaward surveys, or notify the Committee that the JWOD participating
nonprofit agency is capable, with supporting rationale, and that the survey
is waived. The capability survey will
focus on the technical and production
capabilities and applicable preaward
survey elements to furnish specific supplies or services being considered for
addition to the Procurement List.
(c) The contracting office shall use
the Standard Form 1403 to request a
capability survey of organizations employing people who are blind or have
other severe disabilities.
(d) The contracting office shall furnish a copy of the completed survey, or
notice that the JWOD participating
nonprofit agency is capable and the
survey is waived, to the Executive Director, Committee for Purchase from
People Who Are Blind or Severely Disabled.
[59 FR 67029, Dec. 28, 1994]
Subpart 9.2—Qualifications
Requirements
SOURCE: 50 FR 35476, Aug. 30, 1985, unless
otherwise noted.
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9.200
9.202
Scope of subpart.
This subpart implements 10 U.S.C.
2319 and 41 U.S.C. 253(e) and prescribes
policies and procedures regarding qualification requirements and the acquisitions that are subject to such requirements.
9.201
Definitions.
As used in this subpart—
Qualified bidders list (QBL) means a
list of bidders who have had their products examined and tested and who have
satisfied all applicable qualification requirements for that product or have
otherwise satisfied all applicable qualification requirements.
Qualified manufacturers list (QML)
means a list of manufacturers who
have had their products examined and
tested and who have satisfied all applicable qualification requirements for
that product.
[50 FR 35476, Aug. 30, 1985, as amended at 53
FR 34227, Sept. 2, 1988; 66 FR 2128, Jan. 10,
2001]
9.202
Policy.
(a)(1) The head of the agency or designee shall, before establishing a qualification requirement, prepare a written
justification—
(i) Stating the necessity for establishing the qualification requirement
and specifying why the qualification
requirement must be demonstrated before contract award;
(ii) Estimating the likely costs for
testing and evaluation which will be
incurred by the potential offeror to become qualified; and
(iii) Specifying all requirements that
a potential offeror (or its product)
must satisfy in order to become qualified. Only those requirements which
are the least restrictive to meet the
purposes necessitating the establishment of the qualification requirements
shall be specified.
(2) Upon request to the contracting
activity, potential offerors shall be
provided—
(i) All requirements that they or
their products must satisfy to become
qualified;
(ii) At their expense (but see
9.204(a)(2) with regard to small businesses), a prompt opportunity to dem-
onstrate their abilities to meet the
standards specified for qualification
using qualified personnel and facilities
of the agency concerned, or of another
agency obtained through interagency
agreements, or under contract, or
other methods approved by the agency
(including use of approved testing and
evaluation services not provided under
contract to the agency).
(3) If the services in (a)(2)(ii) above
are provided by contract, the contractors selected to provide testing and
evaluation services shall be—
(i) Those that are not expected to
benefit from an absence of additional
qualified sources; and
(ii) Required by their contracts to adhere to any restriction on technical
data asserted by the potential offeror
seeking qualification.
(4) A potential offeror seeking qualification shall be promptly informed as
to whether qualification is attained
and, in the event it is not, promptly
furnished specific reasons why qualification was not attained.
(b) When justified under the circumstances, the agency activity responsible for establishing a qualification requirement shall submit to the
competition advocate for the procuring
activity responsible for purchasing the
item subject to the qualification requirement, a determination that it is
unreasonable to specify the standards
for qualification which a prospective
offeror (or its product) must satisfy.
After considering any comments of the
competition advocate reviewing the determination, the head of the procuring
activity may waive the requirements of
9.202(a)(1)(ii) through (4) above for up
to 2 years with respect to the item subject to the qualification requirement.
A copy of the waiver shall be furnished
to the head of the agency or other official responsible for actions under
9.202(a)(1). The waiver authority provided in this paragraph does not apply
with respect to qualification requirements contained in a QPL, QML, or
QBL.
(c) If a potential offeror can demonstrate to the satisfaction of the contracting officer that the potential offeror (or its product) meets the standards established for qualification or
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9.203
48 CFR Ch. 1 (10–1–03 Edition)
can meet them before the date specified for award of the contract, a potential offeror may not be denied the opportunity to submit and have considered an offer for a contract solely because the potential offeror—
(1) Is not on a QPL, QML, or QBL
maintained by the Department of Defense (DOD) or the National Aeronautics and Space Administration
(NASA); or
(2) Has not been identified as meeting
a qualification requirement established
after October 19, 1984, by DOD or
NASA; or
(3) Has not been identified as meeting
a qualification requirement established
by a civilian agency (not including
NASA).
(d) The procedures in subpart 19.6 for
referring matters to the Small Business Administration are not mandatory on the contracting officer when
the basis for a referral would involve a
challenge by the offeror to either the
validity of the qualification requirement or the offeror’s compliance with
such requirement.
(e) The contracting officer need not
delay a proposed award in order to provide a potential offeror with an opportunity to demonstrate its ability to
meet the standards specified for qualification. In addition, when approved by
the head of an agency or designee, a
procurement need not be delayed in
order to comply with 9.202(a).
(f) Within 7 years following enforcement of a QPL, QML, or QBL by DOD
or NASA, or within 7 years after any
qualification requirement was originally established by a civilian agency
other than NASA, the qualification requirement shall be examined and revalidated in accordance with the requirements of 9.202(a). For DOD and
NASA,
qualification
requirements,
other than QPL’s, QML’s, and QBL’s,
shall be examined and revalidated
within 7 years after establishment of
the requirement under 9.202(a). Any periods for which a waiver under 9.202(b)
is in effect shall be excluded in computing the 7 years within which review
and revalidation must occur.
[50 FR 35476, Aug. 30, 1985, as amended at 53
FR 34227, Sept. 2, 1988]
9.203
QPL’s, QML’s, and QBL’s.
(a) Qualification and listing in a
QPL, QML, or QBL is the process by
which products are obtained from manufacturers or distributors, examined
and tested for compliance with specification requirements, or manufacturers or potential offerors, are provided
an opportunity to demonstrate their
abilities to meet the standards specified for qualification. The names of
successful products, manufacturers, or
potential offerors are included on lists
evidencing their status. Generally,
qualification is performed in advance
and independently of any specific acquisition action. After qualification,
the products, manufacturers, or potential offerors are included in a Federal
or Military QPL, QML, or QBL. (See
9.202(a)(2) with regard to any product,
manufacturer, or potential offeror not
yet included on an applicable list.)
(b) Specifications requiring a qualified product are included in the following publications:
(1) GSA Index of Federal Specifications, Standards and Commercial Item
Descriptions.
(2) Department of Defense Index of
Specifications and Standards.
(c) Instructions concerning qualification procedures are included in the following publications:
(1) Federal Standardization Manual,
FSPM–0001.
(2) Defense Standardization Manual
4120.24–M, Appendix 2, as amended by
Military Standards 961 and 962.
(d) The publications listed in paragraphs (b) and (c) of this section are
sold to the public. The publications in
paragraphs (b)(1) and (c)(1) of this section may be obtained from the addressee in 11.201(d)(1). The publications
in paragraphs (b)(2) and (c)(2) of this
section may be obtained from the addressee in 11.201(d)(2).
[50 FR 35476, Aug. 30, 1985, as amended at 53
FR 17857, May 18, 1988; 63 FR 34062, June 22,
1998; 67 FR 6120, Feb. 8, 2002]
9.204 Responsibilities for establishment of a qualification requirement.
The responsibilities of agency activities that establish qualification requirements include the following:
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Federal Acquisition Regulation
9.205
(a) Arranging publicity for the qualification requirements. If active competition on anticipated future qualification requirements is likely to be
fewer than two manufacturers or the
products of two manufacturers, the activity responsible for establishment of
the qualification requirements must—
(1) Periodically furnish through the
Governmentwide point of entry (GPE)
a notice seeking additional sources or
products for qualification unless the
contracting officer determines that
such publication would compromise the
national security.
(2) Bear the cost of conducting the
specified testing and evaluation (excluding the costs associated with producing the item or establishing the
production, quality control, or other
system to be tested and evaluated) for
a small business concern or a product
manufactured by a small business concern which has met the standards specified for qualification and which could
reasonably be expected to compete for
a contract for that requirement. However, such costs may be borne only if it
is determined in accordance with agency procedures that such additional
qualified sources or products are likely
to result in cost savings from increased
competition for future requirements
sufficient to amortize the costs incurred by the agency within a reasonable period of time, considering the duration and dollar value of anticipated
future requirements. A prospective
contractor requesting the United
States to bear testing and evaluation
costs must certify as to its status as a
small business concern under section 3
of the Small Business Act in order to
receive further consideration.
(b) Qualifying products that meet
specification requirements.
(c) Listing manufacturers and suppliers whose products are qualified in
accordance with agency procedures.
(d) Furnishing QPL’s, OML’s, or
QBL’s or the qualification requirements
themselves
to
prospective
offerors and the public upon request
(see 9.202(a)(2)(i) above).
(e) Clarifying, as necessary, qualification requirements.
(f) In appropriate cases, when requested by the contracting officer, providing concurrence in a decision not to
enforce a qualification requirement for
a solicitation.
(g) Withdrawing or omitting qualification of a listed product, manufacturer or offeror, as necessary.
(h) Advising persons furnished any
list of products, manufacturers or
offerors meeting a qualification requirement and suppliers whose products are on any such list that—
(1) The list does not constitute endorsement of the product, manufacturer, or other source by the Government;
(2) The products or sources listed
have been qualified under the latest applicable specification;
(3) The list may be amended without
notice;
(4) The listing of a product or source
does not release the supplier from compliance with the specification; and
(5) Use of the list for advertising or
publicity is permitted. However, it
must not be stated or implied that a
particular product or source is the only
product or source of that type qualified, or that the Government in any
way recommends or endorses the products or the sources listed.
(i) Reexamining a qualified product
or manufacturer when—
(1) The manufacturer has modified its
product, or changed the material or the
processing sufficiently so that the validity of previous qualification is questionable;
(2) The requirements in the specification have been amended or revised sufficiently to affect the character of the
product; or
(3) It is otherwise necessary to determine that the quality of the product is
maintained in conformance with the
specification.
[50 FR 35476, Aug. 30, 1985, as amended at 66
FR 27413, May 16, 2001; 68 FR 56679, Oct. 1,
2003]
9.205 Opportunity for qualification before award.
(a) If an agency determines that a
qualification requirement is necessary,
the agency activity responsible for establishing the requirement must urge
manufacturers and other potential
sources to demonstrate their ability to
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9.206
48 CFR Ch. 1 (10–1–03 Edition)
meet the standards specified for qualification and, when possible, give sufficient time to arrange for qualification
before award. The responsible agency
activity must, before establishing any
qualification requirement, furnish notice through the GPE. The notice must
include—
(1) Intent to establish a qualification
requirement;
(2) The specification number and
name of the product;
(3) The name and address of the activity to which a request for the information and opportunity described in
9.202(a)(2) should be submitted;
(4) The anticipated date that the
agency will begin awarding contracts
subject to the qualification requirement;
(5) A precautionary notice that when
a product is submitted for qualification
testing, the applicant must furnish any
specific information that may be requested of the manufacturer before
testing will begin; and
(6) The approximate time period following submission of a product for
qualification testing within which the
applicant will be notified whether the
product passed or failed the qualification testing (see 9.202(a)(4)).
(b) The activity responsible for establishing a qualification requirement
must keep any list maintained of those
already qualified open for inclusion of
additional products, manufacturers, or
other potential sources, including eligible products from designated countries under the terms of the Trade
Agreements Act (see Subpart 25.4).
[50 FR 35476, Aug. 30, 1985, as amended at 64
FR 72418, Dec. 27, 1999; 66 FR 27413, May 16,
2001; 68 FR 56679, Oct. 1, 2003]
9.206 Acquisitions subject to qualification requirements.
9.206–1
General.
(a) Agencies may not enforce any
QPL, QML, or QBL without first complying with the requirements of
9.202(a). However, qualification requirements themselves, whether or not previously embodied in a QPL, QML, or
QBL, may be enforced without regard
to 9.202(a) if they are in either of the
following categories:
(1) Any qualification requirement established by statute prior to October
30, 1984, for civilian agencies (not including NASA); or
(2) Any qualification requirement established by statute or administrative
action prior to October 19, 1984, for
DOD or NASA. Qualification requirements established after the above dates
must comply with 9.202(a) to be enforceable.
(b) Except when the agency head or
designee determines that an emergency
exists, whenever an agency elects,
whether before or after award, not to
enforce a qualification requirement
which it established, the requirement
may not thereafter be enforced unless
the agency complies with 9.202(a).
(c) If a qualification requirement applies, the contracting officer need consider only those offers identified as
meeting the requirement or included
on the applicable QPL, QML, or QBL,
unless an offeror can satisfactorily
demonstrate to the contracting officer
that it or its product or its subcontractor or its product can meet the
standards established for qualification
before the date specified for award.
(d) If a product subject to a qualification requirement is to be acquired as a
component of an end item, the contracting officer must assure that all
such components and their qualification requirements are properly identified in the solicitation since the product or source must meet the standards
specified
for
qualification
before
award.
(e) In acquisitions subject to qualification requirements, the contracting
officer shall take the following steps:
(1) Use presolicitation notices in appropriate cases to advise potential suppliers before issuing solicitations involving qualification requirements.
The notices shall identify the specification containing the qualification requirement and establish an allowable
time period, consistent with delivery
requirements, for prospective offerors
to demonstrate their abilities to meet
the standards specified for qualification. The notice shall be publicized in
accordance with 5.204. Whether or not a
presolicitation notice is used, the general synopsizing requirements of subpart 5.2 apply.
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Federal Acquisition Regulation
9.207
(2) Distribute solicitations to prospective contractors whether or not
they have been identified as meeting
applicable qualification requirements.
(3) When appropriate, request in accordance with agency procedures that
a qualification requirement not be enforced in a particular acquisition and,
if granted, so specify in the solicitation
(see 9.206–1(b)).
(4) Forward requests from potential
suppliers for information on a qualification requirement to the agency activity responsible for establishing the
requirement.
(5) Allow the maximum time, consistent with delivery requirements, between issuing the solicitation and the
contract award. As a minimum, contracting officers shall comply with the
time frames specified in 5.203 when applicable.
[50 FR 35476, Aug. 30, 1985, as amended at 53
FR 34227, Sept. 2, 1988]
9.206–2 Contract clause.
The contracting officer shall insert
the clause at 52.209–1, Qualification Requirements, in solicitations and contracts when the acquisition is subject
to a qualification requirement.
[53 FR 34227, Sept. 2, 1988]
9.206–3 Competition.
(a) Presolicitation. If a qualification
requirement applies to an acquisition,
the contracting officer shall review the
applicable QPL, QML, or QBL or other
identification of those sources which
have met the requirement before
issuing a solicitation to ascertain
whether the number of sources is adequate for competition. (See 9.204(a) for
duties of the agency activity responsible for establishment of the qualification requirement.) If the number of
sources is inadequate, the contracting
officer shall request the agency activity which established the requirement
to—
(1) Indicate the anticipated date on
which any sources presently undergoing evaluation will have demonstrated their abilities to meet the
qualification requirement so that the
solicitation could be rescheduled to
allow as many additional sources as
possible to qualify; or
(2) Indicate whether a means other
than the qualification requirement is
feasible for testing or demonstrating
quality assurance.
(b) Postsolicitation. The contracting
officer shall submit to the agency activity which established the qualification requirement the names and addresses of concerns which expressed interest in the acquisition but are not included on the applicable QPL, QML, or
QBL or identified as meeting the qualification requirement. The activity will
then assist interested concerns in
meeting the standards specified for
qualification (see 9.202(a) (2) and (4)).
[50 FR 35476, Aug. 30, 1985, as amended at 60
FR 34737, July 3, 1995]
9.207 Changes in status regarding
qualification requirements.
(a) The contracting officer shall
promptly report to the agency activity
which established the qualification requirement any conditions which may
merit removal or omission from a QPL,
QML, or QBL or affect whether a
source should continue to be otherwise
identified as meeting the requirement.
These conditions exist when—
(1) Products or services are submitted for inspection or acceptance
that do not meet the qualification requirement;
(2) Products or services were previously rejected and the defects were
not corrected when resubmitted for inspection or acceptance;
(3) A supplier fails to request reevaluation following change of location or
ownership of the plant where the product which met the qualification requirement was manufactured (see the
clause at 52.209–1, Qualification Requirements);
(4) A manufacturer of a product
which met the qualification requirement has discontinued manufacture of
the product;
(5) A source requests removal from a
QPL, QML, or QBL;
(6) A condition of meeting the qualification requirement was violated; e.g.,
advertising or publicity contrary to
9.204(h)(5);
(7) A revised specification imposes a
new qualification requirement;
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9.301
48 CFR Ch. 1 (10–1–03 Edition)
(8) Manufacturing or design changes
have been incorporated in the qualification requirement;
(9) The source is on the List of Parties Excluded from Federal Procurement and Nonprocurement Programs
(see subpart 9.4); or
(10) Performance of a contract subject to a qualification requirement is
otherwise unsatisfactory.
(b) After considering any of the above
or other conditions reasonably related
to whether a product or source continues to meet the standards specified
for qualification, an agency may take
appropriate action without advance notification. The agency shall, however,
promptly notify the affected parties if
a product or source is removed from a
QPL, QML, or QBL, or will no longer be
identified as meeting the standards
specified for qualification. This notice
shall contain specific information why
the product or source no longer meets
the qualification requirement.
[50 FR 35476, Aug. 30, 1985, as amended at 53
FR 34227, Sept. 2, 1988; 56 FR 15149, Apr. 15,
1991; 60 FR 33065, June 26, 1995]
Subpart 9.3—First Article Testing
and Approval
9.301
Definition.
Approval, as used in this subpart,
means the contracting officer’s written
notification to the contractor accepting the test results of the first article.
[48 FR 42142, Sept. 19, 1983, as amended at 66
FR 2128, Jan. 10, 2001]
9.302
General.
First article testing and approval
(hereafter referred to as testing and approval) ensures that the contractor can
furnish a product that conforms to all
contract requirements for acceptance.
Before requiring testing and approval,
the contracting officer shall consider
the—
(a) Impact on cost or time of delivery;
(b) Risk to the Government of foregoing such test; and
(c) Availability of other, less costly,
methods of ensuring the desired quality.
9.303 Use.
Testing and approval may be appropriate when—
(a) The contractor has not previously
furnished the product to the Government;
(b) The contractor previously furnished the product to the Government,
but—
(1) There have been subsequent
changes in processes or specifications;
(2) Production has been discontinued
for an extended period of time; or
(3) The product acquired under a previous contract developed a problem
during its life.
(c) The product is described by a performance specification; or
(d) It is essential to have an approved
first article to serve as a manufacturing standard.
9.304 Exceptions.
Normally, testing and approval is not
required in contracts for—
(a) Research or development;
(b) Products requiring qualification
before award (e.g., when an applicable
qualified products list exists (see subpart 9.2));
(c) Products normally sold in the
commercial market; or
(d) Products covered by complete and
detailed technical specifications, unless the requirements are so novel or
exacting that it is questionable whether the products would meet the requirements without testing and approval.
9.305 Risk.
Before first article approval, the acquisition of materials or components,
or commencement of production, is
normally at the sole risk of the contractor. To minimize this risk, the contracting officer shall provide sufficient
time in the delivery schedule for acquisition of materials and components,
and for production after receipt of first
article approval. When Government requirements preclude this action, the
contracting officer may, before approval of the first article, authorize the
contractor to acquire specific materials or components or commence production to the extent essential to meet
the delivery schedule (see Alternate II
of the clause at 52.209–3, First Article
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Federal Acquisition Regulation
9.307
Approval—Contractor Testing, and Alternate II of the clause at 52.209–4,
First Article Approval—Government
Testing. Costs incurred based on this
authorization are allocable to the contract for (1) progress payments and (2)
termination settlements if the contract is terminated for the convenience
of the Government.
9.306 Solicitation requirements.
Solicitations containing a testing
and approval requirement shall—
(a) Provide, in the circumstance
where the contractor is to be responsible for the first article approval testing—
(1) The performance or other characteristics that the first article must
meet for approval;
(2) The detailed technical requirements for the tests that must be performed for approval; and
(3) The necessary data that must be
submitted to the Government in the
first article approval test report.
(b) Provide, in the circumstance
where the Government is to be responsible for the first article approval testing—
(1) The performance or other characteristics that the first article must
meet for approval; and
(2) The tests to which the first article
will be subjected for approval.
(c) Inform offerors that the requirement may be waived when supplies
identical or similar to those called for
have previously been delivered by the
offeror and accepted by the Government (see 52.209–3(h) and 52.209–4(i);
(d) Permit the submission of alternative offers, one including testing and
approval and the other excluding testing and approval (if eligible under
9.306(c));
(e) State clearly the first article’s relationship to the contract quantity
(see paragraph (e) of the clause at
52.209–3, First Article Approval—Contractor Testing, or 52.209–4, First Article Approval—Government Testing);
(f) Contain a delivery schedule for
the production quantity (see 11.404).
The delivery schedule may—
(1) Be the same whether or not testing and approval is waived; or
(2) Provide for earlier delivery when
testing and approval is waived and the
Government desires earlier delivery. In
the latter case, any resulting difference
in delivery schedules shall not be a factor in evaluation for award. The clause
at 52.209–4, First Article Approval—
Government Testing, shall contain the
delivery schedule for the first article;
(g) Provide for the submission of contract numbers, if any, to document the
offeror’s eligibility under 9.306(c);
(h) State whether the approved first
article will serve as a manufacturing
standard; and
(i) Include, when the Government is
responsible for first article testing, the
Government’s estimated testing costs
as a factor for use in evaluating offers
(when appropriate).
(j) Inform offerors that the prices for
first articles and first article tests in
relation to production quantities shall
not be materially unbalanced (see
15.404–1(g)) if first article test items or
tests are to be separately priced.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 34753, Aug. 21, 1989; 55 FR 25527, June 21,
1990; 60 FR 48237, Sept. 18, 1995; 62 FR 51270,
Sept. 30, 1997]
9.307 Government administration procedures.
(a) Before the contractor ships the
first article, or the first article test report, to the Government laboratory or
other activity responsible for approval
at the address specified in the contract,
the contract administration office
shall provide that activity with as
much advance notification as is feasible of the forthcoming shipment,
and—
(1) Advise that activity of the contractual requirements for testing and
approval, or evaluation, as appropriate;
(2) Call attention to the notice requirement in paragraph (b) of the
clause at 52.209–3, First Article Approval— Contractor Testing, or 52.209–
4, First Article Approval—Government
Testing; and
(3) Request that the activity inform
the contract administration office of
the date when testing or evaluation
will be completed.
(b) The Government laboratory or
other activity responsible for first article testing or evaluation shall inform
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9.308
48 CFR Ch. 1 (10–1–03 Edition)
the contracting office whether to approve, conditionally approve, or disapprove the first article. The contracting officer shall then notify the
contractor of the action taken and furnish a copy of the notice to the contract administration office. The notice
shall include the first article shipment
number, when available, and the applicable contract line item number. Any
changes in the drawings, designs, or
specifications determined by the contracting officer to be necessary shall be
made under the Changes clause, and
not by the notice of approval, conditional approval, or disapproval furnished the contractor.
9.308
Contract clauses.
9.308–1 Testing performed by the contractor.
(a)(1) The contracting officer shall
insert the clause at 52.209–3, First Article Approval—Contractor Testing, in
solicitations and contracts when a
fixed-price contract is contemplated
and it is intended that the contract require (i) first article approval and (ii)
that the contractor be required to conduct the first article testing.
(2) If it is intended that the contractor be required to produce the first
article and the production quantity at
the same facility, the contracting officer shall use the clause with its Alternate I.
(3) If it is necessary to authorize the
contractor to purchase material or to
commence production before first article approval, the contracting officer
shall use the clause with its Alternate
II.
(b)(1) The contracting officer shall
insert a clause substantially the same
as the clause at 52.209–3, First Article
Approval—Contractor Testing, in solicitations and contracts when a costreimbursement
contract
is
contemplated and it is intended that the
contract require (i) first article approval and (ii) that the contractor be
required to conduct the first article
test.
(2) If it is intended that the contractor be required to produce the first
article and the production quantity at
the same facility, the contracting officer shall use a clause substantially the
same as the clause at 52.209–3, First Article Approval—Contractor Testing,
with its Alternate I.
(3) If it is necessary to authorize the
contractor to purchase material or to
commence production before first article approval, the contracting officer
shall use a clause substantially the
same as the clause at 52.209–3, First Article Approval—Contractor Testing,
with its Alternate II.
9.308–2 Testing performed by the Government.
(a)(1) The contracting officer shall
insert the clause at 52.209–4, First Article Approval—Government Testing, in
solicitations and contracts when a
fixed-price contract is contemplated
and it is intended that the contract require first article approval and that
the Government will be responsible for
conducting the first article test.
(2) If it is intended that the contractor be required to produce the first
article and the production quantity at
the same facility, the contracting officer shall use the basic clause with its
Alternate I.
(3) If it is necessary to authorize the
contractor to purchase material or to
commence production before first article approval, the contracting officer
shall use the basic clause with its Alternate II.
(b)(1) The contracting officer shall
insert a clause substantially the same
as the clause at 52.209–4, First Article
Approval—Government Testing, in solicitations and contracts when a costreimbursement
contract
is
contemplated and it is intended that the
contract require first article approval
and that the Government be responsible for conducting the first article
test.
(2) If it is intended that the contractor be required to produce the first
article and the production quantity at
the same facility, the contracting officer shall use a clause substantially the
same as the clause at 52.209–4, First Article Approval—Government Testing,
with its Alternate I.
(3) If it is necessary to authorize the
contractor to purchase material or to
commence production before first article approval, the contracting officer
shall use a clause substantially the
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Federal Acquisition Regulation
9.403
same as the clause at 52.209–4, First Article Approval—Government Testing,
with its Alternate II.
Subpart 9.4—Debarment,
Suspension, and Ineligibility
9.400
Scope of subpart.
(a) This subpart—
(1) Prescribes policies and procedures
governing the debarment and suspension of contractors by agencies for the
causes given in 9.406–2 and 9.407–2;
(2) Provides for the listing of contractors debarred, suspended, proposed for
debarment, and declared ineligible (see
the definition of ineligible in 2.101); and
(3) Sets forth the consequences of
this listing.
(b) Although this subpart does cover
the listing of ineligible contractors
(9.404) and the effect of this listing
(9.405(b)), it does not prescribe policies
and procedures governing declarations
of ineligibility.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 19814, May 8, 1989; 66 FR 2128, Jan. 10,
2001]
9.401
Applicability.
In accordance with Public Law 103–
355, Section 2455 (31 U.S.C. 6101, note),
and Executive Order 12689, any debarment, suspension or other Governmentwide exclusion initiated under the Nonprocurement Common Rule implementing Executive Order 12549 on or
after August 25, 1995 shall be recognized by and effective for Executive
Branch agencies as a debarment or suspension under this subpart. Similarly,
any debarment, suspension, proposed
debarment or other Government-wide
exclusion initiated on or after August
25, 1995 under this subpart shall also be
recognized by and effective for those
agencies and participants as an exclusion under the Nonprocurement Common Rule.
[60 FR 33065, June 26, 1995]
9.402
Policy.
(a) Agencies shall solicit offers from,
award contracts to, and consent to subcontracts with responsible contractors
only. Debarment and suspension are
discretionary actions that, taken in ac-
cordance with this subpart, are appropriate means to effectuate this policy.
(b) The serious nature of debarment
and suspension requires that these
sanctions be imposed only in the public
interest for the Government’s protection and not for purposes of punishment. Agencies shall impose debarment or suspension to protect the Government’s interest and only for the
causes and in accordance with the procedures set forth in this subpart.
(c) When more than one agency has
an interest in the debarment or suspension of a contractor, consideration
shall be given to designating one agency as the lead agency for making the
decision. Agencies are encouraged to
establish methods and procedures for
coordinating their debarment or suspension actions.
(d) Agencies shall establish appropriate procedures to implement the
policies and procedures of this subpart.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 19814, May 8, 1989]
9.403 Definitions.
As used in this subpart—
Affiliates. Business concerns, organizations, or individuals are affiliates of
each other if, directly or indirectly, (1)
either one controls or has the power to
control the other, or (2) a third party
controls or has the power to control
both. Indicia of control include, but are
not limited to, interlocking management or ownership, identity of interests among family members, shared facilities and equipment, common use of
employees, or a business entity organized following the debarment, suspension, or proposed debarment of a contractor which has the same or similar
management, ownership, or principal
employees as the contract or that was
debarred, suspended, or proposed for
debarment.
Agency means any executive department, military department or defense
agency, or other agency or independent
establishment of the executive branch.
Civil judgment means a judgment or
finding of a civil offense by any court
of competent jurisdiction.
Contractor means any individual or
other legal entity that—
(1) Directly or indirectly (e.g.,
through an affiliate), submits offers for
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9.404
48 CFR Ch. 1 (10–1–03 Edition)
or is awarded, or reasonably may be expected to submit offers for or be awarded, a Government contract, including a
contract for carriage under Government or commercial bills of lading, or
a subcontract under a Government contract; or
(2) Conducts business, or reasonably
may be expected to conduct business,
with the Government as an agent or
representative of another contractor.
Debarring official means (1) an agency
head or (2) a designee authorized by the
agency head to impose debarment.
Indictment means indictment for a
criminal offense. An information or
other filing by competent authority
charging a criminal offense is given the
same effect as an indictment.
Legal proceedings means any civil judicial proceeding to which the Government is a party or any criminal proceeding. The term includes appeals
from such proceedings.
Nonprocurement Common Rule means
the procedures used by Federal Executive Agencies to suspend, debar, or exclude individuals or entities from participation in nonprocurement transactions under Executive Order 12549.
Examples of nonprocurement transactions are grants, cooperative agreements, scholarships, fellowships, contracts of assistance, loans, loan guarantees, subsidies, insurance, payments
for specified use, and donation agreements.
Suspending official means (1) an agency head or (2) a designee authorized by
the agency head to impose suspension.
Unfair trade practices means the commission of any of the following acts by
a contractor:
(1) A violation of section 337 of the
Tariff Act of 1930 (19 U.S.C. 1337) as determined by the International Trade
Commission.
(2) A violation, as determined by the
Secretary of Commerce, of any agreement of the group known as the ‘‘Coordination Committee’’ for purposes of
the Export Administration Act of 1979
(50 U.S.C. App. 2401, et seq.) or any similar bilateral or multilateral export
control agreement.
(3) A knowingly false statement regarding a material element of a certification concerning the foreign content
of an item of supply, as determined by
the Secretary of the Department or the
head of the agency to which such certificate was furnished.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 19814, May 8, 1989; 56 FR 15149, Apr. 15,
1991; 59 FR 11372, Mar. 10, 1994; 60 FR 33065,
June 26, 1995; 66 FR 2128, Jan. 10, 2001]
9.404 List of Parties Excluded from
Federal Procurement and Nonprocurement Programs.
(a) The General Services Administration (GSA)—
(1) Compiles and maintains a current
list of all parties debarred, suspended,
proposed for debarment, or declared ineligible by agencies or by the General
Accounting Office;
(2) Periodically revises and distributes the list and issues supplements, if
necessary, to all agencies and the General Accounting Office; and
(3) Includes in the list the name and
telephone number of the official responsible for its maintenance and distribution.
(b) The List of Parties Excluded from
Federal Procurement and Nonprocurement Programs includes the—
(1) Names and addresses of all contractors debarred, suspended, proposed
for debarment, or declared ineligible,
in alphabetical order, with cross-references when more than one name is
involved in a single action;
(2) Name of the agency or other authority taking the action;
(3) Cause for the action (see 9.406–2
and 9.407–2 for causes authorized under
this subpart) or other statutory or regulatory authority;
(4) Effect of the action;
(5) Termination date for each listing;
(6) DUNS No.; and
(7) Name and telephone number of
the point of contact for the action.
(c) Each agency must—
(1) Provide GSA with the information
required by paragraph (b) of this section within 5 working days after the
action becomes effective;
(2) Notify GSA within 5 working days
after modifying or rescinding an action;
(3) Notify GSA of the names and addresses of agency organizations that
are to receive the list and the number
of copies to be furnished to each;
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Federal Acquisition Regulation
9.405
(4) In accordance with internal retention procedures, maintain records relating to each debarment, suspension,
or proposed debarment taken by the
agency;
(5) Establish procedures to provide
for the effective use of the List of Parties Excluded from Federal Procurement and Nonprocurement Programs,
including internal distribution thereof,
to ensure that the agency does not solicit offers from, award contracts to, or
consent to subcontracts with contractors on the List of Parties Excluded
from Federal Procurement and Nonprocurement Programs, except as otherwise provided in this subpart; and
(6) Direct inquiries concerning listed
contractors to the agency or other authority that took the action.
(d) The List of Parties Excluded from
Federal Procurement and Nonprocurement Programs is available as follows:
(1) The printed version is published
monthly. Copies may be obtained by
purchasing a yearly subscription.
(i) Federal agencies may subscribe
through their organization’s printing
and distribution office.
(ii) The public may subscribe by writing the Superintendent of Documents,
U.S. Government Printing Office,
Washington, DC 20402, or by calling the
Government Printing Office Inquiry
and Order Desk at (202) 512–1800.
(2) The electronic version is updated
daily and is available via—
(i)
The
internet
at
http://
epls.arnet.gov; or
(ii) Electronic bulletin board. Dial
(202) 219–0132. The settings are N–8–1–F.
(e) For general questions about entries on the List of Parties Excluded
from Federal Procurement and Nonprocurement Programs or additional
information on accessing the electronic bulletin board, call GSA at (202)
501–4873 or 501–4740.
[65 FR 16286, Mar. 27, 2000
9.405 Effect of listing.
(a) Contractors debarred, suspended,
or proposed for debarment are excluded
from receiving contracts, and agencies
shall not solicit offers from, award contracts to, or consent to subcontracts
with these contractors, unless the
agency head or a designee determines
that there is a compelling reason for
such action (see 9.405–2, 9.406–1(c), 9.407–
1(d),
and
23.50(e)).
Contractors
debarred, suspended or proposed for debarment are also excluded from conducting business with the Government
as agents or representatives of other
contractors.
(b) Contractors included on the List
of Parties Excluded from Federal Procurement and Nonprocurement Programs as having been declared ineligible on the basis of statutory or other
regulatory procedures are excluded
from receiving contracts, and if applicable, subcontracts, under the conditions and for the period set forth in the
statute or regulation. Agencies shall
not solicit offers from, award contracts
to, or consent to subcontracts with
these contractors under those conditions and for that period.
(c) Contractors debarred, suspended,
or proposed for debarment are excluded
from acting as individual sureties (see
part 28).
(d)(1) After the opening of bids or receipt of proposals, the contracting officer shall review the List of Parties Excluded from Federal Procurement and
Nonprocurement Programs.
(2) Bids received from any listed contractor in response to an invitation for
bids shall be entered on the abstract of
bids, and rejected unless the agency
head or a designee determines in writing that there is a compelling reason to
consider the bid.
(3) Proposals, quotations, or offers received from any listed contractor shall
not be evaluated for award or included
in the competitive range, nor shall discussions be conducted with a listed offeror during a period of ineligibility,
unless the agency head or a designee
determines, in writing, that there is a
compelling reason to do so. If the period of ineligibility expires or is terminated prior to award, the contracting
officer may, but is not required to, consider such proposals, quotations, or offers.
(4) Immediately prior to award, the
contracting officer shall again review
the List of Parties Excluded from Federal Procurement and Nonprocurement
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9.405–1
48 CFR Ch. 1 (10–1–03 Edition)
Programs to ensure that no award is
made to a listed contractor.
[48 FR 42142, Sept. 19, 1983, as amended at 52
FR 9038, Mar. 20, 1987; 54 FR 19814, May 8,
1989; 54 FR 48982, Nov. 28, 1989; 55 FR 21707,
May 25, 1990; 56 FR 29127, June 25, 1991; 59 FR
67033, Dec. 28, 1994; 60 FR 33065, June 26, 1995;
65 FR 16286, Mar. 27, 2000]
9.405–1 Continuation of current contracts.
(a) Notwithstanding the debarment,
suspension, or proposed debarment of a
contractor, agencies may continue contracts or subcontracts in existence at
the time the contractor was debarred,
suspended, or proposed for debarment
unless the agency head or a designee
directs otherwise. A decision as to the
type of termination action, if any, to
be taken should be made only after review by agency contracting and technical personnel and by counsel to ensure the propriety of the proposed action.
(b) Ordering activities may continue
to place orders against existing contracts, including indefinite delivery
contracts, in the absence of a termination.
(c) Agencies shall not renew or otherwise extend the duration of current
contracts, or consent to subcontracts,
with contractors debarred, suspended,
or proposed for debarment, unless the
agency head or a designee authorized
representative states, in writing, the
compelling reasons for renewal or extension.
[54 FR 19815, May 8, 1989, as amended at 59
FR 67033, Dec. 28, 1994]
9.405–2 Restrictions
tracting.
on
subcon-
(a) When a contractor debarred, suspended, or proposed for debarment is
proposed as a subcontractor for any
subcontract subject to Government
consent (see subpart 44.2), contracting
officers shall not consent to subcontracts with such contractors unless
the agency head or a designee states in
writing the compelling reasons for this
approval action. (See 9.405(b) concerning declarations of ineligibility affecting subcontracting.)
(b) The Government suspends or
debars contractors to protect the Government’s interests. By operation of
the clause at 52.209–6, Protecting the
Government’s Interests When Subcontracting with Contractors Debarred,
Suspended or Proposed for Debarment,
contractors shall not enter into any
subcontract in excess of $25,000 with a
contractor that has been debarred, suspended, or proposed for debarment unless there is a compelling reason to do
so. If a contractor intends to subcontract with a party that is debarred,
suspended, or proposed for debarment
as evidenced by the party’s inclusion
on the List of Parties Excluded from
Federal Procurement and Nonprocurement Programs (see 9.404), a corporate
officer or designee of the contractor is
required by operation of the clause at
52.209–6, Protecting the Government’s
Interests when Subcontracting with
Contractors Debarred, Suspended, or
Proposed for Debarment, to notify the
contracting officer, in writing, before
entering into such subcontract. The
notice must provide the following:
(1) The name of the subcontractor;
(2) The contractor’s knowledge of the
reasons for the subcontractor being on
the List of Parties Excluded from Federal Procurement and Nonprocurement
Programs;
(3) The compelling reason(s) for doing
business with the subcontractor notwithstanding its inclusion on the List
of Parties Excluded from Federal Procurement and Nonprocurement Programs; and
(4) The systems and procedures the
contractor has established to ensure
that it is fully protecting the Government’s interests when dealing with
such subcontractor in view of the specific basis for the party’s debarment,
suspension, or proposed debarment.
(c) The contractor’s compliance with
the requirements of 52.209–6 will be reviewed during Contractor Purchasing
System Reviews (see subpart 44.3).
[54 FR 19815, May 8, 1989, as amended at 56
FR 29127, June 25, 1991; 59 FR 67033, Dec. 28,
1994; 60 FR 33066, June 26, 1995; 60 FR 48237,
Sept. 18, 1995]
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Federal Acquisition Regulation
9.406
9.406–1
Debarment.
9.406–1 General.
(a) It is the debarring official’s responsibility to determine whether debarment is in the Government’s interest. The debarring official may, in the
public interest, debar a contractor for
any of the causes in 9.406–2, using the
procedures in 9.406–3. The existence of a
cause for debarment, however, does not
necessarily require that the contractor
be debarred; the seriousness of the contractor’s acts or omissions and any remedial measures or mitigating factors
should be considered in making any debarment decision. Before arriving at
any debarment decision, the debarring
official should consider factors such as
the following:
(1) Whether the contractor had effective standards of conduct and internal
control systems in place at the time of
the activity which constitutes cause
for debarment or had adopted such procedures prior to any Government investigation of the activity cited as a cause
for debarment.
(2) Whether the contractor brought
the activity cited as a cause for debarment to the attention of the appropriate Government agency in a timely
manner.
(3) Whether the contractor has fully
investigated the circumstances surrounding the cause for debarment and,
if so, made the result of the investigation available to the debarring official.
(4) Whether the contractor cooperated fully with Government agencies
during the investigation and any court
or administrative action.
(5) Whether the contractor has paid
or has agreed to pay all criminal, civil,
and administrative liability for the improper activity, including any investigative or administrative costs incurred by the Government, and has
made or agreed to make full restitution.
(6) Whether the contractor has taken
appropriate disciplinary action against
the individuals responsible for the activity which constitutes cause for debarment.
(7) Whether the contractor has implemented or agreed to implement remedial measures, including any identified
by the Government.
(8) Whether the contractor has instituted or agreed to institute new or revised review and control procedures
and ethics training programs.
(9) Whether the contractor has had
adequate time to eliminate the circumstances within the contractor’s organization that led to the cause for debarment.
(10) Whether the contractor’s management recognizes and understands
the seriousness of the misconduct giving rise to the cause for debarment and
has implemented programs to prevent
recurrence.
The existence or nonexistence of any
mitigating factors or remedial measures such as set forth in this paragraph
(a) is not necessarily determinative of
a contractor’s present responsibility.
Accordingly, if a cause for debarment
exists, the contractor has the burden of
demonstrating, to the satisfaction of
the debarring official, its present responsibility and that debarment is not
necessary.
(b) Debarment constitutes debarment
of all divisions or other organizational
elements of the contractor, unless the
debarment decision is limited by its
terms to specific divisions, organizational elements, or commodities. The
debarring official may extend the debarment decision to include any affiliates of the contractor if they are (1)
specifically named and (2) given written notice of the proposed debarment
and an opportunity to respond (see
9.406–3(c)).
(c) A contractor’s debarment, or proposed debarment, shall be effective
throughout the executive branch of the
Government, unless the agency head or
a designee (except see 23.506(e)) states
in writing the compelling reasons justifying continued business dealings between that agency and the contractor.
(d)(1) When the debarring official has
authority to debar contractors from
both acquisition contracts pursuant to
this regulation and contracts for the
purchase of Federal personal property
pursuant to the Federal Property Management Regulations (FPMR) 101–45.6,
that official shall consider simultaneously debarring the contractor from
the award of acquisition contracts and
from the purchase of Federal personal
property.
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9.406–2
48 CFR Ch. 1 (10–1–03 Edition)
(2) When debarring a contractor from
the award of acquisition contracts and
from the purchase of Federal personal
property, the debarment notice shall so
indicate and the appropriate FAR and
FPMR citations shall be included.
[48 FR 42142, Sept. 19, 1983, as amended at 52
FR 6121, Feb. 27, 1987; 54 FR 19815, May 8,
1989; 55 FR 21707, May 25, 1990; 55 FR 30465,
July 26, 1990; 56 FR 67129, Dec. 27, 1991; 59 FR
67033, Dec. 28, 1994]
9.406–2 Causes for debarment.
The debarring official may debar—
(a) A contractor for a conviction of
or civil judgment for—
(1) Commission of fraud or a criminal
offense in connection with (i) obtaining, (ii) attempting to obtain, or (iii)
performing a public contract or subcontract;
(2) Violation of Federal or State antitrust statutes relating to the submission of offers;
(3) Commission of embezzlement,
theft, forgery, bribery, falsification or
destruction of records, making false
statements, tax evasion, or receiving
stolen property;
(4) Intentionally affixing a label
bearing a ‘‘Made in America’’ inscription (or any inscription having the
same meaning) to a product sold in or
shipped to the United States or its outlying areas, when the product was not
made in the United States or its outlying areas (see Section 202 of the Defense Production Act (Public Law 102–
558)); or
(5) Commission of any other offense
indicating a lack of business integrity
or business honesty that seriously and
directly affects the present responsibility of a Government contractor or
subcontractor.
(b)(1) A contractor, based upon a preponderance of the evidence for—
(i) Violation of the terms of a Government contract or subcontract so serious as to justify debarment, such as—
(A) Willful failure to perform in accordance with the terms of one or more
contracts; or
(B) A history of failure to perform, or
of unsatisfactory performance of, one
or more contracts.
(ii) Violations of the Drug-Free
Workplace Act of 1988 (Public Law 100–
690), as indicated by—
(A) Failure to comply with the requirements of the clause at 52.223–6,
Drug-Free Workplace; or
(B) Such a number of contractor employees convicted of violations of
criminal drug statutes occurring in the
workplace as to indicate that the contractor has failed to make a good faith
effort to provide a drug-free workplace
(see 23.504).
(iii) Intentionally affixing a label
bearing a ‘‘Made in America’’ inscription (or any inscription having the
same meaning) to a product sold in or
shipped to the United States or its outlying areas, when the product was not
made in the United States or its outlying areas (see Section 202 of the Defense Production Act (Public Law 102–
558)).
(iv) Commission of an unfair trade
practice as defined in 9.403 (see Section
201 of the Defense Production Act (Public Law 102–558)).
(2) A contractor, based on a determination by the Attorney General of
the United States, or designee, that the
contractor is not in compliance with
Immigration and Nationality Act employment provisions (see Executive
Order 12989). The Attorney General’s
determination is not reviewable in the
debarment proceedings.
(c) A contractor or subcontractor
based on any other cause of so serious
or compelling a nature that it affects
the present responsibility of the contractor or subcontractor.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 4968, Jan. 31 ,1989; 54 FR 19815, May 8,
1989; 55 FR 21707, May 25, 1990; 59 FR 11372,
Mar. 10, 1994; 61 FR 2633, Jan. 26, 1996; 61 FR
41473, Aug. 8, 1996; 61 FR 69291, Dec. 31, 1996;
68 FR 28080, May 22, 2003]
9.406–3 Procedures.
(a) Investigation and referral. Agencies
shall establish procedures for the
prompt reporting, investigation, and
referral to the debarring official of
matters appropriate for that official’s
consideration.
(b) Decisionmaking process. (1) Agencies shall establish procedures governing the debarment decisionmaking
process that are as informal as is practicable, consistent with principles of
fundamental fairness. These procedures
shall afford the contractor (and any
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9.406–3
specifically named affiliates) an opportunity to submit, in person, in writing,
or through a representative, information and argument in opposition to the
proposed debarment.
(2) In actions not based upon a conviction or civil judgment, if it is found
that the contractor’s submission in opposition raises a genuine dispute over
facts material to the proposed debarment, agencies shall also—
(i) Afford the contractor an opportunity to appear with counsel, submit
documentary evidence, present witnesses, and confront any person the
agency presents; and
(ii) Make a transcribed record of the
proceedings and make it available at
cost to the contractor upon request,
unless the contractor and the agency,
by mutual agreement, waive the requirement for a transcript.
(c) Notice of proposal to debar. A notice of proposed debarment shall be
issued by the debarring official advising the contractor and any specifically
named affiliates, by certified mail, return receipt requested—
(1) That debarment is being considered;
(2) Of the reasons for the proposed debarment in terms sufficient to put the
contractor on notice of the conduct or
transaction(s) upon which it is based;
(3) Of the cause(s) relied upon under
9.406–2 for proposing debarment;
(4) That, within 30 days after receipt
of the notice, the contractor may submit, in person, in writing, or through a
representative, information and argument in opposition to the proposed debarment, including any additional specific information that raises a genuine
dispute over the material facts;
(5) Of the agency’s procedures governing debarment decisionmaking;
(6) Of the effect of the issuance of the
notice of proposed debarment; and
(7) Of the potential effect of an actual
debarment.
(d) Debarring official’s decision. (1) In
actions based upon a conviction or
judgment, or in which there is no genuine dispute over material facts, the
debarring official shall make a decision
on the basis of all the information in
the administrative record, including
any submission made by the contractor. If no suspension is in effect,
the decision shall be made within 30
working days after receipt of any information and argument submitted by the
contractor, unless the debarring official extends this period for good cause.
(2)(i) In actions in which additional
proceedings are necessary as to disputed material facts, written findings
of fact shall be prepared. The debarring
official shall base the decision on the
facts as found, together with any information and argument submitted by the
contractor and any other information
in the administrative record.
(ii) The debarring official may refer
matters involving disputed material
facts to another official for findings of
fact. The debarring official may reject
any such findings, in whole or in part,
only after specifically determining
them to be arbitrary and capricious or
clearly erroneous.
(iii) The debarring official’s decision
shall be made after the conclusion of
the proceedings with respect to disputed facts.
(3) In any action in which the proposed debarment is not based upon a
conviction or civil judgment, the cause
for debarment must be established by a
preponderance of the evidence.
(e) Notice of debarring official’s decision. (1) If the debarring official decides
to impose debarment, the contractor
and any affiliates involved shall be
given prompt notice by certified mail,
return receipt requested—
(i) Referring to the notice of proposed
debarment;
(ii) Specifying the reasons for debarment;
(iii) Stating the period of debarment,
including effective dates; and
(iv) Advising that the debarment is
effective throughout the executive
branch of the Government unless the
head of an agency or a designee makes
the statement called for by 9.406–1(c).
(2) If debarment is not imposed, the
debarring official shall promptly notify
the contractor and any affiliates involved, by certified mail, return receipt requested.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 19815, May 8, 1989; 59 FR 67033, Dec. 28,
1994]
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9.406–4
9.406–4
48 CFR Ch. 1 (10–1–03 Edition)
Period of debarment.
(a)(1) Debarment shall be for a period
commensurate with the seriousness of
the cause(s). Generally, debarment
should not exceed 3 years, except
that—
(i) Debarment for violation of the
provisions of the Drug-Free Workplace
Act of 1988 (see 23.506) may be for a period not to exceed 5 years; and
(ii) Debarments under 9.406–2(b)(2)
shall be for one year unless extended
pursuant to paragraph (b) of this subsection.
(2) If suspension precedes a debarment, the suspension period shall be
considered in determining the debarment period.
(b) The debarring official may extend
the debarment for an additional period,
if that official determines that an extension is necessary to protect the
Government’s interest. However, a debarment may not be extended solely on
the basis of the facts and circumstances upon which the initial debarment action was based. Debarments
under 9.406–2(b)(2) may be extended for
additional periods of one year if the Attorney General or designee determines
that the contractor continues to be in
violation of the employment provisions
of the Immigration and Nationality
Act. If debarment for an additional period is determined to be necessary, the
procedures of 9.406–3 shall be followed
to extend the debarment.
(c) The debarring official may reduce
the period or extent of debarment,
upon the contractor’s request, supported by documentation, for reasons
such as—
(1) Newly discovered material evidence;
(2) Reversal of the conviction or civil
judgment upon which the debarment
was based;
(3) Bona fide change in ownership or
management;
(4) Elimination of other causes for
which the debarment was imposed; or
(5) Other reasons the debarring
offical deems appropriate.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 4968, Jan. 31 ,1989; 54 FR 19815, May 8,
1989; 55 FR 21707, May 25, 1990; 61 FR 41473,
Aug. 8, 1996]
9.406–5 Scope of debarment.
(a) The fraudulent, criminal, or other
seriously improper conduct of any officer, director, shareholder, partner, employee, or other individual associated
with a contractor may be imputed to
the contractor when the conduct occurred in connection with the individual’s performance of duties for or on
behalf of the contractor, or with the
contractor’s knowledge, approval, or
acquiescence. The contractor’s acceptance of the benefits derived from the
conduct shall be evidence of such
knowledge, approval, or acquiescence.
(b) The fraudulent, criminal, or other
seriously improper conduct of a contractor may be imputed to any officer,
director, shareholder, partner, employee, or other individual associated
with the contractor who participated
in, knew of, or had reason to know of
the contractor’s conduct.
(c) The fraudulent, criminal, or other
seriously improper conduct of one contractor participating in a joint venture
or similar arrangement may be imputed to other participating contractors if the conduct occurred for or on
behalf of the joint venture or similar
arrangement, or with the knowledge,
approval, or acquiescence of these contractors. Acceptance of the benefits derived from the conduct shall be evidence of such knowledge, approval, or
acquiescence.
9.407
Suspension.
9.407–1 General.
(a) The suspending official may, in
the public interest, suspend a contractor for any of the causes in 9.407–2,
using the procedures in 9.407–3.
(b)(1) Suspension is a serious action
to be imposed on the basis of adequate
evidence, pending the completion of investigation or legal proceedings, when
it has been determined that immediate
action is necessary to protect the Government’s interest. In assessing the
adequacy of the evidence, agencies
should consider how much information
is available, how credible it is given
the circumstances, whether or not important allegations are corroborated,
and what inferences can reasonably be
drawn as a result. This assessment
should include an examination of basic
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documents such as contracts, inspection reports, and correspondence.
(b)(2) The existence of a cause for
suspension does not necessarily require
that the contractor be suspended. The
suspending official should consider the
seriousness of the contractor’s acts or
omissions and may, but is not required
to, consider remedial measures or mitigating factors, such as those set forth
in 9.406–1(a). A contractor has the burden of promptly presenting to the suspending official evidence of remedial
measures or mitigating factors when it
has reason to know that a cause for
suspension exists. The existence or
nonexistence of any remedial measures
or mitigating factors is not necessarily
determinative of a contractor’s present
responsibility.
(c) Suspension constitutes suspension
of all divisions or other organizational
elements of the contractor, unless the
suspension decision is limited by its
terms to specific divisions, organizational elements, or commodities. The
suspending official may extend the suspension decision to include any affiliates of the contractor if they are (1)
specifically named and (2) given written notice of the suspension and an opportunity to respond (see 9.407–3(c)).
(d) A contractor’s suspension shall be
effective throughout the executive
branch of the Government, unless the
agency head or a designee (except see
23.506(e)) states in writing the compelling reasons justifying continued business dealings between that agency and
the contractor.
(e)(1) When the suspending official
has authority to suspend contractors
from both acquisition contracts pursuant to this regulation and contracts for
the purchase of Federal personal property pursuant to FPMR 101–45.6, that
official shall consider simultaneously
suspending the contractor from the
award of acquisition contracts and
from the purchase of Federal personal
property.
(2) When suspending a contractor
from the award of acquisition contracts and from the purchase of Federal personal property, the suspension
notice shall so indicate and the appro-
priate FAR and FPMR citations shall
be included.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 4968, Jan. 31, 1989; 54 FR 19816, May 8,
1989; 56 FR 67130, Dec. 27, 1991; 59 FR 67033,
Dec. 28, 1994]
9.407–2
Causes for suspension.
(a) The suspending official may suspend a contractor suspected, upon adequate evidence, of—
(1) Commission of fraud or a criminal
offense in connection with (i) obtaining, (ii) attempting to obtain, or (iii)
performing a public contract or subcontract;
(2) Violation of Federal or State antitrust statutes relating to the submission of offers;
(3) Commission of embezzlement,
theft, forgery, bribery, falsification or
destruction of records, making false
statements, tax evasion, or receiving
stolen property; or
(4) Violations of the Drug-Free Workplace Act of 1988 (Public Law 100–690),
as indicated by—
(i) Failure to comply with the requirements of the clause at 52.223–6,
Drug-Free Workplace; or
(ii) Such a number of contractor employees convicted of violations of
criminal drug statutes occurring in the
workplace as to indicate that the contractor has failed to make a good faith
effort to provide a drug-free workplace
(see 23.504);
(5) Intentionally affixing a label
bearing a ‘‘Made in America’’ inscription (or any inscription having the
same meaning) to a product sold in or
shipped to the United States or its outlying areas, when the product was not
made in the United States or its outlying areas (see Section 202 of the Defense Production Act (Public Law 102–
558));
(6) Commission of an unfair trade
practice as defined in 9.403 (see section
201 of the Defense Production Act (Pub.
L. 102–558)); or
(7) Commission of any other offense
indicating a lack of business integrity
or business honesty that seriously and
directly affects the present responsibility of a Government contractor or
subcontractor.
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9.407–3
48 CFR Ch. 1 (10–1–03 Edition)
(b) Indictment for any of the causes
in paragraph (a) above constitutes adequate evidence for suspension.
(c) The suspending official may upon
adequate evidence also suspend a contractor for any other cause of so serious or compelling a nature that it affects the present responsibility of a
Government contractor or subcontractor.
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 4968, Jan. 31, 1989; 55 FR 21707, May 25,
1990; 59 FR 11373, Mar. 10, 1994; 61 FR 2633,
Jan. 26, 1996; 61 FR 69291, Dec. 31, 1996; 68 FR
28081, May 22, 2003]
9.407–3 Procedures.
(a) Investigation and referral. Agencies
shall establish procedures for the
prompt reporting, investigation, and
referral to the suspending official of
matters appropriate for that official’s
consideration.
(b) Decisionmaking process. (1) Agencies shall establish procedures governing the suspension decisionmaking
process that are as informal as is practicable, consistent with principles of
fundamental fairness. These procedures
shall afford the contractor (and any
specifically named affiliates) an opportunity, following the imposition of suspension, to submit, in person, in writing, or through a representative, information and argument in opposition to
the suspension.
(2) In actions not based on an indictment, if it is found that the contractor’s submission in opposition raises a
genuine dispute over facts material to
the suspension and if no determination
has been made, on the basis of Department of Justice advice, that substantial interests of the Government in
pending or contemplated legal proceedings based on the same facts as the
suspension would be prejudiced, agencies shall also—
(i) Afford the contractor an opportunity to appear with counsel, submit
documentary evidence, present witnesses, and confront any person the
agency presents; and
(ii) Make a transcribed record of the
proceedings and make it available at
cost to the contractor upon request,
unless the contractor and the agency,
by mutual agreement, waive the requirement for a transcript.
(c) Notice of suspension. When a contractor and any specifically named affiliates are suspended, they shall be immediately advised by certified mail, return receipt requested—
(1) That they have been suspended
and that the suspension is based on an
indictment or other adequate evidence
that the contractor has committed
irregularities (i) of a serious nature in
business dealings with the Government
or (ii) seriously reflecting on the propriety of further Government dealings
with the contractor—any such irregularities shall be described in terms
sufficient to place the contractor on
notice without disclosing the Government’s evidence;
(2) That the suspension is for a temporary period pending the completion
of an investigation and such legal proceedings as may ensue;
(3) Of the cause(s) relied upon under
9.407–2 for imposing suspension;
(4) Of the effect of the suspension;
(5) That, within 30 days after receipt
of the notice, the contractor may submit, in person, in writing, or through a
representative, information and argument in opposition to the suspension,
including any additional specific information that raises a genuine dispute
over the material facts; and
(6) That additional proceedings to determine disputed material facts will be
conducted unless (i) the action is based
on an indictment or (ii) a determination is made, on the basis of Department of Justice advice, that the substantial interests of the Government in
pending or contemplated legal proceedings based on the same facts as the
suspension would be prejudiced.
(d) Suspending official’s decision. (1) In
actions (i) based on an indictment, (ii)
in which the contractor’s submission
does not raise a genuine dispute over
material facts, or (iii) in which additional proceedings to determine disputed material facts have been denied
on the basis of Department of Justice
advice, the suspending official’s decision shall be based on all the information in the administrative record, including any submission made by the
contractor.
(2)(i) In actions in which additional
proceedings are necessary as to disputed material facts, written findings
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of fact shall be prepared. The suspending official shall base the decision
on the facts as found, together with
any information and argument submitted by the contractor and any other
information in the administrative
record.
(ii) The suspending official may refer
matters involving disputed material
facts to another official for findings of
fact. The suspending official may reject any such findings, in whole or in
part, only after specifically determining them to be arbitrary and capricious or clearly erroneous.
(iii) The suspending official’s decision shall be made after the conclusion
of the proceedings with respect to disputed facts.
(3) The suspending official may modify or terminate the suspension or
leave it in force (for example, see 9.406–
4(c) for the reasons for reducing the period or extent of debarment). However,
a decision to modify or terminate the
suspension shall be without prejudice
to the subsequent imposition of (i) suspension by any other agency or (ii) debarment by any agency.
(4) Prompt written notice of the suspending official’s decision shall be sent
to the contractor and any affiliates involved, by certified mail, return receipt requested.
[48 FR 42142, Sept. 19, 1983, as amended at 51
FR 2649, Jan. 17, 1986]
9.407–4 Period of suspension.
(a) Suspension shall be for a temporary period pending the completion
of investigation and any ensuing legal
proceedings, unless sooner terminated
by the suspending official or as provided in this subsection.
(b) If legal proceedings are not initiated within 12 months after the date of
the suspension notice, the suspension
shall be terminated unless an Assistant
Attorney General requests its extension, in which case it may be extended
for an additional 6 months. In no event
may a suspension extend beyond 18
months, unless legal proceedings have
been initiated within that period.
(c) The suspending official shall notify the Department of Justice of the
proposed termination of the suspension, at least 30 days before the 12month period expires, to give that De-
partment an opportunity to request an
extension.
[48 FR 42142, Sept. 19, 1983, as amended at 51
FR 2649, Jan. 17, 1986]
9.407–5 Scope of suspension.
The scope of suspension shall be the
same as that for debarment (see 9.406–
5), except that the procedures of 9.407–
3 shall be used in imposing suspension.
9.408 Certification regarding debarment, suspension, proposed debarment, and other responsibility matters.
(a) When an offeror, in compliance
with the provision at 52.209–5, Certification Regarding Debarment, Suspension, Proposed Debarment, and Other
Responsibility Matters, indicates an
indictment, charge, civil judgment,
conviction,
suspension,
debarment,
proposed debarment, ineligibility, or
default of a contract, the contracting
officer shall—
(1) Request such additional information from the offeror as the contracting officer deems necessary in
order to make a determination of the
offeror’s responsibility (but see 9.405);
and
(2) Notify, prior to proceeding with
award, in accordance with agency procedures (see 9.406–3(a) and 9.407–3(a)),
the agency official responsible for initiating debarment or suspension action, where an offeror indicates the existence of an indictment, charge, conviction, or civil judgment.
(b) Offerors who do not furnish the
certification or such information as
may be requested by the contracting
officer shall be given an opportunity to
remedy the deficiency. Failure to furnish the certification or such information may render the offeror nonresponsible.
[54 FR 19816, May 8, 1989]
9.409 Solicitation provision and contract clause.
(a) The contracting officer shall insert the provision at 52.209–5, Certification Regarding Debarment, Suspension, Proposed Debarment, and Other
Responsibility Matters, in solicitations
where the contract value is expected to
exceed
the
simplified
acquisition
threshold.
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9.500
48 CFR Ch. 1 (10–1–03 Edition)
(b) The contracting officer shall insert the clause at 52.209–6, Protecting
the Government’s Interests when Subcontracting
with
Contractors
Debarred, Suspended, or Proposed for
Debarment, in solicitations and contracts where the contract value exceeds $25,000.
[60 FR 34748, July 3, 1995]
Subpart 9.5—Organizational and
Consultant Conflicts of Interest
9.500
Scope of subpart.
This subpart:
(a) Prescribes responsibilities, general rules, and procedures for identifying, evaluating, and resolving organizational conflicts of interest;
(b) Provides examples to assist contracting officers in applying these rules
and procedures to individual contracting situations; and
(c) Implements section 8141 of the
1989 Department of Defense Appropriation Act, Pub. L. 100–463, 102 Stat. 2270–
47 (1988).
[55 FR 42685, Oct. 22, 1990, as amended at 65
FR 36014, June 6, 2000]
9.501
Definition.
Marketing consultant, as used in this
subpart, means any independent contractor who furnishes advice, information, direction, or assistance to an offeror or any other contractor in support of the preparation or submission
of an offer for a Government contract
by that offeror. An independent contractor is not a marketing consultant
when rendering—
(1) Services excluded in subpart 37.2;
(2) Routine engineering and technical
services (such as installation, operation, or maintenance of systems,
equipment, software, components, or
facilities);
(3) Routine legal, actuarial, auditing,
and accounting services; and
(4) Training services.
[55 FR 42685, Oct. 22, 1990, as amended at 66
FR 2128, Jan. 10, 2001]
9.502
Applicability.
(a) This subpart applies to contracts
with either profit or nonprofit organizations, including nonprofit organiza-
tions created largely or wholly with
Government funds.
(b) The applicability of this subpart
is not limited to any particular kind of
acquisition. However, organizational
conflicts of interest are more likely to
occur in contracts involving—
(1) Management support services;
(2) Consultant or other professional
services;
(3) Contractor performance of or assistance in technical evaluations; or
(4) Systems engineering and technical direction work performed by a
contractor that does not have overall
contractual responsibility for development or production.
(c) An oganizational conflict of interest may result when factors create an
actual or potential conflict of interest
on an instant contract, or when the nature of the work to be performed on the
instant contract creates an actual or
potential conflict of interest on a future acquisition. In the latter case,
some restrictions on future activities
of the contractor may be required.
(d) Acquisitions subject to unique
agency organizational conflict of interest statutes are excluded from the requirements of this subpart.
[48 FR 42142, Sept. 19, 1983, as amended at 55
FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25,
1991]
9.503 Waiver.
The agency head or a designee may
waive any general rule or procedure of
this subpart by determining that its
application in a particular situation
would not be in the Government’s interest. Any request for waiver must be
in writing, shall set forth the extent of
the conflict, and requires approval by
the agency head or a designee. Agency
heads shall not delegate waiver authority below the level of head of a contracting activity.
9.504 Contracting officer responsibilities.
(a) Using the general rules, procedures, and examples in this subpart,
contracting officers shall analyze
planned acquisitions in order to—
(1) Identify and evaluate potential organizational conflicts of interest as
early in the acquisition process as possible; and
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(2) Avoid, neutralize, or mitigate significant potential conflicts before contract award.
(b) Contracting officers should obtain
the advice of counsel and the assistance of appropriate technical specialists in evaluating potential conflicts
and in developing any necessary solicitation provisions and contract clauses
(see 9.506).
(c) Before issuing a solicitation for a
contract that may involve a significant
potential conflict, the contracting officer shall recommend to the head of the
contracting activity a course of action
for resolving the conflict (see 9.506).
(d) In fulfilling their responsibilities
for identifying and resolving potential
conflicts, contracting officers should
avoid creating unnecessary delays, burdensome information requirements,
and excessive documentation. The contracting officer’s judgment need be formally documented only when a substantive issue concerning potential organizational conflict of interest exists.
(e) The contracting officer shall
award the contract to the apparent
successful offeror unless a conflict of
interest is determined to exist that
cannot be avoided or mitigated. Before
determining to withhold award based
on conflict of interest considerations,
the contracting officer shall notify the
contractor, provide the reasons therefor, and allow the contractor a reasonable opportunity to respond. If the contracting officer finds that it is in the
best interest of the United States to
award the contract notwithstanding a
conflict of interest, a request for waiver shall be submitted in accordance
with 9.503. The waiver request and decision shall be included in the contract
file.
[48 FR 42142, Sept. 19, 1983, as amended at 55
FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25,
1991]
9.505 General rules.
The general rules in 9.505–1 through
9.505–4 prescribe limitations on contracting as the means of avoiding, neutralizing, or mitigating organizational
conflicts of interest that might otherwise exist in the stated situations.
Some illustrative examples are provided in 9.508. Conflicts may arise in
situations not expressly covered in this
section 9.505 or in the examples in 9.508.
Each individual contracting situation
should be examined on the basis of its
particular facts and the nature of the
proposed contract. The exercise of
common sense, good judgment, and
sound discretion is required in both the
decision on whether a significant potential conflict exists and, if it does,
the development of an appropriate
means for resolving it. The two underlying principles are—
(a) Preventing the existence of conflicting roles that might bias a contractor’s judgment; and
(b) Preventing unfair competitive advantage. In addition to the other situations described in this subpart, an unfair competitive advantage exists
where a contractor competing for
award for any Federal contract possesses—
(1) Proprietary information that was
obtained from a Government official
without proper authorization; or
(2) Source selection information (as
defined in 2.101) that is relevant to the
contract but is not available to all
competitors, and such information
would assist that contractor in obtaining the contract.
[48 FR 42142, Sept. 19, 1983, as amended at 55
FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25,
1991; 62 FR 232, Jan. 2, 1997; 64 FR 32748, June
17, 1999; 67 FR 13063, Mar. 20, 2002]
9.505–1 Providing systems engineering
and technical direction.
(a) A contractor that provides systems engineering and technical direction for a system but does not have
overall contractual responsibility for
its development, its integration, assembly, and checkout, or its production shall not (1) be awarded a contract
to supply the system or any of its
major components or (2) be a subcontractor or consultant to a supplier of
the system or any of its major components.
(b) Systems engineering includes a
combination of substantially all of the
following activities: determining specifications, identifying and resolving
interface problems, developing test requirements, evaluating test data, and
supervising design. Technical direction
includes a combination of substantially
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9.505–2
48 CFR Ch. 1 (10–1–03 Edition)
all of the following activities: developing work statements, determining
parameters, directing other contractors’ operations, and resolving technical controversies. In performing
these activities, a contractor occupies
a highly influential and responsible position in determining a system’s basic
concepts and supervising their execution by other contractors. Therefore
this contractor should not be in a position to make decisions favoring its own
products or capabilities.
9.505–2 Preparing specifications or
work statements.
(a)(1) If a contractor prepares and
furnishes complete specifications covering nondevelopmental items, to be
used in a competitive acquisition, that
contractor shall not be allowed to furnish these items, either as a prime contractor or as a subcontractor, for a reasonable period of time including, at
least, the duration of the initial production contract. This rule shall not
apply to—
(i) Contractors that furnish at Government request specifications or data
regarding a product they provide, even
though the specifications or data may
have been paid for separately or in the
price of the product; or
(ii) Situations in which contractors,
acting as industry representatives,
help Government agencies prepare, refine, or coordinate specifications, regardless of source, provided this assistance is supervised and controlled by
Government representatives.
(2) If a single contractor drafts complete specifications for nondevelopmental equipment, it should be eliminated for a reasonable time from competition for production based on the
specifications. This should be done in
order to avoid a situation in which the
contractor could draft specifications
favoring its own products or capabilities. In this way the Government can
be assured of getting unbiased advice
as to the content of the specifications
and can avoid allegations of favoritism
in the award of production contracts.
(3) In development work, it is normal
to select firms that have done the most
advanced work in the field. These firms
can be expected to design and develop
around their own prior knowledge. De-
velopment contractors can frequently
start production earlier and more
knowledgeably than firms that did not
participate in the development, and
this can affect the time and quality of
production, both of which are important to the Government. In many instances the Government may have financed the development. Thus, while
the development contractor has a competitive advantage, it is an unavoidable
one that is not considered unfair; hence
no prohibition should be imposed.
(b)(1) If a contractor prepares, or assists in preparing, a work statement to
be used in competitively acquiring a
system or services—or provides material leading directly, predictably, and
without delay to such a work statement—that contractor may not supply
the system, major components of the
system, or the services unless—
(i) It is the sole source;
(ii) It has participated in the development and design work; or
(iii) More than one contractor has
been involved in preparing the work
statement.
(2) Agencies should normally prepare
their own work statements. When contractor assistance is necessary, the
contractor might often be in a position
to favor its own products or capabilities. To overcome the possibility of
bias, contractors are prohibited from
supplying a system or services acquired
on the basis of work statements growing out of their services, unless excepted in subparagraph (1) above.
(3) For the reasons given in 9.505–
2(a)(3), no prohibitions are imposed on
development and design contractors.
9.505–3 Providing evaluation services.
Contracts for the evaluation of offers
for products or services shall not be
awarded to a contractor that will
evaluate its own offers for products or
services, or those of a competitor,
without proper safeguards to ensure
objectivity to protect the Government’s interests.
[62 FR 12694, Mar. 17, 1997]
9.505–4 Obtaining access to proprietary information.
(a) When a contractor requires proprietary information from others to
perform a Government contract and
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can use the leverage of the contract to
obtain it, the contractor may gain an
unfair competitive advantage unless
restrictions are imposed. These restrictions protect the information and encourage companies to provide it when
necessary for contract performance.
They are not intended to protect information (1) furnished voluntarily without limitations on its use or (2) available to the Government or contractor
from other sources without restriction.
(b) A contractor that gains access to
proprietary information of other companies in performing advisory and assistance services for the Government
must agree with the other companies
to protect their information from unauthorized use or disclosure for as long
as it remains proprietary and refrain
from using the information for any
purpose other than that for which it
was furnished. The contracting officer
shall obtain copies of these agreements
and ensure that they are properly executed.
(c) Contractors also obtain proprietary and source selection information
by acquiring the services of marketing
consultants which, if used in connection with an acquisition, may give the
contractor an unfair competitive advantage. Contractors should make inquiries of marketing consultants to ensure that the marketing consultant has
provided no unfair competitive advantage.
[48 FR 42142, Sept. 19, 1983, as amended at 55
FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25,
1991; 62 FR 235, Jan. 2, 1997]
9.506 Procedures.
(a) If information concerning prospective contractors is necessary to
identify and evaluate potential organizational conflicts of interest or to develop recommended actions, contracting officers should first seek the
information from within the Government or from other readily available
sources. Government sources include
the files and the knowledge of personnel within the contracting office,
other contracting offices, the cognizant
contract administration and audit activities and offices concerned with contract
financing.
Non-Government
sources include publications and com-
mercial services, such as credit rating
services, trade and financial journals,
and business directories and registers.
(b) If the contracting officer decides
that a particular acquisition involves a
significant potential organizational
conflict of interest, the contracting officer shall, before issuing the solicitation, submit for approval to the chief
of the contracting office (unless a higher level official is designated by the
agency)—
(1) A written analysis, including a
recommended course of action for
avoiding, neutralizing, or mitigating
the conflict, based on the general rules
in 9.505 or on another basis not expressly stated in that section;
(2) A draft solicitation provision (see
9.507–1); and
(3) If appropriate, a proposed contract clause (see 9.507–2).
(c) The approving official shall—
(1) Review the contracting officer’s
analysis and recommended course of
action, including the draft provision
and any proposed clause;
(2) Consider the benefits and detriments to the Government and prospective contractors; and
(3) Approve, modify, or reject the recommendations in writing.
(d) The contracting officer shall—
(1) Include the approved provision(s)
and any approved clause(s) in the solicitation or the contract, or both;
(2) Consider additional information
provided by prospective contractors in
response to the solicitation or during
negotiations; and
(3) Before awarding the contract, resolve the conflict or the potential conflict in a manner consistent with the
approval or other direction by the head
of the contracting activity.
(e) If, during the effective period of
any restriction (see 9.507), a contracting office transfers acquisition responsibility for the item or system involved, it shall notify the successor
contracting office of the restriction,
and send a copy of the contract under
which the restriction was imposed.
[55 FR 42686, Oct. 22, 1990, as amended at 62
FR 235, Jan. 2, 1997]
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9.507
48 CFR Ch. 1 (10–1–03 Edition)
9.507 Solicitation provisions and contract clause.
9.507–1 Solicitation provisions.
As indicated in the general rules in
9.505, significant potential organizational conflicts of interest are normally resolved by imposing some restraint, appropriate to the nature of
the conflict, upon the contractor’s
eligibilty for future contracts or subcontracts. Therefore, affected solicitations shall contain a provision that—
(a) Invites offerors’ attention to this
subpart;
(b) States the nature of the potential
conflict as seen by the contracting officer;
(c) States the nature of the proposed
restraint upon future contractor activities; and
(d) Depending on the nature of the
acquisition, states whether or not the
terms of any proposed clause and the
application of this subpart to the contract are subject to negotiation.
[55 FR 42687, Oct. 22, 1990, as amended at 56
FR 55377, Oct. 25, 1991; 60 FR 34748, July 3,
1995; 60 FR 49721, Sept. 26, 1995; 62 FR 235,
Jan. 2, 1997]
9.507–2 Contract clause.
(a) If, as a condition of award, the
contractor’s eligibility for future
prime contract or subcontract awards
will be restricted or the contractor
must agree to some other restraint, the
solicitation shall contain a proposed
clause that specifies both the nature
and duration of the proposed restraint.
The contracting officer shall include
the clause in the contract, first negotiating the clause’s final terms with the
successful offeror, if it is appropriate
to do so (see 9.508–1(d) of this subsection).
(b) The restraint imposed by a clause
shall be limited to a fixed term of reasonable duration, sufficient to avoid
the circumstance of unfair competitive
advantage or potential bias. This period varies. It might end, for example,
when the first production contract
using the contractor’s specifications or
work statement is awarded, or it might
extend through the entire life of a system for which the contractor has performed systems engineering and technical direction. In every case, the re-
striction shall specify termination by a
specific date or upon the occurrence of
an identifiable event.
[55 FR 42687, Oct. 22, 1990]
9.508 Examples.
The examples in paragraphs (a)
through (i) following illustrate situations in which questions concerning organizational conflicts of interest may
arise. They are not all inclusive, but
are intended to help the contracting officer apply the general rules in 9.505 to
individual contract situations.
(a) Company A agrees to provide systems engineering and technical direction for the Navy on the powerplant for
a group of submarines (i.e., turbines,
drive shafts, propellers, etc.). Company
A should not be allowed to supply any
powerplant components. Company A
can, however, supply components of
the submarine unrelated to the powerplant (e.g., fire control, navigation,
etc.). In this example, the system is the
powerplant, not the submarine, and the
ban on supplying components is limited to those for the system only.
(b) Company A is the systems engineering and technical direction contractor for system X. After some
progress, but before completion, the
system is canceled. Later, system Y is
developed to achieve the same purposes
as system X, but in a fundamentally
different fashion. Company B is the
systems engineering and technical direction contractor for system Y. Company A may supply system Y or its
components.
(c) Company A develops new electronic equipment and, as a result of
this development, prepares specifications. Company A may supply the
equipment.
(d) XYZ Tool Company and PQR Machinery Company, representing the
American Tool Institute, work under
Government supervision and control to
refine specifications or to clarify the
requirements of a specific acquisition.
These companies may supply the item.
(e) Before an acquisition for information technology is conducted, Company
A is awarded a contract to prepare data
system specifications and equipment
performance criteria to be used as the
basis for the equipment competition.
Since the specifications are the basis
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Federal Acquisition Regulation
9.603
for selection of commercial hardware,
a potential conflict of interest exists.
Company A should be excluded from
the initial follow-on information technology hardware acquisition.
(f) Company A receives a contract to
define the detailed performance characteristics an agency will require for
purchasing rocket fuels. Company A
has not developed the particular fuels.
When the definition contract is awarded, it is clear to both parties that the
agency will use the performance characteristics arrived at to choose competitively a contractor to develop or
produce the fuels. Company A may not
be awarded this follow-on contract.
(g) Company A receives a contract to
prepare a detailed plan for scientific
and technical training of an agency’s
personnel. It suggests a curriculum
that the agency endorses and incorporates in its request for proposals to
institutions to establish and conduct
the training. Company A may not be
awarded a contract to conduct the
training.
(h) Company A is selected to study
the use of lasers in communications.
The agency intends to ask that firms
doing research in the field make proprietary information available to Company A. The contract must require
Company A to (1) enter into agreements with these firms to protect any
proprietary information they provide
and (2) refrain from using the information in supplying lasers to the Government or for any purpose other than
that for which it was intended.
(i) An agency that regulates an industry wishes to develop a system for
evaluating and processing license applications. Contractor X helps develop
the system and process the applications. Contractor X should be prohibited from acting as a consultant to any
of the applicants during its period of
performance and for a reasonable period thereafter.
[48 FR 42142, Sept. 19, 1983. Redesignated at
55 FR 42687, Oct. 22, 1990; 61 FR 41469, Aug. 8,
1996]
Subpart 9.6—Contractor Team
Arrangements
9.601
Definition.
Contractor team arrangement, as used
in this subpart, means an arrangement
in which—
(1) Two or more companies form a
partnership or joint venture to act as a
potential prime contractor; or
(2) A potential prime contractor
agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program.
[48 FR 42142, Sept. 19, 1983, as amended at 66
FR 2128, Jan. 10, 2001]
9.602
General.
(a) Contractor team arrangements
may be desirable from both a Government and industry standpoint in order
to enable the companies involved to (1)
complement each other’s unique capabilities and (2) offer the Government
the best combination of performance,
cost, and delivery for the system or
product being acquired.
(b) Contractor team arrangements
may be particularly appropriate in
complex research and development acquisitions, but may be used in other
appropriate
acquisitions,
including
production.
(c) The companies involved normally
form a contractor team arrangement
before submitting an offer. However,
they may enter into an arrangement
later in the acquisition process, including after contract award.
9.603
Policy.
The Government will recognize the
integrity and validity of contractor
team arrangements; provided, the arrangements are identified and company
relationships are fully disclosed in an
offer or, for arrangements entered into
after submission of an offer, before the
arrangement becomes effective. The
Government will not normally require
or encourage the dissolution of contractor team arrangements.
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9.604
48 CFR Ch. 1 (10–1–03 Edition)
9.604 Limitations.
Nothing in this subpart authorizes
contractor team arrangements in violation of antitrust statutes or limits
the Government’s rights to—
(a) Require consent to subcontracts
(see subpart 44.2);
(b) Determine, on the basis of the
stated contractor team arrangement,
the responsibility of the prime contractor (see subpart 9.1);
(c) Provide to the prime contractor
data rights owned or controlled by the
Government;
(d) Pursue its policies on competitive
contracting, subcontracting, and component breakout after initial production or at any other time; and
(e) Hold the prime contractor fully
responsible for contract performance,
regardless of any team arrangement
between the prime contractor and its
subcontractors.
Subpart 9.7—Defense Production
Pools and Research and Development Pools
9.701 Definition.
Pool, as used in this subpart, means a
group of concerns (see 19.001) that
have—
(1) Associated together in order to
obtain and perform, jointly or in conjunction with each other, defense production or research and development
contracts;
(2) Entered into an agreement governing their organization, relationship,
and procedures; and
(3) Obtained approval of the agreement by either—
(i) The Small Business Administration (SBA) under section 9 or 11 of the
Small Business Act (15 U.S.C. 638 or
640) (see 13 CFR part 125); or
(ii) A designated official under Part
V of Executive Order 10480, August 14,
1953 (18 FR 4939, August 20, 1953) and
section 708 of the Defense Production
Act of 1950 (50 U.S.C. App. 2158).
[48 FR 42142, Sept. 19, 1983, as amended at 51
FR 2649, Jan. 17, 1986; 66 FR 2128, Jan. 10,
2001]
9.702 Contracting with pools.
(a) Except as specified in this subpart, a pool shall be treated the same
as any other prospective or actual contractor.
(b) The contracting officer shall not
award a contract to a pool unless the
offer leading to the contract is submitted by the pool in its own name or
by an individual pool member expressly stating that the offer is on behalf of the pool.
(c) Upon receipt of an offer submitted
by a group representing that it is a
pool, the contracting officer shall
verify its approved status with the
SBA District Office Director or other
approving agency and document the
contract file that the verification was
made.
(d) Pools approved by the SBA under
the Small Business Act are entitled to
the preferences and privileges accorded
to small business concerns. Approval
under the Defense Production Act does
not confer these preferences and privileges.
(e) Before awarding a contract to an
unincorporated pool, the contracting
officer shall require each pool member
participating in the contract to furnish
a certified copy of a power of attorney
identifying the agent authorized to
sign the offer or contract on that member’s behalf. The contracting officer
shall attach a copy of each power of attorney to each signed copy of the contract retained by the Government.
[48 FR 42142, Setp. 19, 1983, as amended at 61
FR 67410, Dec. 20, 1996]
9.703 Contracting with individual pool
members.
(a) Pool members may submit individual offers, independent of the pool.
However, the contracting officer shall
not consider an independent offer by a
pool member if that pool member participates in a competing offer submitted by the pool.
(b) If a pool member submits an individual offer, independent of the pool,
the contracting officer shall consider
the pool agreement, along with other
factors, in determining whether that
pool member is a responsible prospective contractor under subpart 9.1.
PART 10—MARKET RESEARCH
Sec.
10.000
Scope of part.
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Federal Acquisition Regulation
10.001
10.002
10.001
Policy.
Procedures.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 60 FR 48237, Sept. 18, 1995, unless
otherwise noted.
10.000
Scope of part.
This part prescribes policies and procedures for conducting market research to arrive at the most suitable
approach to acquiring, distributing,
and supporting supplies and services.
This part implements requirements of
41 U.S.C. 253a(a)(1), 41 U.S.C 264b, and
10 U.S.C. 2377.
10.001
Policy.
(a) Agencies must—
(1) Ensure that legitimate needs are
identified and trade-offs evaluated to
acquire items that meet those needs;
(2) Conduct market research appropriate to the circumstances—
(i) Before developing new requirements documents for an acquisition by
that agency;
(ii) Before soliciting offers for acquisitions with an estimated value in excess of the simplified acquisition
threshold;
(iii) Before soliciting offers for acquisitions with an estimated value less
than the simplified acquisition threshold when adequate information is not
available and the circumstances justify
its cost;
(iv) Before soliciting offers for acquisitions that could lead to a bundled
contract (15 U.S.C. 644(e)(2)(A)); and
(v) Agencies shall conduct market research on an ongoing basis, and take
advantage to the maximum extent
practicable of commercially available
market research methods, to identify
effectively the capabilities, including
the capabilities of small businesses and
new entrants into Federal contracting,
that are available in the marketplace
for meeting the requirements of the
agency in furtherance of defense
against or recovery from terrorism or
nuclear, biological, chemical or radiological attack (Public Law 107–296, Sec.
858); and
(3) Use the results of market research
to—
(i) Determine if sources capable of
satisfying the agency’s requirements
exist;
(ii) Determine if commercial items
or, to the extent commercial items
suitable to meet the agency’s needs are
not available, nondevelopmental items
are available that—
(A) Meet the agency’s requirements;
(B) Could be modified to meet the
agency’s requirements; or
(C) Could meet the agency’s requirements if those requirements were
modified to a reasonable extent;
(iii) Determine the extent to which
commercial items or nondevelopmental
items could be incorporated at the
component level;
(iv) Determine the practices of firms
engaged in producing, distributing, and
supporting commercial items, such as
terms for warranties, buyer financing,
maintenance and packaging, and marking;
(v) Ensure maximum practicable use
of recovered materials (see subpart
23.4) and promote energy conservation
and efficiency; and
(vi) Determine whether bundling is
necessary and justified (see 7.107) (15
U.S.C. 644(e)(2)(A)).
(vii) Assess the availability of electronic and information technology that
meets all or part of the applicable accessibility standards issued by the Architectural and Transportation Barriers Compliance Board at 36 CFR part
1194(see Subpart 39.2).
(b) When conducting market research, agencies should not request potential sources to submit more than
the minimum information necessary.
(c) If an agency contemplates awarding a bundled contract, the agency—
(1) When performing market research, should consult with the local
Small Business Administration procurement center representative (PCR)
or, if a PCR is not assigned to the procuring activity, the SBA Office of Government Contracting Area Office serving the area in which the procuring activity is located; and
(2) At least 30 days before release of
the solicitation—
(i) Must notify any affected incumbent small business concerns of the
Government’s intention to bundle the
requirement; and
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10.002
48 CFR Ch. 1 (10–1–03 Edition)
(ii) Should notify any affected incumbent small business concerns of
how the concerns may contact the appropriate Small Business Administration representative.
[60 FR 48237, Sept. 18, 1995, as amended at 64
FR 72443, Dec. 27, 1999; 65 FR 46054, July 26,
2000; 66 FR 20896, Apr. 25, 2001; 68 FR 4049,
Jan. 27, 2003]
10.002
Procedures.
(a) Acquisitions begin with a description of the Government’s needs stated
in terms sufficient to allow conduct of
market research.
(b) Market research is then conducted to determine if commercial
items or nondevelopmental items are
available to meet the Government’s
needs or could be modified to meet the
Government’s needs.
(1) The extent of market research
will vary, depending on such factors as
urgency, estimated dollar value, complexity, and past experience. Market
research involves obtaining information specific to the item being acquired
and should include—
(i) Whether the Government’s needs
can be met by—
(A) Items of a type customarily
available in the commercial marketplace;
(B) Items of a type customarily
available in the commercial marketplace with modifications; or
(C) Items used exclusively for governmental purposes;
(ii) Customary practices regarding
customizing, modifying or tailoring of
items to meet customer needs and associated costs;
(iii) Customary practices, including
warranty, buyer financing, discounts,
etc., under which commercial sales of
the products are made;
(iv) The requirements of any laws
and regulations unique to the item
being acquired;
(v) The availability of items that
contain recovered materials and items
that are energy efficient;
(vi) The distribution and support capabilities of potential suppliers, including alternative arrangements and cost
estimates; and
(vii) Size and status of potential
sources (see part 19).
(2) Techniques for conducting market
research may include any or all of the
following:
(i) Contacting knowledgeable individuals in Government and industry regarding market capabilities to meet requirements.
(ii) Reviewing the results of recent
market research undertaken to meet
similar or identical requirements.
(iii) Publishing formal requests for
information in appropriate technical or
scientific journals or business publications.
(iv) Querying the Governmentwide
database of contracts and other procurement instruments intended for use
by multiple agencies available at http:/
/www.contractdirectory.gov and other
Government and commercial databases
that provide information relevant to
agency acquisitions.
(v) Participating in interactive, online communication among industry,
acquisition personnel, and customers.
(vi) Obtaining source lists of similar
items from other contracting activities
or agencies, trade associations or other
sources.
(vii) Reviewing catalogs and other
generally available product literature
published by manufacturers, distributors, and dealers or available on-line.
(viii) Conducting interchange meetings or holding presolicitation conferences to involve potential offerors
early in the acquisition process.
(c) If market research indicates commercial or nondevelopmental items
might not be available to satisfy agency needs, agencies shall reevaluate the
need in accordance with 10.001(a)(3)(ii)
and determine whether the need can be
restated to permit commercial or nondevelopmental items to satisfy the
agency’s needs.
(d)(1) If market research establishes
that the Government’s need may be
met by a type of item or service customarily available in the commercial
marketplace that would meet the definition of a commercial item at subpart
2.1, the contracting officer shall solicit
and award any resultant contract using
the policies and procedures in part 12.
(2) If market research establishes
that the Government’s need cannot be
met by a type of item or service customarily available in the marketplace,
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Federal Acquisition Regulation
11.002
part 12 shall not be used. When publication of the notice at 5.201 is required,
the contracting officer shall include a
notice to prospective offerors that the
Government does not intend to use
part 12 for the acquisition (see 5.207(e)).
(e) Agencies should document the results of market research in a manner
appropriate to the size and complexity
of the acquisition.
[60 FR 48237, Sept. 18, 1995, as amended at 68
FR 43863, July 24, 2003; 68 FR 56679, 56682, Oct.
1, 2003]
PART 11—DESCRIBING AGENCY
NEEDS
Sec.
11.000
11.001
11.002
Subpart 11.5—Liquidated Damages
11.500
11.501
11.502
11.503
Scope.
Policy.
Procedures.
Contract clauses.
Subpart 11.6—Priorities and Allocations
11.600 Scope of subpart.
11.601 Definitions.
11.602 General.
11.603 Procedures.
11.604 Solicitation provisions and contract
clauses.
Subpart 11.7—Variation in Quantity
11.701
11.702
11.703
Scope of part.
Definitions.
Policy.
Supply contracts.
Construction contracts.
Contract clauses.
Subpart 11.8—Testing
11.801
Subpart 11.1—Selecting and Developing
Requirements Documents
Preaward in-use evaluation.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
11.101 Order of precedence for requirements
documents.
11.102 Standardization program.
11.103 Market acceptance.
11.104 Use of brand name or equal purchase
descriptions.
11.105 Items peculiar to one manufacturer.
11.106 Purchase descriptions for service contracts.
11.107 Solicitation provision.
Subpart 11.2—Using and Maintaining
Requirements Documents
11.201 Identification and availability of
specifications.
11.202 Maintenance of standardization documents.
11.203 Customer satisfaction.
11.204 Solicitation provisions and contract
clauses.
Subpart 11.3—Acceptable Material
SOURCE: 60 FR 48238, Sept. 18, 1995, unless
otherwise noted.
11.000
This part prescribes policies and procedures for describing agency needs.
11.001
Subpart 11.4—Delivery or Performance
Schedules
11.401 General.
11.402 Factors to consider in establishing
schedules.
11.403 Supplies or services.
11.404 Contract clauses.
Definitions.
As used in this part—
Reconditioned means restored to the
original normal operating condition by
readjustments and material replacement.
Remanufactured means factory rebuilt to original specifications.
[62 FR 44810, Aug. 22, 1997, as amended at 63
FR 9051, Feb. 23, 1998; 65 FR 36017, June 6,
2000]
11.002
11.301 Definitions.
11.302 Policy.
11.303 Special requirements for printing and
writing paper.
11.304 Contract clause.
Scope of part.
Policy.
(a) In fulfilling requirements of 10
U.S.C. 2305(a)(1), 10 U.S.C. 2377, 41
U.S.C. 253a(a), and 41 U.S.C. 264b, agencies shall—
(1) Specify needs using market research in a manner designed to—
(i) Promote full and open competition (see part 6), or maximum practicable competition when using simplified acquisition procedures, with due
regard to the nature of the supplies or
services to be acquired; and
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11.002
48 CFR Ch. 1 (10–1–03 Edition)
(ii) Only include restrictive provisions or conditions to the extent necessary to satisfy the needs of the agency or as authorized by law.
(2) To the maximum extent practicable, ensure that acquisition officials—
(i) State requirements with respect
to an acquisition of supplies or services
in terms of—
(A) Functions to be performed;
(B) Performance required; or
(C) Essential physical characteristics;
(ii) Define requirements in terms
that enable and encourage offerors to
supply commercial items, or, to the extent that commercial items suitable to
meet the agency’s needs are not available, nondevelopmental items, in response to the agency solicitations;
(iii) Provide offerors of commercial
items and nondevelopmental items an
opportunity to compete in any acquisition to fill such requirements;
(iv) Require prime contractors and
subcontractors at all tiers under the
agency contracts to incorporate commercial items or nondevelopmental
items as components of items supplied
to the agency; and
(v) Modify requirements in appropriate cases to ensure that the requirements can be met by commercial items
or, to the extent that commercial
items suitable to meet the agency’s
needs are not available, nondevelopmental items.
(b) The Metric Conversion Act of
1975, as amended by the Omnibus Trade
and Competitiveness Act of 1988 (15
U.S.C. 205a, et seq.), designates the metric system of measurement as the preferred system of weights and measures
for United States trade and commerce,
and it requires that each agency use
the metric system of measurement in
its acquisitions, except to the extent
that such use is impracticable or is
likely to cause significant inefficiencies or loss of markets to United States
firms. Requiring activities are responsible for establishing guidance implementing this policy in formulating
their requirements for acquisitions.
(c) To the extent practicable and consistent with subpart 9.5, potential
offerors should be given an opportunity
to comment on agency requirements or
to recommend application and tailoring of requirements documents and
alternative
approaches.
Requiring
agencies should apply specifications,
standards, and related documents initially for guidance only, making final
decisions on the application and tailoring of these documents as a product
of the design and development process.
Requiring agencies should not dictate
detailed design solutions prematurely
(see 7.101 and 7.105(a)(8)).
(d)(1) The Resource Conservation and
Recovery Act of 1976 (42 U.S.C. 6901, et
seq.), Executive Order 13101 of September 14, 1998, Greening the Government through Waste Prevention, Recycling, and Federal Acquisition, Executive Order 13123 of June 3, 1999, Greening the Government through Efficient
Energy Management, and Executive
Order 13221 of July 31, 2001, Energy-Efficient Standby Power Devices, establish requirements for acquiring—
(i) Products containing recovered
materials;
(ii) Environmentally preferable products and services;
(iii) Energy-efficient products and
services;
(iv) Products and services that utilize
renewable energy technologies; and
(v) Products containing energy-efficient standby power devices.
(2) Executive agencies shall consider
use of recovered materials, energy- and
water-efficient products and services,
products containing energy-efficient
standby
power
devices,
environmentally preferable purchasing criteria
developed by the EPA, and environmental objectives (see Subparts 23.2
and 23.4, and 23.703(b)) when—
(i) Developing, reviewing, or revising
Federal and military specifications,
product descriptions (including commercial item descriptions) and standards;
(ii) Describing Government requirements for supplies and services; and
(iii) Developing source-selection factors.
(e) Some or all of the performance
levels or performance specifications in
a solicitation may be identified as targets rather than as fixed or minimum
requirements.
(f) In accordance with Section 508 of
the Rehabilitation Act of 1973 (29
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Federal Acquisition Regulation
11.103
U.S.C. 794d), requiring activities must
prepare requirements documents for
electronic and information technology
that comply with the applicable accessibility standards issued by the Architectural and Transportation Barriers
Compliance Board at 36 CFR part 1194
(see subpart 39.2).
[60 FR 48238, Sept. 18, 1995, as amended at 61
FR 39192, July 26, 1996; 62 FR 263, Jan. 2, 1997;
62 FR 44810, Aug. 22, 1997; 62 FR 51230, Sept.
30, 1997; 65 FR 36017, June 6, 2000; 66 FR 20897,
Apr. 25, 2001; 66 FR 65352, Dec. 18, 2001; 68 FR
43858, July 24, 2003]
Subpart 11.1—Selecting and Developing Requirements Documents
11.101 Order of precedence for requirements documents.
(a) Agencies may select from existing
requirements documents, modify or
combine existing requirements documents, or create new requirements documents to meet agency needs, consistent with the following order of
precedence:
(1) Documents mandated for use by
law.
(2) Performance-oriented documents.
(3) Detailed design-oriented documents.
(4) Standards, specifications and related publications issued by the Government outside the Defense or Federal
series for the non-repetitive acquisition of items.
(b) Agencies shall prepare requirements documents to achieve maximum
practicable—
(1) Energy efficiency, including using
products containing energy-efficient
standby power devices and renewable
energy technologies; and
(2) Use of recovered material, other
materials that are environmentally
preferable, energy- and water-efficient
products, and renewable energy technologies (see subparts 23.2, 23.4, and
23.7).
(c) In accordance with OMB Circular
A–119, ‘‘Federal Participation in the
Development and Use of Voluntary
Consensus Standards and in Conformity Assessment Activities,‘‘agencies must use voluntary consensus
standards, when they exist, in lieu of
Government-unique standards, except
where inconsistent with law or otherwise impractical. The private sector
manages and administers voluntary
consensus standards. Such standards
are not mandated by law (e.g., industry
standards such as ISO 9000).
[60 FR 48238, Sept. 18, 1995, as amended at 62
FR 44810, Aug. 22, 1997; 64 FR 51834, Sept. 24,
1999; 66 FR 65352, Dec. 18, 2001; 68 FR 43858,
July 24, 2003]
11.102
Standardization program.
Agencies shall select existing requirements documents or develop new
requirements documents that meet the
needs of the agency in accordance with
the guidance contained in the Federal
Standardization Manual, FSPM–0001,
and, for DoD components, DoD 4120.3–
M, Defense Standardization Program
Policies and Procedures. The Federal
Standardization Manual may be obtained from the General Services Administration
(see
address
in
11.201(d)(1)). DoD 4120.3–M may be obtained from DoD (see address in
11.201(d)(2)).
[63 FR 34062, June 22, 1998]
11.103
Market acceptance.
(a) Section 8002(c) of Pub. L. 103–355
provides that, in accordance with agency procedures, the head of an agency
may, under appropriate circumstances,
require offerors to demonstrate that
the items offered—
(1) Have either—
(i) Achieved commercial market acceptance; or
(ii) Been satisfactorily supplied to an
agency under current or recent contracts for the same or similar requirements; and
(2) Otherwise meet the item description, specifications, or other criteria
prescribed in the public notice and solicitation.
(b) Appropriate circumstances may,
for example, include situations where
the agency’s minimum need is for an
item that has a demonstrated reliability, performance or product support record in a specified environment.
Use of market acceptance is inappropriate when new or evolving items may
meet the agency’s needs.
(c) In developing criteria for demonstrating that an item has achieved
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11.104
48 CFR Ch. 1 (10–1–03 Edition)
commercial market acceptance, the
contracting officer shall ensure the criteria in the solicitation—
(1) Reflect the minimum need of the
agency and are reasonably related to
the demonstration of an item’s acceptability to meet the agency’s minimum
need;
(2) Relate to an item’s performance
and intended use, not an offeror’s capability;
(3) Are supported by market research;
(4) Include consideration of items
supplied satisfactorily under recent or
current Government contracts, for the
same or similar items; and
(5) Consider the entire relevant commercial market, including small business concerns.
(d) Commercial market acceptance
shall not be used as a sole criterion to
evaluate whether an item meets the
Government’s requirements.
(e) When commercial market acceptance is used, the contracting officer
shall document the file to—
(1) Describe the circumstances justifying the use of commercial market acceptance criteria; and
(2) Support the specific criteria being
used.
11.104 Use of brand name or equal
purchase descriptions.
(a) While the use of performance
specifications is preferred to encourage
offerors to propose innovative solutions, the use of brand name or equal
purchase descriptions may be advantageous under certain circumstances.
(b) Brand name or equal purchase descriptions must include, in addition to
the brand name, a general description
of those salient physical, functional, or
performance characteristics of the
brand name item that an ‘‘equal’’ item
must meet to be acceptable for award.
Use brand name or equal descriptions
when the salient characteristics are
firm requirements.
[64 FR 32742, June 17, 1999]
11.105 Items peculiar to one manufacturer.
Agency requirements shall not be
written so as to require a particular
brand name, product, or a feature of a
product, peculiar to one manufacturer,
thereby precluding consideration of a
product manufactured by another company, unless—
(a) The particular brand name, product, or feature is essential to the Government’s requirements, and market
research indicates other companies’
similar products, or products lacking
the particular feature, do not meet, or
cannot be modified to meet, the agency’s minimum needs;
(b) The authority to contract without providing for full and open competition is supported by the required
justifications and approvals (see 6.302–
1); and
(c) The basis for not providing for
maximum practicable competition is
documented in the file when the acquisition is awarded using simplified acquisition procedures.
[60 FR 48238, Sept. 18, 1995, as amended at 61
FR 39192, July 26, 1996; 62 FR 263, Jan. 2, 1997;
62 FR 10710, Mar. 10, 1997. Redesignated and
amended at 64 FR 32742, June 17, 1999]
11.106 Purchase descriptions for service contracts.
In drafting purchase descriptions for
service contracts, agency requiring activities shall ensure that inherently
governmental functions (see subpart
7.5) are not assigned to a contractor.
These purchase descriptions shall
(a) Reserve final determination for
Government officials;
(b) Require proper identification of
contractor personnel who attend meetings, answer Government telephones,
or work in situations where their actions could be construed as acts of Government officials unless, in the judgment of the agency, no harm can come
from failing to identify themselves;
and
(c) Require suitable marking of all
documents or reports produced by contractors.
[61 FR 2629, Jan. 26, 1996. Redesignated at 64
FR 32742, June 17, 1999]
§ 11.107 Solicitation provision.
(a) Insert the provision at 52.211–6,
Brand Name or Equal, when brand
name or equal purchase descriptions
are included in a solicitation.
(b) Insert the provision at 52.211–7,
Alternatives to Government-Unique
Standards, in solicitations that use
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Federal Acquisition Regulation
11.201
Government-unique standards when
the agency uses the transaction-based
reporting method to report its use of
voluntary consensus standards to the
National Institute of Standards and
Technology (see OMB Circular A–119,
‘‘Federal Participation in the Development and Use of Voluntary Consensus
Standards and in Conformity Assessment Activities’’). Use of the provision
is optional for agencies that report
their use of voluntary consensus standards to the National Institute of Standards and Technology using the categorical reporting method. Agencies that
manage their specifications on a contract-by-contract basis use the transaction-based method of reporting.
Agencies that manage their specifications centrally use the categorical
method of reporting. Agency regulations regarding specification management describe which method is used.
[64 FR 51835, Sept. 24, 1999]
Subpart 11.2—Using and Maintaining Requirements Documents
11.201 Identification and availability
of specifications.
(a) Solicitations citing requirements
documents listed in the General Services Administration (GSA) Index of
Federal Specifications, Standards and
Commercial Item Descriptions, the
DoD Index of Specifications and Standards (DoDISS), or other agency index
shall identify each document’s approval date and the dates of any applicable amendments and revisions. Do
not use general identification references, such as ‘‘the issue in effect on
the date of the solicitation.’’ Contracting offices will not normally furnish these cited documents with the solicitation, except when—
(1) The requirements document must
be furnished with the solicitation to
enable prospective contractors to make
a competent evaluation of the solicitation;
(2) In the judgment of the contracting officer, it would be impracticable for prospective contractors to obtain the documents in reasonable time
to respond to the solicitation; or
(3) A prospective contractor requests
a copy of a Government promulgated
requirements document.
(b) Contracting offices shall clearly
identify in the solicitation any pertinent documents not listed in the GSA
Index of Federal Specifications, Standards and Commercial Item Descriptions or DoDISS. Such documents shall
be furnished with the solicitation or
specific instructions shall be furnished
for obtaining or examining such documents.
(c) When documents refer to other
documents, such references shall
(1) Be restricted to documents, or appropriate portions of documents, that
apply in the acquisition;
(2) Cite the extent of their applicability;
(3) Not conflict with other documents
and provisions of the solicitation; and
(4) Identify all applicable first tier
references.
(d)(1) The GSA Index of Federal Specifications, Standards and Commercial
Item Descriptions, FPMR Part 101–29,
may be purchased from the—General
Services Administration, Federal Supply Service, Specifications Section,
Suite 8100, 470 East L’Enfant Plaza,
SW, Washington, DC 20407, Telephone
(202) 619–8925.
(2) The DoDISS may be obtained
from the—
(i) ASSIST database via the Internet
at http://assist.daps.mil; or
(ii) Department of Defense Single
Stock Point (DoDSSP), Building 4,
Section D 700 Robbins Avenue, Philadelphia, PA 19111–5094, Telephone (215)
697–2667/2179, Facsimile (215) 697–1462.
(e) Agencies may purchase some nongovernment standards, including voluntary consensus standards, from the
National Technical Information Service’s Fedworld Information Network.
Agencies may also obtain nongovernment standards from the standards developing organization responsible for
the preparation, publication, or maintenance of the standard, or from an authorized document reseller. The National Institute of Standards and Technology can assist agencies in identifying sources for, and content of, nongovernment standards. DoD activities
may obtain from the DoDSSP those
nongovernment standards, including
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11.202
48 CFR Ch. 1 (10–1–03 Edition)
voluntary consensus standards, adopted for use by defense activities.
[60 FR 48238, Sept. 18, 1995, as amended at 62
FR 40236, July 25, 1997; 63 FR 34063, June 22,
1998; 64 FR 51835, Sept. 24, 1999; 64 FR 72446,
Dec. 27, 1999]
11.202 Maintenance of standardization
documents.
(a) Recommendations for changes to
standardization documents listed in
the GSA Index of Federal Specifications, Standards and Commercial Item
Descriptions should be submitted to
the General Services Administration,
Federal Supply Service, Office of Acquisition, Washington, DC 20406. Agencies shall submit recommendations for
changes to standardization documents
listed in the DoDISS to the cognizant
preparing activity.
(b) When an agency cites an existing
standardization document but modifies
it to meet its needs, the agency shall
follow the guidance in Federal Standardization Manual and, for Defense
components, DoD 4120.3–M, Defense
Standardization Program Policies and
Procedures.
11.203 Customer satisfaction.
Acquisition organizations shall communicate with customers to determine
how well the requirements document
reflects the customer’s needs and to obtain suggestions for corrective actions.
Whenever practicable, the agency may
provide affected industry an opportunity to comment on the requirements documents.
11.204 Solicitation provisions and contract clauses.
(a) The contracting officer shall insert the provision at 52.211–1, Availability of Specifications Listed in the
GSA Index of Federal Specifications,
Standards and Commercial Item Descriptions, FPMR Part 101–29, in solicitations that cite specifications listed
in the Index that are not furnished
with the solicitation.
(b) The contracting officer shall insert the provision at 52.211–2, Availability of Specifications Listed in the
DoD Index of Specifications and Standards (DoDISS) and Descriptions Listed
in the Acquisition Management Systems and Data Requirements Control
List, DoD 5010.12–L, in solicitations
that cite specifications listed in the
DoDISS or DoD 5010.12–L that are not
furnished with the solicitation.
(c) The contracting officer shall insert a provision substantially the same
as the provision at 52.211–3, Availability of Specifications Not Listed in
the GSA Index of Federal Specifications, Standards and Commercial Item
Descriptions, in solicitations that cite
specifications that are not listed in the
Index and are not furnished with the
solicitation, but may be obtained from
a designated source.
(d) The contracting officer shall insert a provision substantially the same
as the provision at 52.211–4, Availability for Examination of Specifications Not Listed in the GSA Index of
Federal Specifications, Standards and
Commercial Item Descriptions, in solicitations that cite specifications that
are not listed in the Index and are
available for examination at a specified
location.
[60 FR 48238, Sept. 18, 1995, as amended at 63
FR 34063, June 22, 1998]
Subpart 11.3—Acceptable
Material
SOURCE: 65 FR 36018, June 6, 2000, unless
otherwise noted.
11.301
Definitions.
As used in this subpart—
Postconsumer material means a material or finished product that has served
its intended use and has been discarded
for disposal or recovery, having completed its life as a consumer item.
Postconsumer material is a part of the
broader category of ‘‘recovered material.’’ For paper and paper products,
postconsumer
material
means
‘‘postconsumer fiber’’ defined by the
U.S. Environmental Protection Agency
(EPA) as—
(1) Paper, paperboard, and fibrous
materials from retail stores, office
buildings, homes, and so forth, after
they have passed through their endusage as a consumer item, including:
used corrugated boxes; old newspapers;
old magazines; mixed waste paper; tabulating cards; and used cordage; or
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11.304
(2) All paper, paperboard, and fibrous
materials that enter and are collected
from municipal solid waste; but not
(3) Fiber derived from printers’ overruns, converters’ scrap, and over-issue
publications.
Recovered material for paper and paper
products, is defined by EPA in its Comprehensive Procurement Guideline as
‘‘recovered fiber’’ and means the following materials:
(1) Postconsumer fiber.
(2) Manufacturing wastes such as—
(i) Dry paper and paperboard waste
generated after completion of the papermaking process (that is, those manufacturing operations up to and including the cutting and trimming of the
paper machine reel into smaller rolls
or rough sheets) including: envelope
cuttings, bindery trimmings, and other
paper and paperboard waste resulting
from printing, cutting, forming, and
other converting operations; bag, box,
and carton manufacturing wastes; and
butt rolls, mill wrappers, and rejected
unused stock; and
(ii) Repulped finished paper and paperboard from obsolete inventories of
paper and paperboard manufacturers,
merchants, wholesalers, dealers, printers, converters, or others.
11.302 Policy.
(a) Agencies must not require virgin
material or supplies composed of or
manufactured using virgin material
unless compelled by law or regulation
or unless virgin material is vital for
safety or meeting performance requirements of the contract.
(b)(1) When acquiring other than
commercial items, agencies must require offerors to identify used, reconditioned, or remanufactured supplies; or
unused former Government surplus
property proposed for use under the
contract. These supplies or property
may not be used in contract performance unless authorized by the contracting officer.
(2)
When
acquiring
commercial
items, the contracting officer must
consider the customary practices in
the industry for the item being acquired. The contracting officer may require offerors to provide information
on used, reconditioned, or remanufactured supplies, or unused former Gov-
ernment surplus property proposed for
use under the contract. The request for
the information must be included in
the solicitation, and to the maximum
extent practicable must be limited to
information or standards consistent
with normal commercial practices.
(c) When the contracting officer
needs additional information to determine whether supplies meet minimum
recovered material standards stated in
the solicitation, the contracting officer
may require offerors to submit additional information on the recycled content or related standards. The request
for the information must be included in
the solicitation. When acquiring commercial items, limit the information to
the maximum extent practicable to
that available under normal commercial practices.
11.303 Special requirements for printing and writing paper.
(a) Section 505 of Executive Order
13101,
Greening
the
Government
through Waste Prevention, Recycling,
and Federal Acquisition, establishes
minimum recovered material content
standards for agency purchases of
printing and writing paper. Section 505
requires that 100 percent of an agency’s
purchases of printing and writing paper
must meet or exceed one of the minimum content standards specified in
paragraph (b) of this section.
(b) For high-speed copier paper, offset paper, forms bond, computer printout paper, carbonless paper, file folders, white wove envelopes, writing and
office paper, book paper, cotton fiber
paper, and cover stock, the minimum
content standard must be no less than
30 percent postconsumer materials. If
paper
containing
30
percent
postconsumer material is not reasonably available, does not meet reasonable performance requirements, or is
only available at an unreasonable
price, then the agency must purchase
paper containing no less than 20 percent postconsumer material.
11.304
Contract clause.
Insert the clause at 52.211–5, Material
Requirements, in solicitations and contracts for supplies that are not commercial items.
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11.401
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 11.4—Delivery or
Performance Schedules
SOURCE: 48 FR 42159, Sept. 19, 1983, unless
otherwise noted. Redesignated at 60 FR 48241,
Sept. 18, 1995.
11.401 General.
(a) The time of delivery or performance is an essential contract element
and shall be clearly stated in solicitations. Contracting officers shall ensure
that delivery or performance schedules
are realistic and meet the requirements of the acquisition. Schedules
that are unnecessarily short or difficult to attain—
(1) Tend to restrict competition,
(2) Are inconsistent with small business policies, and
(3) May result in higher contract
prices.
(b) Solicitations shall, except when
clearly unnecessary, inform bidders or
offerors of the basis on which their bids
or proposals will be evaluated with respect to time of delivery or performance.
(c) If timely delivery or performance
is unusually important to the Government, liquidated damages clauses may
be used (see subpart 11.5).
[48 FR 42159, Sept. 19, 1983. Redesignated and
amended at 60 FR 48241, Sept. 18, 1995]
11.402 Factors to consider in establishing schedules.
(a) Supplies or services. When establishing a contract delivery or performance schedule, consideration shall be
given to applicable factors such as
the—
(1) Urgency of need;
(2) Industry practices;
(3) Market conditions;
(4) Transportation time;
(5) Production time;
(6) Capabilities of small business concerns;
(7) Administrative time for obtaining
and evaluating offers and for awarding
contracts;
(8) Time for contractors to comply
with any conditions precedent to contract performance; and
(9) Time for the Government to perform its obligations under the contract; e.g., furnishing Government
property.
(b) Construction. When scheduling the
time for completion of a construction
contract, the contracting officer shall
consider applicable factors such as
the—
(1) Nature and complexity of the
project;
(2) Construction seasons involved;
(3) Required completion date;
(4) Availability of materials and
equipment;
(5) Capacity of the contractor to perform; and
(6) Use of multiple completion dates.
(In any given contract, separate completion dates may be established for
separable items of work. When multiple completion dates are used, requests for extension of time must be
evaluated with respect to each item,
and the affected completion dates
modified when appropriate.)
[48 FR 42159, Sept. 19, 1983. Redesignated and
amended at 60 FR 48241, Sept. 18, 1995]
11.403
Supplies or services.
(a) The contracting officer may express contract delivery or performance
schedules in terms of—
(1) Specific calendar dates;
(2) Specific periods from the date of
the contract; i.e., from the date of
award or acceptance by the Government, or from the date shown as the effective date of the contract;
(3) Specific periods from the date of
receipt by the contractor of the notice
of award or acceptance by the Government (including notice by receipt of
contract document executed by the
Government); or
(4) Specific time for delivery after receipt by the contractor of each individual order issued under the contract,
as in indefinite delivery type contracts
and GSA schedules.
(b) The time specified for contract
performance should not be curtailed to
the prejudice of the contractor because
of delay by the Government in giving
notice of award.
(c) If the delivery schedule is based
on the date of the contract, the contracting officer shall mail or otherwise
furnish to the contractor the contract,
notice of award, acceptance of proposal, or other contract document not
later than the date of the contract.
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Federal Acquisition Regulation
11.404
(d) If the delivery schedule is based
on the date the contractor receives the
notice of award, or if the delivery
schedule is expressed in terms of specific calendar dates on the assumption
that the notice of award will be received by a specified date, the contracting officer shall send the contract,
notice of award, acceptance of proposal, or other contract document by
certified mail, return receipt requested, or by any other method that
will provide evidence of the date of receipt.
(e) In invitations for bids, if the delivery schedule is based on the date of
the contract, and a bid offers delivery
based on the date the contractor receives the contract or notice of award,
the contracting officer shall evaluate
the bid by adding 5 calendar days (as
representing the normal time for arrival through ordinary mail). If the
contract or notice of award will be
transmitted electronically, (1) the solicitation shall so state; and (2) the
contracting officer shall evaluate delivery schedule based on the date of
contract receipt or notice of award, by
adding one working day. (The term
‘‘working day’’ excludes weekends and
U.S. Federal holidays.) If the offered
delivery date computed with mailing
or transmittal time is later than the
delivery date required by the invitation for bids, the bid shall be considered nonresponsive and rejected. If
award is made, the delivery date will
be the number of days offered in the
bid after the contractor actually receives the notice of award.
11.404 Contract clauses.
(a) Supplies or services. (1) The contracting officer may use a time of delivery clause to set forth a required delivery schedule and to allow an offeror
to propose an alternative delivery
schedule. The clauses and their alternates may be used in solicitations and
contracts for other than construction
and
architect-engineering
substantially as shown, or they may be
changed or new clauses written.
(2) The contracting officer may insert
in solicitations and contracts other
than those for construction and architect-engineering, a clause substantially the same as the clause at 52.211–
8, Time of Delivery, if the Government
requires delivery by a particular time
and the delivery schedule is to be based
on the date of the contract. If the delivery schedule is expressed in terms of
specific calendar dates or specific periods and is based on an assumed date of
award, the contracting officer may use
the clause with its Alternate I. If the
delivery schedule is expressed in terms
of specific calendar dates or specific periods and is based on an assumed date
the contractor will receive notice of
award, the contracting officer may use
the clause with its Alternate II. If the
delivery schedule is to be based on the
actual date the contractor receives a
written notice of award, the contracting officer may use the clause
with its Alternate III.
(3) The contracting officer may insert
in solicitations and contracts other
than those for construction and architect-engineering, a clause substantially the same as the clause at 52.211–
9, Desired and Required Time of Delivery, if the Government desires delivery
by a certain time but requires delivery
by a specified later time, and the delivery schedule is to be based on the date
of the contract. If the delivery schedule
is expressed in terms of specific calendar dates or specific periods and is
based on an assumed date of award, the
contracting officer may use the clause
with its Alternate I. If the delivery
schedule is expressed in terms of specific calendar dates or specific periods
and is based on an assumed date the
contractor will receive notice of award,
the contracting officer may use the
clause with its Alternate II. If the delivery schedule is to be based on the actual date the contractor receives a
written notice of award, the contracting officer may use the clause
with its Alternate III.
(b) Construction. The contracting officer shall insert the clause at 52.211–10,
Commencement,
Prosecution,
and
Completion of Work, in solicitations
and contracts when a fixed-price construction contract is contemplated.
The clause may be changed to accommodate the issuance of orders under indefinite-delivery contracts. If the completion date is expressed as a specific
calendar date, computed on the basis of
the contractor receiving the notice to
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11.500
48 CFR Ch. 1 (10–1–03 Edition)
proceed by a certain day, the contracting officer may use the clause
with its Alternate I.
[48 FR 42159, Sept. 19, 1983, as amended at 56
FR 41732, Aug. 22, 1991. Redesignated and
amended at 60 FR 48241, Sept. 18, 1995]
Subpart 11.5—Liquidated
Damages
SOURCE: 65 FR 46064, July 26, 2000, unless
otherwise noted.
11.500
Scope.
This subpart prescribes policies and
procedures for using liquidated damages clauses in solicitations and contracts for supplies, services, research
and development, and construction.
This subpart does not apply to liquidated damages for subcontracting
plans (see 19.705–7) or liquidated damages related to the Contract Work
Hours and Safety Standards Act (see
subpart 22.3).
11.501
Policy.
(a) The contracting officer must consider the potential impact on pricing,
competition, and contract administration before using a liquidated damages
clause. Use liquidated damages clauses
only when—
(1) The time of delivery or timely
performance is so important that the
Government may reasonably expect to
suffer damage if the delivery or performance is delinquent; and
(2) The extent or amount of such
damage would be difficult or impossible to estimate accurately or prove.
(b) Liquidated damages are not punitive and are not negative performance
incentives (see 16.402–2). Liquidated
damages are used to compensate the
Government for probable damages.
Therefore, the liquidated damages rate
must be a reasonable forecast of just
compensation for the harm that is
caused by late delivery or untimely
performance of the particular contract.
Use a maximum amount or a maximum
period for assessing liquidated damages
if these limits reflect the maximum
probable damage to the Government.
Also, the contracting officer may use
more than one liquidated damages rate
when the contracting officer expects
the probable damage to the Government to change over the contract period of performance.
(c) The contracting officer must take
all reasonable steps to mitigate liquidated damages. If the contract contains a liquidated damages clause and
the contracting officer is considering
terminating the contract for default,
the contracting officer should seek expeditiously to obtain performance by
the contractor or terminate the contract and repurchase (see subpart 49.4).
Prompt contracting officer action will
prevent excessive loss to defaulting
contractors and protect the interests of
the Government.
(d) The head of the agency may reduce or waive the amount of liquidated
damages assessed under a contract, if
the Commissioner, Financial Management Service, or designee approves (see
Treasury Order 145–10).
11.502
Procedures.
(a) Include the applicable liquidated
damages clause and liquidated damages
rates in solicitations when the contract will contain liquidated damages
provisions.
(b) Construction contracts with liquidated damages provisions must describe the rate(s) of liquidated damages
assessed per day of delay. The rate(s)
should include the estimated daily cost
of Government inspection and superintendence. The rate(s) should also include an amount for other expected expenses associated with delayed completion such as—
(1) Renting substitute property; or
(2) Paying additional allowance for
living quarters.
11.503
Contract clauses.
(a) Use the clause at 52.211–11, Liquidated Damages—Supplies, Services,
or Research and Development, in fixedprice solicitations and contracts for
supplies, services, or research and development when the contracting officer
determines that liquidated damages
are appropriate (see 11.501(a)).
(b) Use the clause at 52.211–12, Liquidated Damages—Construction, in solicitations and contracts for construction, other than cost-plus-fixed-fee,
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11.602
when the contracting officer determines that liquidated damages are appropriate (see 11.501(a)). If the contract
specifies more than one completion
date for separate parts or stages of the
work, revise paragraph (a) of the clause
to state the amount of liquidated damages for delay of each separate part or
stage of the work.
(c) Use the clause at 52.211–13, Time
Extensions, in solicitations and contracts for construction that use the
clause at 52.211–12, Liquidated Damages—Construction, when that clause
has been revised as provided in paragraph (b) of this section.
Subpart 11.6—Priorities and
Allocations
SOURCE: 51 FR 19714, May 30, 1986, unless
otherwise noted. Redesignated at 60 FR 48241,
Sept. 18, 1995.
11.600
Scope of subpart.
This subpart implements the Defense
Priorities and Allocations System
(DPAS), a Department of Commerce
(DOC) regulation in support of authorized national defense programs (see 15
CFR part 700).
[51 FR 19714, May 30, 1986, as amended at 56
FR 41744, Aug. 22, 1991]
11.601
Definitions.
As used in this subpart—
Authorized program, means a program
approved by the Federal Emergency
Management Agency (FEMA) for priorities and allocations support under the
Defense Production Act of 1950, as
amended (50 U.S.C. app. 2061, et seq.), to
promote the national defense. Schedule
I of the DPAS lists currently authorized programs.
Controlled materials, means the various shapes and forms of steel, copper,
aluminum, and nickel alloys specified
in Schedule II, and defined in Schedule
III, of the DPAS.
Delegate Agency, means an agency of
the U.S. Government authorized by
delegation from DOC to place priority
ratings on contracts that support authorized programs. Schedule I of the
DPAS lists the Delegate Agencies.
Rated order means a prime contract
for any product, service, or material
(including controlled materials) placed
by a Delegate Agency under the provisions of the DPAS in support of an authorized program and which requires
preferential treatment, and includes
subcontracts and purchase orders resulting under such contracts.
[51 FR 19714, May 30, 1986. Redesignated at 60
FR 48241, Sept. 18, 1995; 66 FR 2128, Jan. 10,
2001]
11.602 General.
(a) Under Title I of the Defense Production Act of 1950, as amended (50
U.S.C. app. 2061, et seq.), the President
is authorized (1) to require that contracts in support of the national defense be accepted and performed on a
preferential or priority basis over all
other contracts, and (2) to allocate materials and facilities in such a manner
as to promote the national defense.
(b) The Office of Industrial Resource
Administration (OIRA), DOC, is responsible for administering and enforcing a
system of priorities and allocations to
carry out Title I of the Defense Production Act for industrial items. The
DPAS has been established to promote
the timely availability of the necessary industrial resources to meet
current national defense requirements
and to provide a framework to facilitate rapid industrial mobilization in
case of national emergency.
(c) The Delegate Agencies (see Schedule I of the DPAS) have been given authority by DOC to place rated orders in
support of authorized programs. Other
government agencies, Canada, and
other friendly foreign nations may
apply for special rating authority in
support of authorized programs (see 15
CFR 700.55).
(d) Rated orders shall be placed in accordance with the procedures in the
DPAS. Contracting officers responsible
for acquisitions in support of authorized programs shall be familiar with
the DPAS and should provide guidance
on the DPAS to contractors and suppliers receiving rated orders. Agency
heads shall ensure compliance with the
DPAS by contracting activities within
their agencies.
(e) Under the Defense Production
Act, any willful violation of the Act,
the DPAS, or any official action taken
by DOC under the DPAS, is a crime
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11.603
48 CFR Ch. 1 (10–1–03 Edition)
punishable by a maximum fine of
$10,000, one year in prison, or both (see
15 CFR 700.70 and 15 CFR 700.74).
[51 FR 19714, May 30, 1986, as amended at 56
FR 41744, Aug. 22, 1991]
11.603 Procedures.
(a) There are two levels of priority
for rated orders established by the
DPAS, identified by the rating symbols
‘‘DO’’ and ‘‘DX.’’ All DO rated orders
have equal priority with each other
and take preference over unrated orders. All DX rated orders have equal
priority with each other and take preference over DO rated and unrated orders. DX ratings are used for special
defense programs designated by the
President to be of the highest national
priority.
(b) DOC may issue a Directive to
compel a contractor or supplier to accept a rated order, to rearrange production or delivery schedules, or to improve shipments against particular
rated orders. Directives issued by DOC
take precedence over all rated and
unrated orders as stated in the Directive.
(c) In addition to any other contractual requirements, a valid rated order
must contain (see 15 CFR 700.12) the
following:
(1) A priority rating consisting of the
appropriate DO or DX rating symbol
and a program of identification symbol
to indicate the authorized program (see
Schedule I of the DPAS).
(2) A required delivery date or delivery dates.
(3) The signature of an individual authorized by the agency to sign rated orders.
(d) The DPAS has the following three
basic elements which are essential to
the operation of the system:
(1) Mandatory acceptance of rated orders. A rated order shall be accepted by
a contractor or supplier unless rejected
for the reasons provided for mandatory
rejection in 15 CFR 700.13(b), or for optional rejection in 15 CFR 700.13(c).
(2) Mandatory extension of priority ratings throughout the acquisition chain.
Contractors and suppliers receiving
rated orders shall extend priority ratings to subcontractors or vendors when
acquiring items to fill the rated orders
(see 15 CFR 700.15).
(3) Priority scheduling of production
and delivery. Contractors and suppliers
receiving rated orders shall give the
rated orders priority over other contracts as needed to meet delivery requirements (see 15 CFR 700.14).
(e) Agencies shall provide contracting activities with specific guidance on the issuance of rated orders in
support of agency programs.
(f) Contracting officers shall follow
agency procedural instructions concerning the use of rated orders in support of agency programs.
(g) Contracting officers, contractors,
or subcontractors at any tier, that experience difficulty placing rated orders, obtaining timely delivery under
rated orders, locating a contractor or
supplier to fill a rated order, ensuring
that rated orders receive preferential
treatment by contractors or suppliers,
or require rating authority for items
not automatically ratable under the
DPAS, should promptly seek special
priorities assistance in accordance
with agency procedures (see 15 CFR
700.50–700.55).
(h) Contracting officers shall report
promptly any violations of the DPAS
to DOC in accordance with agency procedures.
[51 FR 19714, May 30, 1986, as amended at 56
FR 41744, Aug. 22, 1991]
11.604 Solicitation provisions and contract clauses.
(a) Contracting officers shall insert
the provision at 52.211–14, Notice of Priority Rating for National Defense Use,
in solicitations when the contract to be
awarded will be a rated order.
(b) Contracting officers shall insert
the clause at 52.211–15, Defense Priority
and Allocation Requirements, in contracts that are rated orders.
[51 FR 19714, May 30, 1986. Redesignated and
amended at 60 FR 48241, Sept. 18, 1995]
Subpart 11.7—Variation in
Quantity
SOURCE: 48 FR 42159, Sept. 19, 1983, unless
otherwise noted. Redesignated at 60 FR 48241,
Sept. 18, 1995.
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Federal Acquisition Regulation
11.701
11.703
Supply contracts.
(a) A fixed-price supply contract may
authorize Government acceptance of a
variation in the quantity of items
called for if the variation is caused by
conditions of loading, shipping, or
packing, or by allowances in manufacturing processes. Any permissible variation shall be stated as a percentage
and it may be an increase, a decrease,
or a combination of both; however,
contracts for subsistence items may
use other applicable terms of variation
in quantity.
(b) There should be no standard or
usual variation percentage. The overrun or underrun permitted in each contract should be based upon the normal
commercial practices of a particular
industry for a particular item, and the
permitted percentage should be no
larger than is necessary to afford a
contractor reasonable protection. The
permissible variation shall not exceed
plus or minus 10 percent unless a different limitation is established in
agency regulations. Consideration shall
be given to the quantity to which the
percentage variation applies. For example, when delivery will be made to
multiple destinations and it is desired
that the quantity variation apply to
the item quantity for each destination,
this requirement must be stated in the
contract.
(c) Contractors are responsible for delivery of the specified quantity of
items in a fixed-price contract, within
allowable variations, if any. If a contractor delivers a quantity of items in
excess of the contract requirements
plus any allowable variation in quantity, particularly small dollar value
overshipments, it results in unnecessary administrative costs to the Government in determining disposition of
the excess quantity. Accordingly, the
contract may include the clause at
52.211–17, Delivery of Excess Quantities,
to provide that—
(1) Excess quantities of items totaling up to $250 in value may be retained
without compensating the contractor;
and
(2) Excess quantities of items totaling over $250 in value may, at the Government’s option, be either returned at
the contractor’s expense or retained
and paid for at the contract unit price.
[48 FR 42159, Sept. 19, 1983, as amended at 54
FR 34753, Aug. 21, 1989; 62 FR 40236, July 25,
1997]
11.702
Construction contracts.
Construction contracts may authorize a variation in estimated quantities
of unit-priced items. When the variation between the estimated quantity
and the actual quantity of a unitpriced item is more than plus or minus
15 percent, an equitable adjustment in
the contract price shall be made upon
the demand of either the Government
or the contractor. The contractor may
request an extension of time if the
quantity variation is such as to cause
an increase in the time necessary for
completion. The contracting officer
must receive the request in writing
within 10 days from the beginning of
the period of delay. However, the contracting officer may extend this time
limit before the date of final settlement of the contract. The contracting
officer shall ascertain the facts and
make any adjustment for extending the
completion date that the findings justify.
11.703
Contract clauses.
(a) The contracting officer shall insert the clause at 52.211–16, Variation
in Quantity, in solicitations and contracts, if authorizing a variation in
quantity in fixed-price contracts for
supplies or for services that involve the
furnishing of supplies.
(b) The contracting officer may insert the clause at 52.211–17, Delivery of
Excess Quantities, in solicitations and
contracts, when a fixed-price supply
contract is contemplated.
(c) The contracting officer shall insert the clause at 52.211–18, Variation
in Estimated Quantity, in solicitations
and contracts when a fixed-price construction contract is contemplated
that authorizes a variation in the estimated quantity of unit-priced items.
[48 FR 42159, Sept. 19, 1983, as amended at 54
FR 34753, Aug. 21, 1989. Redesignated and
amended at 60 FR 48241, Sept. 18, 1995; 64 FR
10538, Mar. 4, 1999]
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11.801
48 CFR Ch. 1 (10–1–03 Edition)
12.303
Subpart 11.8—Testing
SOURCE: 62 FR 51230, Sept. 30, 1997, unless
otherwise noted.
11.801
Preaward in-use evaluation.
Supplies may be evaluated under
comparable in-use conditions without a
further test plan, provided offerors are
so advised in the solicitation. The results of such tests or demonstrations
may be used to rate the proposal, to determine technical acceptability, or
otherwise to evaluate the proposal (see
15.305).
PART 12—ACQUISITION OF
COMMERCIAL ITEMS
Sec.
12.000
12.001
Scope of part.
Definition.
Subpart 12.4—Unique Requirements Regarding Terms and Conditions for
Commercial Items
12.401
12.402
12.403
12.404
General.
Acceptance.
Termination.
Warranties.
Subpart 12.5—Applicability of Certain Laws
to the Acquisition of Commercial Items
12.500 Scope of subpart.
12.501 Applicability.
12.502 Procedures.
12.503 Applicability of certain laws to Executive agency contracts for the acquisition of commercial items.
12.504 Applicability of certain laws to subcontracts for the acquisition of commercial items.
Subpart 12.6—Streamlined Procedures for
Evaluation and Solicitation for Commercial Items
Subpart 12.1—Acquisition of Commercial
Items—General
12.101
12.102
Contract format.
12.601 General.
12.602 Streamlined evaluation of offers.
12.603 Streamlined solicitation for commercial items.
Policy.
Applicability.
Subpart 12.2—Special Requirements for the
Acquisition of Commercial Items
12.201 General.
12.202 Market research and description of
agency need.
12.203 Procedures for solicitation, evaluation, and award.
12.204 Solicitation/contract form.
12.205 Offers.
12.206 Use of past performance.
12.207 Contract type.
12.208 Contract quality assurance.
12.209 Determination of price reasonableness.
12.210 Contract financing.
12.211 Technical data.
12.212 Computer software.
12.213 Other commercial practices.
12.214 Cost Accounting Standards.
12.215 Notification of overpayment.
Subpart 12.3—Solicitation Provisions and
Contract Clauses for the Acquisition of
Commercial Items
12.300 Scope of subpart.
12.301 Solicitation provisions and contract
clauses for the acquisition of commercial
items.
12.302 Tailoring of provisions and clauses
for the acquisition of commercial items.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct.
1, 2003, the authority citation for Part 12 was
revised, effective Oct. 31, 2003. For the convenience of the user, the revised text is set
forth below:
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 60 FR 48241, Sept. 18, 1995, unless
otherwise noted.
12.000
Scope of part.
This part prescribes policies and procedures unique to the acquisition of
commercial items. It implements the
Federal Government’s preference for
the acquisition of commercial items
contained in Title VIII of the Federal
Acquisition Streamlining Act of 1994
(Public Law 103–355) by establishing acquisition policies more closely resembling those of the commercial marketplace and encouraging the acquisition
of commercial items and components.
12.001
Definition.
Subcontract, as used in this part, includes, but is not limited to, a transfer
of commercial items between divisions,
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Federal Acquisition Regulation
12.201
subsidiaries, or affiliates of a contractor or subcontractor.
Subpart 12.1—Acquisition of
Commercial Items—General
12.101 Policy.
Agencies shall—
(a) Conduct market research to determine whether commercial items or
nondevelopmental items are available
that could meet the agency’s requirements;
(b) Acquire commercial items or nondevelopmental items when they are
available to meet the needs of the
agency; and
(c) Require prime contractors and
subcontractors at all tiers to incorporate, to the maximum extent practicable, commercial items or nondevelopmental items as components of
items supplied to the agency.
12.102 Applicability.
(a) This part shall be used for the acquisition of supplies or services that
meet the definition of commercial
items at section 2.101.
(b) Contracting officers shall use the
policies in this part in conjunction
with the policies and procedures for solicitation, evaluation and award prescribed in part 13, Simplified Acquisition Procedures; part 14, Sealed Bidding; or part 15, Contracting by Negotiation, as appropriate for the particular acquisition.
(c) Contracts for the acquisition of
commercial items are subject to the
policies in other parts of this chapter.
When a policy in another part of this
chapter is inconsistent with a policy in
this part, this part 12 shall take precedence for the acquisition of commercial items.
(d) The definition of commercial item
in section 2.101 uses the phrase ‘‘purposes other than governmental purposes.’’ These purposes are those that
are not unique to a government.
(e) This part shall not apply to the
acquisition of commercial items—
(1) At or below the micro-purchase
threshold;
(2) Using the Standard Form 44 (see
13.306);
(3) Using the imprest fund (see
13.305);
(4) Using the Governmentwide commercial purchase card; or
(5) Directly from another Federal
agency.
(f)(1) Contracting officers may treat
any acquisition of supplies or services
that, as determined by the head of the
agency, are to be used to facilitate defense against or recovery from terrorism or nuclear, biological, chemical,
or radiological attack, as an acquisition of commercial items. This paragraph applies to solicitations issued by
any agency from January 24, 2003,
through November 24, 2003 (Public Law
107–296, Sec. 856).
(2) Acquisition of biotechnology supplies or services, for use to facilitate
the defense against terrorism or biological attack against the United
States, by or for the Department of Defense shall be considered as an acquisition of commercial items when award
is made and funds are obligated on or
before September 30, 2003 (Public Law
107–107, Sec. 836(a)(2)). The authority of
this paragraph is in addition to and
does not limit the authority of paragraph (f)(1) of this section. Nothing in
this paragraph shall preclude a contracting officer from treating an acquisition described in this paragraph as
one for a non-commercial item if a determination is made by the contracting
officer that the purchase cannot be
made at a fair and reasonable price
using the policies of this part.
[60 FR 48241, Sept. 18, 1995, as amended at 61
FR 39192, July 26, 1996; 62 FR 64917, Dec. 9,
1997; 64 FR 32743, June 17, 1999; 66 FR 53484,
Oct. 22, 2001; 67 FR 56121, Aug. 30, 2002; 68 FR
4050, Jan. 27, 2003]
Subpart 12.2—Special Requirements for the Acquisition of
Commercial Items
12.201
General.
Public Law 103–355 establishes special
requirements for the acquisition of
commercial items intended to more
closely resemble those customarily
used in the commercial marketplace.
This subpart identifies those special requirements as well as other considerations necessary for proper planning,
solicitation, evaluation and award of
contracts for commercial items.
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12.202
48 CFR Ch. 1 (10–1–03 Edition)
12.202 Market research and description of agency need.
(a) Market research (see 10.001) is an
essential element of building an effective strategy for the acquisition of
commercial items and establishes the
foundation for the agency description
of need (see part 11), the solicitation,
and resulting contract.
(b) The description of agency need
must contain sufficient detail for potential offerors of commercial items to
know which commercial products or
services may be suitable. Generally, for
acquisitions in excess of the simplified
acquisition threshold, an agency’s
statement of need for a commercial
item will describe the type of product
or service to be acquired and explain
how the agency intends to use the
product or service in terms of function
to be performed, performance requirement or essential physical characteristics. Describing the agency’s needs in
these terms allows offerors to propose
methods that will best meet the needs
of the Government.
(c) Follow the procedures in subpart
11.2 regarding the identification and
availability of specifications, standards
and commercial item descriptions.
(d) Requirements documents for electronic and information technology
must comply with the applicable accessibility standards issued by the Architectural and Transportation Barriers
Compliance Board at 36 CFR part 1194
(see subpart 39.2).
[60 FR 48241, Sept. 18, 1995, as amended at 62
FR 264, Jan. 2, 1997; 66 FR 20897, Apr. 25, 2001]
12.203 Procedures
for
solicitation,
evaluation, and award.
Contracting officers shall use the
policies unique to the acquisition of
commercial items prescribed in this
part in conjunction with the policies
and procedures for solicitation, evaluation and award prescribed in part 13,
Simplified
Acquisition
Procedures;
part 14, Sealed Bidding; or part 15, Contracting by Negotiation, as appropriate
for the particular acquisition. The contracting officer may use the streamlined procedure for soliciting offers for
commercial items prescribed in 12.603.
For acquisitions of commercial items
exceeding the simplified acquisition
threshold but not exceeding $5,000,000,
including options, contracting activities shall employ the simplified procedures authorized by subpart 13.5 to the
maximum extent practicable.
[60 FR 48241, Sept. 18, 1995, as amended at 62
FR 264, Jan. 2, 1997; 62 FR 64917, Dec. 9, 1997]
12.204 Solicitation/contract form.
(a) The contracting officer shall use
the Standard Form 1449, Solicitation/
Contract/Order for Commercial Items,
if (1) the acquisition is expected to exceed the simplified acquisition threshold; (2) a paper solicitation or contract
is being issued; and (3) procedures at
12.603 are not being used. Use of the SF
1449 is nonmandatory but encouraged
for commercial acquisitions not exceeding the simplified acquisition
threshold.
(b) Consistent with the requirements
at 5.203 (a) and (h), the contracting officer may allow fewer than 15 days before issuance of the solicitation.
[62 FR 264, Jan. 2, 1997]
12.205 Offers.
(a) Where technical information is
necessary for evaluation of offers,
agencies should, as part of market research, review existing product literature generally available in the industry to determine its adequacy for
purposes of evaluation. If adequate,
contracting officers shall request existing product literature from offerors of
commercial items in lieu of unique
technical proposals.
(b) Contracting officers should allow
offerors to propose more than one product that will meet a Government need
in response to solicitations for commercial items. The contracting officer
shall evaluate each product as a separate offer.
(c) Consistent with the requirements
at 5.203(b), the contracting officer may
allow fewer than 30 days response time
for receipt of offers for commercial
items, unless the acquisition is subject
to NAFTA or the Trade Agreements
Act (see 5.203(h)).
[60 FR 48241, Sept. 18, 1995, as amended at 62
FR 264, Jan. 2, 1997; 64 FR 72418, Dec. 27, 1999]
12.206 Use of past performance.
Past performance should be an important element of every evaluation
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Federal Acquisition Regulation
12.212
and contract award for commercial
items. Contracting officers should consider past performance data from a
wide variety of sources both inside and
outside the Federal Government in accordance with the policies and procedures contained in subpart 9.1, section
13.106, or subpart 15.3, as applicable.
quantities ordered, length of the performance period, and specific performance requirements. The contracting officer must ensure that contract terms,
conditions, and prices are commensurate with the Government’s need.
[60 FR 48241, Sept. 18, 1995, as amended at 61
FR 39192, July 26, 1996; 62 FR 51270, Sept. 30,
1997; 62 FR 64917, Dec. 9, 1997]
12.210
12.207
Contract type.
Agencies shall use firm-fixed-price
contracts or fixed-price contracts with
economic price adjustment for the acquisition of commercial items. Indefinite-delivery contracts (see subpart
16.5) may be used where the prices are
established based on a firm-fixed-price
or fixed-price with economic price adjustment. Use of any other contract
type to acquire commercial items is
prohibited. These contract types may
be used in conjunction with an award
fee and performance or delivery incentives when the award fee or incentive is
based solely on factors other than cost
(see 16.202–1 and 16.203–1).
[60 FR 48241, Sept. 18, 1995, as amended at 68
FR 13201, Mar. 18, 2003]
12.208
Contract quality assurance.
Contracts for commercial items shall
rely on contractors’ existing quality
assurance systems as a substitute for
Government inspection and testing before tender for acceptance unless customary market practices for the commercial item being acquired include inprocess inspection. Any in-process inspection by the Government shall be
conducted in a manner consistent with
commercial practice.
12.209 Determination of price reasonableness.
While the contracting officer must
establish price reasonableness in accordance with 13.106–3, 14.408–2, or subpart 15.4, as applicable, the contracting
officer should be aware of customary
commercial terms and conditions when
pricing commercial items. Commercial
item prices are affected by factors that
include, but are not limited to, speed of
delivery, length and extent of warranty, limitations of seller’s liability,
[66 FR 53484, Oct. 22, 2001]
Contract financing.
Customary market practice for some
commercial items may include buyer
contract financing. The contracting officer may offer Government financing
in accordance with the policies and
procedures in part 32.
12.211
Technical data.
Except as provided by agency-specific
statutes, the Government shall acquire
only the technical data and the rights
in that data customarily provided to
the public with a commercial item or
process. The contracting officer shall
presume that data delivered under a
contract for commercial items was developed exclusively at private expense.
When a contract for commercial items
requires the delivery of technical data,
the contracting officer shall include
appropriate provisions and clauses delineating the rights in the technical
data in addenda to the solicitation and
contract (see part 27 or agency FAR
supplements).
12.212
Computer software.
(a) Commercial computer software or
commercial computer software documentation shall be acquired under licenses customarily provided to the
public to the extent such licenses are
consistent with Federal law and otherwise satisfy the Government’s needs.
Generally, offerors and contractors
shall not be required to—
(1) Furnish technical information related to commercial computer software
or commercial computer software documentation that is not customarily
provided to the public; or
(2) Relinquish to, or otherwise provide, the Government rights to use,
modify, reproduce, release, perform,
display, or disclose commercial computer software or commercial computer software documentation except
as mutually agreed to by the parties.
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12.213
48 CFR Ch. 1 (10–1–03 Edition)
(b) With regard to commercial computer software and commercial computer software documentation, the
Government shall have only those
rights specified in the license contained in any addendum to the contract.
12.213 Other commercial practices.
It is a common practice in the commercial marketplace for both the
buyer and seller to propose terms and
conditions written from their particular perspectives. The terms and
conditions prescribed in this part seek
to balance the interests of both the
buyer and seller. These terms and conditions are generally appropriate for
use in a wide range of acquisitions.
However, market research may indicate other commercial practices that
are appropriate for the acquisition of
the particular item. These practices
should be considered for incorporation
into the solicitation and contract if the
contracting officer determines them
appropriate in concluding a business
arrangement satisfactory to both parties and not otherwise precluded by law
or Executive order.
[62 FR 264, Jan. 2, 1997]
12.214 Cost Accounting Standards.
Cost Accounting Standards (CAS) do
not apply to contracts and subcontracts for the acquisition of commercial items when these contracts
and subcontracts are firm-fixed-price
or fixed-price with economic price adjustment (provided that the price adjustment is not based on actual costs
incurred). See 48 CFR 30.201–1 for CAS
applicability to fixed-price with economic price adjustment contracts and
subcontracts for commercial items
when the price adjustment is based on
actual costs incurred. When CAS applies, the contracting officer shall insert the appropriate provisions and
clauses as prescribed in 48 CFR 30.201.
[63 FR 9054, Feb. 23, 1998]
12.215 Notification of overpayment.
If the contractor notifies the contracting officer of a duplicate contract
financing or invoice payment or that
the Government has otherwise overpaid on a contract financing or invoice
payment, the contracting officer must
promptly provide instructions to the
contractor, in coordination with the
cognizant payment office, regarding
timely disposition of the overpayment.
[68 FR 56683, Oct. 1, 2003]
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct.
1, 2003, § 12.215 was added, effective Oct. 31,
2003.
Subpart 12.3—Solicitation Provisions and Contract Clauses
for the Acquisition of Commercial Items
12.300 Scope of subpart.
This subpart establishes provisions
and clauses to be used when acquiring
commercial items.
12.301 Solicitation provisions and contract clauses for the acquisition of
commercial items.
(a) In accordance with Section 8002 of
Public Law 103–355 (41 U.S.C 264, note),
contracts for the acquisition of commercial items shall, to the maximum
extent practicable, include only those
clauses—
(1) Required to implement provisions
of law or executive orders applicable to
the acquisition of commercial items; or
(2) Determined to be consistent with
customary commercial practice.
(b) Insert the following provisions in
solicitations for the acquisition of
commercial items, and clauses in solicitations and contracts for the acquisition of commercial items:
(1) The provision at 52.212–1, Instructions to Offerors—Commercial Items.
This provision provides a single,
streamlined set of instructions to be
used when soliciting offers for commercial items and is incorporated in the
solicitation by reference (see Block
27a, SF 1449). The contracting officer
may tailor these instructions or provide additional instructions tailored to
the specific acquisition in accordance
with 12.302.
(2) The provision at 52.212–3, Offeror
Representations and Certifications—Commercial Items. This provision provides a
single, consolidated list of certifications and representations for the acquisition of commercial items and is
attached to the solicitation for offerors
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Federal Acquisition Regulation
12.301
to complete and return with their
offer. This provision may not be tailored except in accordance with Subpart 1.4. Use the provision with its Alternate I in solicitations issued by
DoD, NASA, or the Coast Guard that
are expected to exceed the threshold at
4.601(a). Use the provision with its Alternate II in solicitations for acquisitions for which small disadvantaged
business procurement mechanisms are
authorized on a regional basis.
(3) The clause at 52.212–4, Contract
Terms and Conditions—Commercial
Items. This clause includes terms and
conditions which are, to the maximum
extent practicable, consistent with customary commercial practices and is incorporated in the solicitation and contract by reference (see Block 27, SF
1449). The contracting officer may tailor this clause in accordance with
12.302.
(4) The clause at 52.212–5, Contract
Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items. This clause
incorporates by reference only those
clauses required to implement provisions of law or executive orders applicable to the acquisition of commercial
items. The contracting officer shall attach this clause to the solicitation and
contract and, using the appropriate
clause prescriptions, indicate which, if
any, of the additional clauses cited in
52.2125(b) or (c) are applicable to the
specific acquisition. When cost information is obtained pursuant to part 15
to establish the reasonableness of
prices for commercial items, the contracting officer shall insert the clauses
prescribed for this purpose in an addendum to the solicitation and contract.
This clause may not be tailored. Use
the clause with its Alternate I when
the head of the agency has waived the
examination of records by the Comptroller General in accordance with
25.1001.
(c) When the use of evaluation factors is appropriate, the contracting officer may—
(1) Insert the provision at 52.212–2,
Evaluation— Commercial Items, in solicitations for commercial items (see
12.602); or
(2) Include a similar provision containing all evaluation factors required
by section 13.106, subpart 14.2 or subpart 15.3, as an addendum (see
12.302(d)).
(d) Use of required provisions and
clauses. Notwithstanding prescriptions
contained elsewhere in the FAR, when
acquiring commercial items, contracting officers shall be required to
use only those provisions and clauses
prescribed in this part. The provisions
and clauses prescribed in this part
shall be revised, as necessary, to reflect
the applicability of statutes and executive orders to the acquisition of commercial items.
(e) Discretionary use of FAR provisions
and clauses. The contracting officer
may include in solicitations and contracts by addendum other FAR provisions and clauses when their use is consistent with the limitations contained
in 12.302. For example:
(1) The contracting officer may include appropriate clauses when an indefinite-delivery type of contract will
be used. The clauses prescribed at
16.506 may be used for this purpose.
(2) The contracting officer may include
appropriate
provisions
and
clauses when the use of options is in
the Government’s interest. The provisions and clauses prescribed in 17.208
may be used for this purpose. If the
provision at 52.212–2 is used, paragraph
(b) provides for the evaluation of options.
(3) The contracting officer may use
the provisions and clauses contained in
part 23 regarding the use of recovered
material when appropriate for the item
being acquired.
(f) Agencies may supplement the provisions and clauses prescribed in this
part (to require use of additional provisions and clauses) only as necessary to
reflect agency unique statutes applicable to the acquisition of commercial
items or as may be approved by the
agency senior procurement executive,
or the individual responsible for representing the agency on the FAR Council, without power of delegation.
[60 FR 48241, Sept. 18, 1995, as amended at 61
FR 39192, July 26, 1996; 61 FR 67430, Dec. 20,
1996; 62 FR 51270, Sept. 30, 1997; 62 FR 64917,
Dec. 9, 1997; 63 FR 35720, June 30, 1998; 63 FR
52427, Sept. 30, 1998; 63 FR 70267, Dec. 18, 1998;
64 FR 32748, June 17, 1999; 64 FR 72418, Dec.
27, 1999; 67 FR 6120, Feb. 8, 2002; 67 FR 13065,
Mar. 20, 2002; 67 FR 21538, Apr. 30, 2002]
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12.302
48 CFR Ch. 1 (10–1–03 Edition)
12.302 Tailoring of provisions and
clauses for the acquisition of commercial items.
(a) General. The provisions and
clauses established in this subpart are
intended to address, to the maximum
extent practicable, commercial market
practices for a wide range of potential
Government acquisitions of commercial items. However, because of the
broad range of commercial items acquired by the Government, variations
in commercial practices, and the relative volume of the Government’s acquisitions in the specific market, contracting officers may, within the limitations of this subpart, and after conducting appropriate market research,
tailor the provision at 52.212–1, Instructions to Offerors-Commercial Items,
and the clause at 52.212–4, Contract
Terms
and
Conditions-Commercial
Items, to adapt to the market conditions for each acquisition.
(b) Tailoring 52.212–4, Contract Terms
and Conditions—Commercial Items. The
following paragraphs of the clause at
52.212–4, Contract Terms and Conditions—Commercial Items, implement
statutory requirements and shall not
be tailored—
(1) Assignments;
(2) Disputes;
(3) Payment (except as provided in
subpart 32.11);
(4) Invoice;
(5) Other compliances; and
(6) Compliance with laws unique to
Government contracts.
(c) Tailoring inconsistent with customary commercial practice. The contracting officer shall not tailor any
clause or otherwise include any additional terms or conditions in a solicitation or contract for commercial items
in a manner that is inconsistent with
customary commercial practice for the
item being acquired unless a waiver is
approved in accordance with agency
procedures. The request for waiver
must describe the customary commercial practice found in the marketplace,
support the need to include a term or
condition that is inconsistent with
that practice and include a determination that use of the customary commercial practice is inconsistent with
the needs of the Government. A waiver
may be requested for an individual or
class of contracts for that specific
item.
(d) Tailoring shall be by addenda to
the solicitation and contract. The contracting officer shall indicate in Block
27a of the SF 1449 if addenda are attached. These addenda may include, for
example, a continuation of the schedule of supplies/services to be acquired
from blocks 18 through 21 of the SF
1449; a continuation of the description
of the supplies/services being acquired;
further elaboration of any other
item(s) on the SF 1449; any other terms
or conditions necessary for the performance of the proposed contract
(such as options, ordering procedures
for indefinite-delivery type contracts,
warranties, contract financing arrangements, etc.).
[60 FR 48241, Sept. 18, 1995, as amended at 61
FR 45772, Aug. 29, 1996; 61 FR 67430, Dec. 20,
1996; 62 FR 264, Jan. 2, 1997]
12.303
Contract format.
Solicitations and contracts for the
acquisition of commercial items prepared using this part 12 shall be assembled, to the maximum extent practicable, using the following format:
(a) Standard Form (SF) 1449;
(b) Continuation of any block from
SF 1449, such as—
(1) Block 10 if a price evaluation adjustment for small disadvantaged business concerns is applicable (the contracting officer shall indicate the percentage(s) and applicable line item(s)),
if an incentive subcontracting clause is
used (the contracting officer shall indicate the applicable percentage), or if
set aside for emerging small businesses, or set-aside for very small business concerns;
(2) Block 18B for remittance address;
(3) Block 19 for contract line item
numbers;
(4) Block 20 for schedule of supplies/
services; or
(5) Block 25 for accounting data;
(c) Contract clauses—
(1) 52.212–4, Contract Terms and Conditions—Commercial Items, by reference (see SF 1449, Block 27a);
(2) Any addendum to 52.212–4; and
(3) 52.212–5, Contract Terms and Conditions Required to Implement Statutes and Executive Orders;
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12.403
(d) Any contract documents, exhibits
or attachments; and
(e) Solicitation provisions—
(1) 52.212–1, Instructions to Offerors—
Commercial Items, by reference (see
SF 1449, Block 27a);
(2) Any addendum to 52.212–1;
(3) 52.212–2, Evaluation—Commercial
Items, or other description of evaluation factors for award, if used; and
(4) 52.212–3, Offeror Representations
and Certifications—Commercial Items.
[60 FR 48241, Sept. 18, 1995; 60 FR 54817, Oct.
26, 1995; 61 FR 67430, Dec. 20, 1996; 63 FR 35720,
June 30, 1997; 63 FR 36121, July 1, 1998; 64 FR
10536, Mar. 4, 1999]
Subpart 12.4—Unique Requirements Regarding Terms and
Conditions for Commercial
Items
12.401
General.
This subpart provides—
(a) Guidance regarding tailoring of
the paragraphs in the clause at 52.212–
4, Contract Terms and Conditions—
Commercial Items, when the paragraphs do not reflect the customary
practice for a particular market; and
(b) Guidance on the administration of
contracts for commercial items in
those areas where the terms and conditions in 52.212–4 differ substantially
from those contained elsewhere in the
FAR.
12.402 Acceptance.
(a) The acceptance paragraph in
52.212–4 is based upon the assumption
that the Government will rely on the
contractor’s assurances that the commercial item tendered for acceptance
conforms to the contract requirements.
The Government inspection of commercial items will not prejudice its
other rights under the acceptance paragraph. Additionally, although the paragraph does not address the issue of rejection, the Government always has
the right to refuse acceptance of nonconforming items. This paragraph is
generally appropriate when the Government is acquiring noncomplex commercial items.
(b) Other acceptance procedures may
be more appropriate for the acquisition
of complex commercial items or com-
mercial items used in critical applications. In such cases, the contracting officer shall include alternative inspection procedure(s) in an addendum and
ensure these procedures and the
postaward remedies adequately protect
the interests of the Government. The
contracting officer must carefully examine the terms and conditions of any
express warranty with regard to the effect it may have on the Government’s
available postaward remedies (see
12.404).
(c) The acquisition of commercial
items under other circumstances such
as on an ‘‘as is’’ basis may also require
acceptance procedures different from
those contained in 52.212–4. The contracting officer should consider the effect the specific circumstances will
have on the acceptance paragraph as
well as other paragraphs of the clause.
12.403
Termination.
(a) General. The clause at 52.212–4 permits the Government to terminate a
contract for commercial items either
for the convenience of the Government
or for cause. However, the paragraphs
in 52.212–4 entitled ‘‘Termination for
the Government’s Convenience’’ and
‘‘Termination for Cause’’ contain concepts which differ from those contained
in the termination clauses prescribed
in part 49. Consequently, the requirements of part 49 do not apply when terminating contracts for commercial
items and contracting officers shall
follow the procedures in this section.
Contracting officers may continue to
use part 49 as guidance to the extent
that part 49 does not conflict with this
section and the language of the termination paragraphs in 52.212–4.
(b) Policy. The contracting officer
should exercise the Government’s right
to terminate a contract for commercial
items either for convenience or for
cause only when such a termination
would be in the best interests of the
Government. The contracting officer
should consult with counsel prior to
terminating for cause.
(c) Termination for cause. (1) The paragraph in 52.2124 entitled ‘‘Excusable
Delay’’ requires contractors notify the
contracting officer as soon as possible
after commencement of any excusable
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12.404
48 CFR Ch. 1 (10–1–03 Edition)
delay. In most situations, this requirement should eliminate the need for a
show cause notice prior to terminating
a contract. The contracting officer
shall send a cure notice prior to terminating a contract for a reason other
than late delivery.
(2) The Government’s rights after a
termination for cause shall include all
the remedies available to any buyer in
the marketplace. The Government’s
preferred remedy will be to acquire
similar items from another contractor
and to charge the defaulted contractor
with any excess reprocurement costs
together with any incidental or consequential damages incurred because of
the termination.
(3) When a termination for cause is
appropriate, the contracting officer
shall send the contractor a written notification regarding the termination.
At a minimum, this notification
shall—
(i) Indicate the contract is terminated for cause;
(ii) Specify the reasons for the termination;
(iii) Indicate which remedies the
Government intends to seek or provide
a date by which the Government will
inform the contractor of the remedy;
and
(iv) State that the notice constitutes
a final decision of the contracting officer and that the contractor has the
right to appeal under the Disputes
clause (see 33.211).
(d) Termination for the Government’s
convenience. (1) When the contracting
officer terminates a contract for commercial items for the Government’s
convenience, the contractor shall be
paid—
(i) The percentage of the contract
price reflecting the percentage of the
work performed prior to the notice of
the termination, and
(ii) Any charges the contractor can
demonstrate directly resulted from the
termination. The contractor may demonstrate such charges using its standard record keeping system and is not
required to comply with the cost accounting standards or the contract
cost principles in part 31. The Government does not have any right to audit
the contractor’s records solely because
of the termination for convenience.
(2) Generally, the parties should mutually agree upon the requirements of
the termination proposal. The parties
must balance the Government’s need to
obtain sufficient documentation to
support payment to the contractor
against the goal of having a simple and
expeditious settlement.
12.404
Warranties.
(a) Implied warranties. The Government’s post award rights contained in
52.212–4 are the implied warranty of
merchantability, the implied warranty
of fitness for particular purpose and
the remedies contained in the acceptance paragraph.
(1)
The
implied
warranty
of
merchantability provides that an item
is reasonably fit for the ordinary purposes for which such items are used.
The items must be of at least average,
fair or medium-grade quality and must
be comparable in quality to those that
will pass without objection in the trade
or market for items of the same description.
(2) The implied warranty of fitness
for a particular purpose provides that
an item is fit for use for the particular
purpose for which the Government will
use the items. The Government can
rely upon an implied warranty of fitness for particular purpose when—
(i) The seller knows the particular
purpose for which the Government intends to use the item; and
(ii) The Government relied upon the
contractor’s skill and judgment that
the item would be appropriate for that
particular purpose.
(3) Contracting officers should consult with legal counsel prior to asserting any claim for a breach of an implied warranty.
(b) Express warranties. The Federal
Acquisition Streamlining Act of 1994
(41 U.S.C. 264 note) requires contracting officers to take advantage of
commercial warranties. To the maximum extent practicable, solicitations
for commercial items shall require
offerors to offer the Government at
least the same warranty terms, including offers of extended warranties, offered to the general public in customary commercial practice. Solicitations may specify minimum warranty
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12.503
terms, such as minimum duration, appropriate for the Government’s intended use of the item.
(1) Any express warranty the Government intends to rely upon must meet
the needs of the Government. The contracting officer should analyze any
commercial warranty to determine if—
(i) The warranty is adequate to protect the needs of the Government, e.g.,
items covered by the warranty and
length of warranty;
(ii) The terms allow the Government
effective postaward administration of
the warranty to include the identification of warranted items, procedures for
the return of warranted items to the
contractor for repair or replacement,
and collection of product performance
information; and
(iii) The warranty is cost-effective.
(2) In some markets, it may be customary commercial practice for contractors to exclude or limit the implied
warranties contained in 52.212–4 in the
provisions of an express warranty. In
such cases, the contracting officer
shall ensure that the express warranty
provides for the repair or replacement
of defective items discovered within a
reasonable period of time after acceptance.
(3) Express warranties shall be included in the contract by addendum
(see 12.302).
Subpart
12.5—Applicability
of
Certain Laws to the Acquisition of Commercial Items
12.500 Scope of subpart.
As required by Section 34 of the Office of Federal Procurement Policy Act
(41 U.S.C. 430), this subpart lists provisions of laws that are not applicable to
contracts for the acquisition of commercial items, or are not applicable to
subcontracts, at any tier, for the acquisition of a commercial item. This subpart also lists provisions of law that
have been amended to eliminate or
modify their applicability to either
contracts or subcontracts for the acquisition of commercial items.
12.501 Applicability.
(a) This subpart applies to any contract or subcontract at any tier for the
acquisition of commercial items.
(b) Nothing in this subpart shall be
construed to authorize the waiver of
any provision of law with respect to
any subcontract if the prime contractor is reselling or distributing commercial items of another contractor
without adding value. This limitation
is intended to preclude establishment
of unusual contractual arrangements
solely for the purpose of Government
sales.
(c) For purposes of this subpart, contractors awarded subcontracts under
subpart 19.8, Contracting with the
Small Business Administration (the
8(a) Program), shall be considered
prime contractors.
12.502
Procedures.
(a) The FAR prescription for the provision or clause for each of the laws
listed in 12.503 has been revised in the
appropriate part to reflect its proper
application to prime contracts for the
acquisition of commercial items.
(b) For subcontracts for the acquisition of commercial items or commercial components, the clauses at 52.212–
5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items, and
52.244–6, Subcontracts for Commercial
Items and Commercial Components, reflect the applicability of the laws listed
in 12.504 by identifying the only provisions and clauses that are required to
be included in a subcontract at any tier
for the acquisition of commercial
items or commercial components.
12.503 Applicability of certain laws to
Executive agency contracts for the
acquisition of commercial items.
(a) The following laws are not applicable to Executive agency contracts for
the acquisition of commercial items:
(1) 41 U.S.C. 43, Walsh-Healey Act
(see subpart 22.6).
(2) 41 U.S.C. 254(a) and 10 U.S.C.
2306(b), Contingent Fees (see 3.404).
(3) 41 U.S.C. 416(a)(6), Minimum Response Time for Offers under Office of
Federal Procurement Policy Act (see
5.203).
(4) 41 U.S.C. 701, et seq., Drug-Free
Workplace Act of 1988 (see 23.501).
(5) 31 U.S.C. 1354(a), Limitation on
use of appropriated funds for contracts
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12.504
48 CFR Ch. 1 (10–1–03 Edition)
with entities not meeting veterans employment reporting requirements (see
22.1302).
(b) Certain requirements of the following laws are not applicable to executive agency contracts for the acquisition of commercial items:
(1) 40 U.S.C. 327 et seq., Requirement
for a certificate and clause under the
Contract Work Hours and Safety
Standards Act (see 22.305).
(2) 41 U.S.C. 57(a) and (b), and 58, Requirement for a clause and certain
other requirements related to the AntiKickback Act of 1986 (see 3.502).
(3) 49 U.S.C. 40118, Requirement for a
clause under the Fly American provisions (see 47.405).
(c) The applicability of the following
laws have been modified in regards to
Executive agency contracts for the acquisition of commercial items:
(1) 41 U.S.C. 253g and 10 U.S.C. 2402,
Prohibition on Limiting Subcontractor
Direct Sales to the United States (see
3.503).
(2) 41 U.S.C. 254(d) and 10 U.S.C. 2306a,
Truth in Negotiations Act (see 15.403).
(3) 41 U.S.C. 422, Cost Accounting
Standards (see 48 CFR chapter 99) (see
12.214).
[60 FR 48241, Sept. 18, 1995, as amended at 61
FR 67418, Dec. 20, 1996; 62 FR 232, 236, Jan. 2,
1997; 62 FR 10710, Mar. 10, 1997; 62 FR 51270,
Sept. 30, 1997; 64 FR 10532, Mar. 4, 1999; 64 FR
72416, Dec. 27, 1999; 66 FR 53488, Oct. 22, 2001]
12.504 Applicability of certain laws to
subcontracts for the acquisition of
commercial items.
(a) The following laws are not applicable to subcontracts at any tier for
the acquisition of commercial items or
commercial components at any tier:
(1) 10 U.S.C. 2631, Transportation of
Supplies by Sea (except for the types of
subcontracts listed at 47.504(d)).
(2) 15 U.S.C. 644(d), Requirements relative to labor surplus areas under the
Small Business Act (see subpart 19.2).
(3) 31 U.S.C. 1352, Limitation on Payments to Influence Certain Federal
Transactions (see subpart 3.8).
(4) 41 U.S.C. 43, Walsh-Healey Act
(see subpart 22.6).
(5) 41 U.S.C. 253d, Validation of Proprietary Data Restrictions (see subpart
27.4).
(6) 41 U.S.C. 254(a) and 10 U.S.C.
2306(b), Contingent Fees (see subpart
3.4).
(7) 41 U.S.C. 254d(c) and 10 U.S.C.
2313(c), Examination of Records of Contractor, when a subcontractor is not
required to provide cost or pricing data
(15.209(b)).
(8) 41 U.S.C. 416(a)(6), Minimum Response Time for Offers under Office of
Federal Procurement Policy Act (see
subpart 5.2).
(9) 41 U.S.C. 418a, Rights in Technical
Data (see subpart 27.4).
(10) 41 U.S.C. 701, et seq., Drug-Free
Workplace Act of 1988 (see subpart
23.5).
(11) 46 U.S.C. Appx 1241(b), Transportation in American Vessels of Government Personnel and Certain Cargo (see
Subpart 47.5) (except for the types of
subcontracts listed at 47.504(d)).
(12) 49 U.S.C. 40118, Fly American
provisions (see subpart 47.4).
(b) The requirements for a certificate
and clause under the Contract Work
Hours and Safety Standards Act, 40
U.S.C. 327, et seq., (see Subpart 22.3) are
not applicable to subcontracts at any
tier for the acquisition of commercial
items or commercial components.
(c) The applicability of the following
laws have been modified in regards to
subcontracts at any tier for the acquisition of commercial items or commercial components:
(1) 41 U.S.C. 253g and 10 U.S.C. 2402,
Prohibition on Limiting Subcontractor
Direct Sales to the United States (see
subpart 3.5).
(2) 41 U.S.C. 254(d) and 10 U.S.C. 2306a,
Truth in Negotiations Act (see subpart
15.4).
(3) 41 U.S.C. 422, Cost Accounting
Standards (48 CFR chapter 99) (see
12.214).
[60 FR 48241, Sept. 18, 1996 as amended at 61
FR 67418, Dec. 20, 1996; 62 FR 232, 236, Jan. 2,
1997; 62 FR 51270, Sept. 30, 1997; 64 FR 72416,
72418, Dec. 27, 1999; 65 FR 46069, July 26, 2000;
68 FR 13203, Mar. 18, 2003]
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Federal Acquisition Regulation
12.603
Subpart 12.6—Streamlined Procedures for Evaluation and Solicitation
for
Commercial
Items
12.601 General.
This subpart provides optional procedures for—
(a) Streamlined evaluation of offers
for commercial items; and
(b) Streamlined solicitation of offers
for commercial items for use where appropriate.
These procedures are intended to
simplify the process of preparing and
issuing solicitations, and evaluating offers for commercial items consistent
with customary commercial practices.
12.602 Streamlined evaluation of offers.
(a) When evaluation factors are used,
the contracting officer may insert a
provision substantially the same as the
provision at 52.212–2, Evaluation—Commercial Items, in solicitations for commercial items or comply with the procedures in 13.106 if the acquisition is
being made using simplified acquisition procedures. When the provision at
52.212–2 is used, paragraph (a) of the
provision shall be tailored to the specific acquisition to describe the evaluation factors and relative importance of
those factors. However, when using the
simplified acquisition procedures in
part 13, contracting officers are not required to describe the relative importance of evaluation factors.
(b) Offers shall be evaluated in accordance with the criteria contained in
the solicitation. For many commercial
items, the criteria need not be more detailed than technical (capability of the
item offered to meet the agency need),
price and past performance. Technical
capability may be evaluated by how
well the proposed products meet the
Government requirement instead of
predetermined subfactors. Solicitations for commercial items do not have
to contain subfactors for technical capability when the solicitation adequately describes the item’s intended
use. A technical evaluation would normally include examination of such
things as product literature, product
samples (if requested), technical features and warranty provisions. Past
performance shall be evaluated in accordance with the procedures in section 13.106 or subpart 15.3, as applicable. The contracting officer shall ensure the instructions provided in the
provision at 52.212–1, Instructions to
Offerors—Commercial Items, and the
evaluation criteria provided in the provision at 52.212–2, Evaluation—Commercial Items, are in agreement.
(c) Select the offer that is most advantageous to the Government based
on the factors contained in the solicitation. Fully document the rationale
for selection of the successful offeror
including discussion of any tradeoffs
considered.
[60 FR 48241, Sept. 18, 1995, as amended at 61
FR 39192, July 26, 1996; 62 FR 264, Jan. 2, 1997;
62 FR 51270, Sept. 30, 1997; 62 FR 64917, Dec.
9, 1997]
12.603 Streamlined
solicitation
commercial items.
(a) When a written solicitation will
be issued, the contracting officer may
use the following procedure to reduce
the time required to solicit and award
contracts for the acquisition of commercial items. This procedure combines the synopsis required by 5.203 and
the issuance of the solicitation into a
single document.
(b) When using the combined synopsis/solicitation procedure, the SF
1449 is not used for issuing the solicitation.
(c) To use these procedures, the contracting officer shall—
(1) Prepare the synopsis as described
at 5.207.
(2) In the Description, include the following additional information:
(i) The following statement:
This is a combined synopsis/solicitation for
commercial items prepared in accordance
with the format in FAR Subpart 12.6, as supplemented with additional information included in this notice. This announcement
constitutes the only solicitation; proposals
are being requested and a written solicitation will not be issued.
(ii) The solicitation number and a
statement that the solicitation is
issued as an invitation to bid (IFB), request for quotation (RFQ) or request
for proposal (RFP).
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12.603
48 CFR Ch. 1 (10–1–03 Edition)
(iii) A statement that the solicitation document and incorporated provisions and clauses are those in effect
through Federal Acquisition Circular
lll.
(iv) A notice regarding any set-aside
and the associated NAICS code and
small business size standard. Also include a statement regarding the Small
Business Competitiveness Demonstration Program, if applicable.
(v) A list of contract line item number(s) and items, quantities and units
of measure, (including option(s), if applicable).
(vi) Description of requirements for
the items to be acquired.
(vii) Date(s) and place(s) of delivery
and acceptance and FOB point.
(viii) A statement that the provision
at 52.212–1, Instructions to Offerors—
Commercial, applies to this acquisition
and a statement regarding any addenda
to the provision.
(ix) A statement regarding the applicability of the provision at 52.212–2,
Evaluation—Commercial
Items,
if
used, and the specific evaluation criteria to be included in paragraph (a) of
that provision. If this provision is not
used, describe the evaluation procedures to be used.
(x) A statement advising offerors to
include a completed copy of the provision at 52.212–3, Offeror Representations and Certifications—Commercial
Items, with its offer.
(xi) A statement that the clause at
52.212–4, Contract Terms and Conditions—Commercial Items, applies to
this acquisition and a statement regarding any addenda to the clause.
(xii) A statement that the clause at
52.212–5, Contract Terms and Conditions Required To Implement Statutes
Or
Executive
Orders—Commercial
Items, applies to this acquisition and a
statement regarding which, if any, of
the additional FAR clauses cited in the
clause are applicable to the acquisition.
(xiii) A statement regarding any additional contract requirement(s) or
terms and conditions (such as contract
financing arrangements or warranty
requirements) determined by the contracting officer to be necessary for this
acquisition and consistent with customary commercial practices.
(xiv) A statement regarding the Defense Priorities and Allocations System (DPAS) and assigned rating, if applicable.
(xv) A statement regarding any applicable Numbered Notes.
(xvi) The date, time and place offers
are due.
(xvii) The name and telephone number of the individual to contact for information regarding the solicitation.
(3) Allow response time for receipt of
offers as follows:
(i) Because the synopsis and solicitation are contained in a single document, it is not necessary to publicize a
separate synopsis 15 days before the
issuance of the solicitation.
(ii) When using the combined synopsis and solicitation, contracting officers must establish a response time in
accordance with 5.203(b) (but see
5.203(h)).
(4) Publicize amendments to solicitations in the same manner as the initial
synopsis and solicitation.
[60 FR 48241, Sept. 18, 1995, as amended at 61
FR 41469, Aug. 8, 1996; 62 FR 264, Jan. 2, 1997;
65 FR 46056, July 26, 2000; 66 FR 27413, May 16,
2001; 68 FR 56679, Oct. 1, 2003]
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SUBCHAPTER C—CONTRACTING METHODS AND CONTRACT
TYPES
13.306 SF 44,
Voucher.
13.307 Forms.
PART 13—SIMPLIFIED ACQUISITION
PROCEDURES
Sec.
13.000
13.001
13.002
13.003
13.004
13.005
of
13.006
Order—Invoice—
Subpart 13.4—Fast Payment Procedure
Scope of part.
Definitions.
Purpose.
Policy.
Legal effect of quotations.
Federal Acquisition Streamlining Act
1994 list of inapplicable laws.
Inapplicable provisions and clauses.
13.401
13.402
13.403
13.404
13.101 General.
13.102 Source list.
13.103 Use of standing price quotations.
13.104 Promoting competition.
13.105 Synopsis and posting requirements.
13.106 Soliciting competition, evaluation of
quotations or offers, award and documentation.
13.106–1 Soliciting competition.
13.106–2 Evaluation of quotations or offers.
13.106–3 Award and documentation.
Subpart 13.2—Actions at or Below the
Micro-Purchase Threshold
General.
Purchase guidelines.
Subpart 13.3—Simplified Acquisition
Methods
13.301 Governmentwide commercial purchase card.
13.302 Purchase orders.
13.302–1 General.
13.302–2 Unpriced purchase orders.
13.302–3 Obtaining contractor acceptance
and modifying purchase orders.
13.302–4 Termination or cancellation of purchase orders.
13.302–5 Clauses.
13.303 Blanket purchase agreements (BPAs).
13.303–1 General.
13.303–2 Establishment of BPAs.
13.303–3 Preparation of BPAs.
13.303–4 Clauses.
13.303–5 Purchases under BPAs.
13.303–6 Review procedures.
13.303–7 Completion of BPAs.
13.303–8 Optional clause.
13.304 [Reserved]
13.305 Imprest funds and third party drafts.
13.305–1 General.
13.305–2 Agency responsibilities.
13.305–3 Conditions for use.
13.305–4 Procedures.
General.
Conditions for use.
Preparation and execution of orders.
Contract clause.
Subpart 13.5—Test Program for Certain
Commercial Items
13.500
13.501
Subpart 13.1—Procedures
13.201
13.202
Purchase
General.
Special documentation requirements.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 62 FR 64917, Dec. 9, 1997, unless
otherwise noted.
13.000 Scope of part.
This part prescribes policies and procedures for the acquisition of supplies
and services, including construction,
research and development, and commercial items, the aggregate amount
of which does not exceed the simplified
acquisition threshold (see 2.101). Subpart 13.5 provides special authority for
acquisitions of commercial items exceeding the simplified acquisition
threshold but not exceeding $5,000,000,
including options. See part 12 for policies applicable to the acquisition of
commercial items exceeding the micropurchase threshold. See 36.602–5 for
simplified procedures to be used when
acquiring architect-engineer services.
13.001 Definitions.
As used in this part—
Authorized individual means a person
who has been granted authority, in accordance with agency procedures, to
acquire supplies and services in accordance with this part.
Governmentwide commercial purchase
card means a purchase card, similar in
nature to a commercial credit card,
issued to authorized agency personnel
to use to acquire and to pay for supplies and services.
Imprest fund means a cash fund of a
fixed amount established by an advance of funds, without charge to an
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13.002
48 CFR Ch. 1 (10–1–03 Edition)
appropriation, from an agency finance
or disbursing officer to a duly appointed cashier, for disbursement as
needed from time to time in making
payment in cash for relatively small
amounts.
Third party draft means an agency
bank draft, similar to a check, that is
used to acquire and to pay for supplies
and services. (See Treasury Financial
Management Manual, Section 3040.70.)
[62 FR 64917, Dec. 9, 1997 as amended at 66 FR
2128, Jan. 10, 2001]
13.002 Purpose.
The purpose of this part is to prescribe simplified acquisition procedures in order to—
(a) Reduce administrative costs;
(b) Improve opportunities for small,
small disadvantaged, and womenowned small business concerns to obtain a fair proportion of Government
contracts;
(c) Promote efficiency and economy
in contracting; and
(d) Avoid unnecessary burdens for
agencies and contractors.
13.003 Policy.
(a) Agencies shall use simplified acquisition procedures to the maximum
extent practicable for all purchases of
supplies or services not exceeding the
simplified acquisition threshold (including purchases at or below the
micro-purchase threshold). This policy
does not apply if an agency can meet
its requirement using—
(1) Required sources of supply under
part 8 (e.g., Federal Prison Industries,
Committee for Purchase from People
Who are Blind or Severely Disabled,
and Federal Supply Schedule contracts);
(2) Existing indefinite delivery/indefinite quantity contracts; or
(3) Other established contracts.
(b)(1) Each acquisition of supplies or
services that has an anticipated dollar
value exceeding $2,500 ($7,500 for acquisitions as described in 13.201(g)(1)(i) and
$15,000 for acquisitions as described in
13.201(g)(1)(ii))
and
not
exceeding
$100,000 ($200,000 for acquisitions described in paragraph (2)(i) of the Simplified Acquisition Threshold definition at 2.101) is reserved exclusively for
small business concerns and shall be
set aside (see 19.000 and subpart 19.5).
See 19.502–2 for exceptions.
(2) The contracting officer may set
aside for HUBZone small business concerns (see 19.1305) an acquisition of supplies or services that has an anticipated dollar value exceeding the micropurchase threshold and not exceeding
the simplified acquisition threshold.
The contracting officer’s decision not
to set aside an acquisition for
HUBZone participation below the simplified acquisition threshold is not subject to review under subpart 19.4.
(3) Each written solicitation under a
set-aside shall contain the appropriate
provisions prescribed by part 19. If the
solicitation is oral, however, information substantially identical to that in
the provision shall be given to potential quoters.
(c) The contracting officer shall not
use simplified acquisition procedures
to acquire supplies and services if the
anticipated award will exceed the simplified
acquisition
threshold
(or
$5,000,000, including options, for acquisitions of commercial items using Subpart 13.5). Do not break down requirements aggregating more than the simplified acquisition threshold (or for
commercial items, the threshold in
subpart 13.5) or the micro-purchase
threshold into several purchases that
are less than the applicable threshold
merely to—
(1) Permit use of simplified acquisition procedures; or
(2) Avoid any requirement that applies to purchases exceeding the micropurchase threshold.
(d) An agency that has specific statutory authority to acquire personal
services (see 37.104) may use simplified
acquisition procedures to acquire those
services.
(e) Agencies shall use the Governmentwide commercial purchase card
and electronic purchasing techniques
to the maximum extent practicable in
conducting simplified acquisitions.
(f) Agencies shall maximize the use
of electronic commerce when practicable and cost-effective (see Subpart
4.5). Drawings and lengthy specifications can be provided off-line in hard
copy or through other appropriate
means.
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Federal Acquisition Regulation
13.005
(g) Authorized individuals shall make
purchases in the simplified manner
that is most suitable, efficient, and economical based on the circumstances
of each acquisition. For acquisitions
not expected to exceed—
(1) The simplified acquisition threshold for other than commercial items,
use any appropriate combination of the
procedures in parts 13, 14, 15, 35, or 36,
including the use of Standard Form
1442, Solicitation, Offer, and Award
(Construction, Alteration, or Repair),
for
construction
contracts
(see
36.701(b)); or
(2) $5 million for commercial items,
use any appropriate combination of the
procedures in parts 12, 13, 14, and 15
(see paragraph (d) of this section).
(h) In addition to other considerations, contracting officers shall—
(1) Promote competition to the maximum extent practicable (see 13.104);
(2) Establish deadlines for the submission of responses to solicitations
that afford suppliers a reasonable opportunity to respond (see 5.203);
(3) Consider all quotations or offers
that are timely received. For evaluation of quotations or offers received
electronically, see 13.106–2(b)(3); and
(4) Use innovative approaches, to the
maximum extent practicable, in awarding contracts using simplified acquisition procedures.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998; 63 FR 70267, Dec. 18,
1998; 67 FR 56121, Aug. 30, 2002; 68 FR 4050,
Jan. 27, 2003]
13.004 Legal effect of quotations.
(a) A quotation is not an offer and,
consequently, cannot be accepted by
the Government to form a binding contract. Therefore, issuance by the Government of an order in response to a
supplier’s quotation does not establish
a contract. The order is an offer by the
Government to the supplier to buy certain supplies or services upon specified
terms and conditions. A contract is established when the supplier accepts the
offer.
(b) When appropriate, the contracting officer may ask the supplier to
indicate acceptance of an order by notification to the Government, preferably in writing, as defined at 2.101. In
other circumstances, the supplier may
indicate acceptance by furnishing the
supplies or services ordered or by proceeding with the work to the point
where substantial performance has occurred.
(c) If the Government issues an order
resulting from a quotation, the Government may (by written notice to the
supplier, at any time before acceptance
occurs) withdraw, amend, or cancel its
offer. (See 13.302–4 for procedures on
termination or cancellation of purchase orders.)
13.005 Federal Acquisition Streamlining Act of 1994 list of inapplicable laws.
(a) The following laws are inapplicable to all contracts and subcontracts
(if otherwise applicable to subcontracts) at or below the simplified
acquisition threshold:
(1) 41 U.S.C. 57 (a) and (b) (Anti-Kickback Act of 1986). (Only the requirement for the incorporation of the contractor procedures for the prevention
and detection of violations, and the
contractual requirement for contractor
cooperation in investigations are inapplicable.).
(2) 40 U.S.C. 270a (Miller Act). (Although the Miller Act does not apply
to contracts at or below the simplified
acquisition
threshold,
alternative
forms of payment protection for suppliers of labor and material (see 28.102)
are still required if the contract exceeds $25,000.).
(3) 40 U.S.C. 327—333 (Contract Work
Hours and Safety Standards Act—Overtime Compensation).
(4) 41 U.S.C. 701(a)(1) (Section 5152 of
the Drug-Free Workplace Act of 1988),
except for individuals.
(5) 42 U.S.C. 6962 (Solid Waste Disposal Act). (The requirement to provide
an estimate of recovered material utilized in contract performance does not
apply unless the contract value exceeds
$100,000.)
(6) 10 U.S.C. 2306(b) and 41 U.S.C.
254(a) (Contract Clause Regarding Contingent Fees).
(7) 10 U.S.C. 2313 and 41 U.S.C. 254(c)
(Authority to Examine Books and
Records of Contractors).
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13.006
48 CFR Ch. 1 (10–1–03 Edition)
(8) 10 U.S.C. 2402 and 41 U.S.C. 253g
(Prohibition on Limiting Subcontractor Direct Sales to the United
States).
(9) 15 U.S.C. 631 note (HUBZone Act
of
1997),
except
for
15
U.S.C.
657a(b)(2)(B), which is optional for the
agencies subject to the requirements of
the Act.
(10) 31 U.S.C. 1354(a) (Limitation on
use of appropriated funds for contracts
with entities not meeting veterans employment reporting requirements).
(b) When acquiring commercial items
or supplies or services procured in accordance with 12.102(f)(1) and (f)(2), the
contracting officer may use a combined
synopsis and solicitation. The FAR
Council may make exceptions when it
determines in writing that it is in the
best interest of the Government that
the enactment should apply to contracts or subcontracts not greater than
the simplified acquisition threshold.
(c) The provisions of paragraph (b) of
this section do not apply to laws that—
(1) Provide for criminal or civil penalties; or
(2) Specifically state that notwithstanding the language of Section 4101,
Public Law 103–355, the enactment will
be applicable to contracts or subcontracts in amounts not greater than
the simplified acquisition threshold.
(d) Any individual may petition the
Administrator, Office of Federal Procurement Policy (OFPP), to include
any applicable provision of law not included on the list set forth in paragraph (a) of this section unless the
FAR Council has already determined in
writing that the law is applicable. The
Administrator, OFPP, will include the
law on the list in paragraph (a) of this
section unless the FAR Council makes
a determination that it is applicable
within 60 days of receiving the petition.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998; 63 FR 70267, Dec. 18,
1998; 65 FR 36018, June 6, 2000; 66 FR 53488,
Oct. 22, 2001; 68 FR 4050, Jan. 27, 2003]
13.006 Inapplicable provisions and
clauses.
While certain statutes still apply,
pursuant to Public Law 103–355, the following provisions and clauses are inapplicable to contracts and subcontracts
at or below the simplified acquisition
threshold:
(a) 52.203–5, Covenant Against Contingent Fees.
(b) 52.203–6, Restrictions on Subcontractor Sales to the
Government.
(c) 52.203–7, Anti-Kickback Procedures.
(d) 52.215–2, Audits and Records—Negotiation.
(e) 52.222–4, Contract Work Hours and
Safety Standards Act—Overtime Compensation.
(f) 52.223–6, Drug-Free Workplace, except for individuals.
(g) 52.223–9, Estimate of Percentage
of Recovered Material Content for
EPA-Designated Products.
[62 FR 64917, Dec. 9, 1997, as amended at 65
FR 36018, June 6, 2000]
Subpart 13.1—Procedures
13.101 General.
(a) In making purchases, contracting
officers shall—
(1) Comply with the policy in 7.202 relating to economic purchase quantities, when practicable;
(2) Satisfy the procedures described
in subpart 19.6 with respect to Certificates of Competency before rejecting a
quotation, oral or written, from a
small business concern determined to
be nonresponsible (see subpart 9.1); and
(3) Provide for the inspection of supplies or services as prescribed in 46.404.
(b) In making purchases, contracting
officers should—
(1) Include related items (such as
small hardware items or spare parts for
vehicles) in one solicitation and make
award on an ‘‘all-or-none’’ or ‘‘multiple
award’’ basis provided suppliers are so
advised when quotations or offers are
requested;
(2) Incorporate provisions and clauses
by reference in solicitations and in
awards under requests for quotations,
provided the requirements in 52.102 are
satisfied;
(3) Make maximum effort to obtain
trade and prompt payment discounts
(see 14.408–3). Prompt payment discounts shall not be considered in the
evaluation of quotations; and
(4) Use bulk funding to the maximum
extent practicable. Bulk funding is a
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Federal Acquisition Regulation
13.105
system whereby the contracting officer
receives authorization from a fiscal
and accounting officer to obligate
funds on purchase documents against a
specified lump sum of funds reserved
for the purpose for a specified period of
time rather than obtaining individual
obligational authority on each purchase document. Bulk funding is particularly appropriate if numerous purchases using the same type of funds are
to be made during a given period.
[62 FR 64917, Dec. 9, 1997, as amended at 64
FR 72418, Dec. 27, 1999]
13.102 Source list.
(a) Contracting officers should use
the Central Contractor Registration
database (see Subpart 4.11) at http://
www.ccr.gov as their primary sources of
vendor information. Offices maintaining additional vendor source files or
listings should identify the status of
each source (when the status is made
known to the contracting office) in the
following categories:
(1) Small business.
(2) Small disadvantaged business.
(3) Women-owned small business.
(4) HUBZone small business.
(5) Service-disabled veteran-owned
small business.
(6) Veteran-owned small business.
(b) The status information may be
used as the basis to ensure that small
business concerns are provided the
maximum practicable opportunities to
respond to solicitations issued using
simplified acquisition procedures.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998; 68 FR 56672, Oct. 1,
2003]
13.103 Use
of
standing
price
quotations.
Authorized individuals do not have to
obtain individual quotations for each
purchase. Standing price quotations
may be used if—
(a) The pricing information is current; and
(b) The Government obtains the benefit of maximum discounts before
award.
13.104 Promoting competition.
The contracting officer must promote competition to the maximum extent practicable to obtain supplies and
services from the source whose offer is
the most advantageous to the Government, considering the administrative
cost of the purchase.
(a) The contracting officer must
not—
(1) Solicit quotations based on personal preference; or
(2) Restrict solicitation to suppliers
of well-known and widely distributed
makes or brands.
(b) If using simplified acquisition
procedures and not using either
FACNET or providing access to the notice of proposed contract action and solicitation information through the
Governmentwide point of entry (GPE),
maximum practicable competition ordinarily can be obtained by soliciting
quotations or offers from sources within the local trade area. Unless the contract action requires synopsis pursuant
to 5.101 and an exception under 5.202 is
not applicable, consider solicitation of
at least three sources to promote competition to the maximum extent practicable. Whenever practicable, request
quotations or offers from two sources
not included in the previous solicitation.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998; 66 FR 27413, May 16,
2001; 68 FR 56679, Oct. 1, 2003]
13.105 Synopsis and posting requirements.
(a) The contracting officer must comply with the public display and synopsis requirements of 5.101 and 5.203 unless—
(1)(i) FACNET is used for an acquisition at or below the simplified acquisition threshold; or
(ii) The GPE is used at or below the
simplified acquisition threshold for
providing widespread public notice of
acquisition opportunities and offerors
are provided a means of responding to
the solicitation electronically; or
(2) An exception in 5.202 applies.
(b) When acquiring commercial items
or supplies or services produced in accordance with 12.102(f)(1) and (f)(2) the
contracting officer may use a combined
synopsis and solicitation. In these
cases, a separate solicitation is not required. The contracting officer must
include
enough
information
to
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13.106
48 CFR Ch. 1 (10–1–03 Edition)
permit suppliers to develop quotations
or offers.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998; 66 FR 27413, May 16,
2001; 68 FR 4050, Jan. 27, 2003]
13.106 Soliciting competition, evaluation of quotations or offers, award
and documentation.
13.106–1
Soliciting competition.
(a) Considerations. In soliciting competition, the contracting officer shall
consider the guidance in 13.104 and the
following before requesting quotations
or offers:
(1)(i) The nature of the article or
service to be purchased and whether it
is highly competitive and readily available in several makes or brands, or is
relatively noncompetitive.
(ii) Information obtained in making
recent purchases of the same or similar
item.
(iii) The urgency of the proposed purchase.
(iv) The dollar value of the proposed
purchase.
(v) Past experience concerning specific dealers’ prices.
(2) When soliciting quotations or offers, the contracting officer shall notify potential quoters or offerors of the
basis on which award will be made
(price alone or price and other factors,
e.g., past performance and quality).
Contracting officers are encouraged to
use best value. Solicitations are not required to state the relative importance
assigned to each evaluation factor and
subfactor, nor are they required to include subfactors.
(b) Soliciting from a single source. (1)
For purchases not exceeding the simplified acquisition threshold, contracting officers may solicit from one
source if the contracting officer determines that the circumstances of the
contract action deem only one source
reasonably available (e.g., urgency, exclusive licensing agreements, or industrial mobilization).
(2) For sole source acquisitions of
commercial items in excess of the simplified acquisition threshold conducted
pursuant to subpart 13.5, the requirements at 13.501(a) apply.
(c) Soliciting orally. (1) The contracting officer shall solicit quotations
orally to the maximum extent practicable, if—
(i) The acquisition does not exceed
the simplified acquisition threshold;
(ii) Oral solicitation is more efficient
than soliciting through available electronic commerce alternatives; and
(iii) Notice is not required under
5.101.
(2) However, an oral solicitation may
not be practicable for contract actions
exceeding $25,000 unless covered by an
exception in 5.202.
(d) Written solicitations. If obtaining
electronic or oral quotations is uneconomical or impracticable, the contracting officer should issue paper solicitations for contract actions likely
to exceed $25,000. The contracting officer shall issue a written solicitation
for construction requirements exceeding $2,000.
(e) Use of options. Options may be included in solicitations, provided the requirements of subpart 17.2 are met and
the aggregate value of the acquisition
and all options does not exceed the dollar threshold for use of simplified acquisition procedures.
(f) Inquiries. An agency should respond to inquiries received through
any medium (including FACNET) if
doing so would not interfere with the
efficient conduct of the acquisition.
For an acquisition conducted through
FACNET, an agency must respond to
telephonic or facsimile inquiries only if
it is unable to receive inquiries
through FACNET.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998]
13.106–2 Evaluation of quotations or
offers.
(a) General. (1) The contracting officer shall evaluate quotations or offers—
(i) In an impartial manner; and
(ii)
Inclusive
of
transportation
charges from the shipping point of the
supplier to the delivery destination.
(2) Quotations or offers shall be evaluated on the basis established in the
solicitation.
(3) All quotations or offers shall be
considered (see paragraph (b) of this
subsection).
(b) Evaluation procedures. (1) The contracting officer has broad discretion in
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Federal Acquisition Regulation
13.106–3
fashioning suitable evaluation procedures. The procedures prescribed in
parts 14 and 15 are not mandatory. At
the contracting officer’s discretion,
one or more, but not necessarily all, of
the evaluation procedures in part 14 or
15 may be used.
(2) If using price and other factors,
ensure that quotations or offers can be
evaluated in an efficient and minimally burdensome fashion. Formal
evaluation plans and establishing a
competitive range, conducting discussions, and scoring quotations or offers
are not required. Contracting offices
may conduct comparative evaluations
of offers. Evaluation of other factors,
such as past performance—
(i) Does not require the creation or
existence of a formal data base; and
(ii) May be based on information such
as the contracting officer’s knowledge
of and previous experience with the
supply or service being acquired, customer surveys, or other reasonable
basis.
(3) For acquisitions conducted using
FACNET or a method that permits
electronic response to the solicitation,
the contracting officer may—
(i) After preliminary consideration of
all quotations or offers, identify from
all quotations or offers received one
that is suitable to the user, such as the
lowest priced brand name product, and
quickly
screen
all
lower
priced
quotations or offers based on readily
discernible value indicators, such as
past performance, warranty conditions,
and maintenance availability; or
(ii) Where an evaluation is based only
on price and past performance, make
an award based on whether the lowest
priced of the quotations or offers having the highest past performance rating possible represents the best value
when compared to any lower priced
quotation or offer.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998]
13.106–3 Award and documentation.
(a) Basis for award. Before making
award, the contracting officer must determine that the proposed price is fair
and reasonable.
(1) Whenever possible, base price reasonableness on competitive quotations
or offers.
(2) If only one response is received,
include a statement of price reasonableness in the contract file. The contracting officer may base the statement on—
(i) Market research;
(ii) Comparison of the proposed price
with prices found reasonable on previous purchases;
(iii) Current price lists, catalogs, or
advertisements. However, inclusion of
a price in a price list, catalog, or advertisement does not, in and of itself, establish fairness and reasonableness of
the price;
(iv) A comparison with similar items
in a related industry;
(v) The contracting officer’s personal
knowledge of the item being purchased;
(vi) Comparison to an independent
Government estimate; or
(vii) Any other reasonable basis.
(3) Occasionally an item can be obtained only from a supplier that quotes
a minimum order price or quantity
that either unreasonably exceeds stated quantity requirements or results in
an unreasonable price for the quantity
required. In these instances, the contracting officer should inform the requiring activity of all facts regarding
the quotation or offer and ask it to
confirm or alter its requirement. The
file shall be documented to support the
final action taken.
(b) File documentation and retention.
Keep documentation to a minimum.
Purchasing offices shall retain data
supporting purchases (paper or electronic) to the minimum extent and duration necessary for management review purposes (see subpart 4.8). The following illustrate the extent to which
quotation or offer information should
be recorded:
(1) Oral solicitations. The contracting
office should establish and maintain
records of oral price quotations in
order to reflect clearly the propriety of
placing the order at the price paid with
the supplier concerned. In most cases,
this will consist merely of showing the
names of the suppliers contacted and
the prices and other terms and conditions quoted by each.
(2) Written solicitations (see 2.101). For
acquisitions not exceeding the simplified acquisition threshold, limit
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13.201
48 CFR Ch. 1 (10–1–03 Edition)
written records of solicitations or offers to notes or abstracts to show
prices, delivery, references to printed
price lists used, the supplier or suppliers contacted, and other pertinent
data.
(3) Special situations. Include additional statements—
(i) Explaining the absence of competition if only one source is solicited
and the acquisition does not exceed the
simplified acquisition threshold (does
not apply to an acquisition of utility
services available from only one
source); or
(ii) Supporting the award decision if
other than price-related factors were
considered in selecting the supplier.
(c) Notification. For acquisitions that
do not exceed the simplified acquisition threshold and for which automatic
notification is not provided through
FACNET or an electronic commerce
method that employs widespread electronic public notice, notification to unsuccessful suppliers shall be given only
if requested or required by 5.301.
(d) Request for information. If a supplier requests information on an award
that was based on factors other than
price alone, a brief explanation of the
basis for the contract award decision
shall be provided (see 15.503(b)(2)).
(e) Taxpayer Identification Number. If
an oral solicitation is used, the contracting officer shall ensure that the
copy of the award document sent to the
payment office is annotated with the
contractor’s Taxpayer Identification
Number (TIN) and type of organization
(see 4.203), unless this information will
be obtained from some other source
(e.g., centralized database). The contracting officer shall disclose to the
contractor that the TIN may be used
by the Government to collect and report on any delinquent amounts arising out of the contractor’s relationship
with the Government (31 U.S.C.
7701(c)(3)).
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58589, 58593, Oct. 30, 1998; 64 FR 51836,
Sept. 24, 1999]
Subpart 13.2—Actions at or Below
the Micro-Purchase Threshold
13.201
General.
(a) Agency heads are encouraged to
delegate micro-purchase authority (see
1.603–3).
(b) The Governmentwide commercial
purchase card shall be the preferred
method to purchase and to pay for
micro-purchases (see 2.101).
(c) Purchases at or below the micropurchase threshold may be conducted
using any of the methods described in
subpart 13.3, provided the purchaser is
authorized and trained, pursuant to
agency procedures, to use those methods.
(d) Micro-purchases do not require
provisions or clauses, except as provided at 4.1104 and 32.1110. This paragraph takes precedence over any other
FAR requirement to the contrary, but
does not prohibit the use of any clause.
(e) The requirements in part 8 apply
to purchases at or below the micro-purchase threshold.
(f) The procurement requirements in
the Resource Conservation and Recovery Act (42 U.S.C. 6962) and Executive
Order 13101 of September 14, 1998,
Greening the Government through
Waste Prevention, Recycling, and Federal Acquisition, apply to purchases at
or below the micro-purchase threshold
(see Subpart 23.4).
(g)(1) For acquisitions of supplies or
services that, as determined by the
head of the agency, are to be used to
facilitate defense against or recovery
from terrorism or nuclear, biological,
chemical, or radiological attack, the
temporary micro-purchase thresholds
are
(i) $7,500 for acquisitions by or for
any agency if the award is made from
January 24, 2003, through November 24,
2003; and
(ii) $15,000 for acquisitions by or for
the Department of Defense if award is
made and funds are obligated on or before September 30, 2003.
(2) Purchases using this authority
must have a clear and direct relationship to defense against or recovery
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from terrorism or nuclear, biological,
chemical, or radiological attack.
[62 FR 64917, Dec. 9, 1997, as amended at 64
FR 10539, Mar. 4, 1999; 65 FR 36018, June 6,
2000; 67 FR 56121, Aug. 30, 2002; 68 FR 4050,
Jan. 27, 2003; 68 FR 56672, Oct. 1, 2003]
13.202 Purchase guidelines.
(a)
Solicitation,
evaluation
of
quotations, and award. (1) To the extent
practicable, micro-purchases shall be
distributed equitably among qualified
suppliers.
(2) Micro-purchases may be awarded
without
soliciting
competitive
quotations if the contracting officer or
individual appointed in accordance
with 1.603–3(b) considers the price to be
reasonable.
(3) The administrative cost of
verifying the reasonableness of the
price for purchases may more than offset potential savings from detecting instances of overpricing. Therefore, action to verify price reasonableness need
only be taken if—
(i) The contracting officer or individual appointed in accordance with
1.603–3(b) suspects or has information
to indicate that the price may not be
reasonable (e.g., comparison to the previous price paid or personal knowledge
of the supply or service); or
(ii) Purchasing a supply or service for
which no comparable pricing information is readily available (e.g., a supply
or service that is not the same as, or is
not similar to, other supplies or services that have recently been purchased
on a competitive basis).
(b) Documentation. If competitive
quotations were solicited and award
was made to other than the low quoter,
documentation to support the purchase
may be limited to identification of the
solicited concerns and an explanation
for the award decision.
Subpart 13.3—Simplified
Acquisition Methods
13.301 Governmentwide
commercial
purchase card.
(a) The Governmentwide commercial
purchase card is authorized for use in
making and/or paying for purchases of
supplies, services, or construction. The
Governmentwide commercial purchase
card may be used by contracting offi-
cers and other individuals designated
in accordance with 1.603–3. The card
may be used only for purchases that
are otherwise authorized by law or regulation.
(b) Agencies using the Governmentwide commercial purchase card shall
establish procedures for use and control of the card that comply with the
Treasury Financial Manual for Guidance of Departments and Agencies
(TFM 4–4500) and that are consistent
with the terms and conditions of the
current GSA credit card contract.
Agency procedures should not limit the
use of the Governmentwide commercial
purchase card to micro-purchases.
Agency procedures should encourage
use of the card in greater dollar
amounts by contracting officers to
place orders and to pay for purchases
against contracts established under
part 8 procedures, when authorized;
and to place orders and/or make payment under other contractual instruments, when agreed to by the contractor. See 32.1110(d) for instructions
for use of the appropriate clause when
payment under a written contract will
be made through use of the card.
(c) The Governmentwide commercial
purchase card may be used to—
(1) Make micro-purchases;
(2) Place a task or delivery order (if
authorized in the basic contract, basic
ordering agreement, or blanket purchase agreement); or
(3) Make payments, when the contractor agrees to accept payment by
the card.
[62 FR 64917, Dec. 9, 1997, as amended at 64
FR 10539, Mar. 4, 1999; 67 FR 6120, Feb. 8, 2002]
13.302
Purchase orders.
13.302–1
General.
(a) Except as provided under the unpriced purchase order method (see
13.302–2), purchase orders generally are
issued on a fixed-price basis. See 12.207
for acquisition of commercial items.
(b) Purchase orders shall—
(1) Specify the quantity of supplies or
scope of services ordered;
(2) Contain a determinable date by
which delivery of the supplies or performance of the services is required;
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13.302–2
48 CFR Ch. 1 (10–1–03 Edition)
(3) Provide for inspection as prescribed in part 46. Generally, inspection and acceptance should be at destination. Source inspection should be
specified only if required by part 46.
When inspection and acceptance will be
performed at destination, advance copies of the purchase order or equivalent
notice shall be furnished to the consignee(s) for material receipt purposes.
Receiving reports shall be accomplished immediately upon receipt and
acceptance of supplies;
(4) Specify f.o.b. destination for supplies to be delivered within the United
States, except Alaska or Hawaii, unless
there are valid reasons to the contrary;
and
(5) Include any trade and prompt payment discounts that are offered, consistent with the applicable principles
at 14.408–3.
(c) The contracting officer’s signature on purchase orders shall be in accordance with 4.101 and the definitions
at 2.101. Facsimile and electronic signature may be used in the production
of purchase orders by automated methods.
(d) Limit the distribution of copies of
purchase orders and related forms to
the minimum deemed essential for administration and transmission of contractual information.
(e) In accordance with 31 U.S.C. 3332,
electronic funds transfer (EFT) is required for payments except as provided
in 32.1110. See Subpart 32.11 for instructions for use of the appropriate clause
in purchase orders. When obtaining
oral quotes, the contracting officer
shall inform the quoter of the EFT
clause that will be in any resulting
purchase order.
[62 FR 64917, Dec. 9, 1997, as amended at 64
FR 10540, Mar. 4, 1999]
13.302–2
Unpriced purchase orders.
(a) An unpriced purchase order is an
order for supplies or services, the price
of which is not established at the time
of issuance of the order.
(b) An unpriced purchase order may
be used only when—
(1) It is impractical to obtain pricing
in advance of issuance of the purchase
order; and
(2) The purchase is for—
(i) Repairs to equipment requiring
disassembly to determine the nature
and extent of repairs;
(ii) Material available from only one
source and for which cost cannot readily be established; or
(iii) Supplies or services for which
prices are known to be competitive,
but exact prices are not known (e.g.,
miscellaneous repair parts, maintenance agreements).
(c) Unpriced purchase orders may be
issued on paper or electronically. A realistic monetary limitation, either for
each line item or for the total order,
shall be placed on each unpriced purchase order. The monetary limitation
shall be an obligation subject to adjustment when the firm price is established. The contracting office shall follow up on each order to ensure timely
pricing. The contracting officer or the
contracting officer’s designated representative shall review the invoice
price and, if reasonable (see 13.106–3(a)),
process the invoice for payment.
13.302–3 Obtaining contractor acceptance and modifying purchase orders.
(a) When it is desired to consummate
a binding contract between the parties
before the contractor undertakes performance, the contracting officer shall
require written (see 2.101) acceptance of
the purchase order by the contractor.
(b) Each purchase order modification
shall identify the order it modifies and
shall contain an appropriate modification number.
(c) A contractor’s written acceptance
of a purchase order modification may
be required only if—
(1) Determined by the contracting officer to be necessary to ensure the contractor’s compliance with the purchase
order as revised; or
(2) Required by agency regulations.
13.302–4 Termination or cancellation
of purchase orders.
(a) If a purchase order that has been
accepted in writing by the contractor
is to be terminated, the contracting officer shall process the termination in
accordance with—
(1) 12.403(d) and 52.212–4(l) for commercial items; or
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(2) Part 49 or 52.213–4 for other than
commercial items.
(b) If a purchase order that has not
been accepted in writing by the contractor is to be canceled, the contracting officer shall notify the contractor in writing that the purchase
order has been canceled, request the
contractor’s written acceptance of the
cancellation, and proceed as follows:
(1) If the contractor accepts the cancellation and does not claim that costs
were incurred as a result of beginning
performance under the purchase order,
no further action is required (i.e., the
purchase order shall be considered canceled).
(2) If the contractor does not accept
the cancellation or claims that costs
were incurred as a result of beginning
performance under the purchase order,
the contracting officer shall process
the termination action as prescribed in
paragraph (a) of this subsection.
tions, deletions, or substitutions) must
not create a void or internal contradiction in the clause. For example, do not
add an inspection and acceptance or
termination for convenience requirement unless the existing requirement
is deleted. Also, do not delete a paragraph without providing for an appropriate substitute.
(3)(i) When an acquisition for supplies for use within the United States
cannot be set aside for small business
concerns and trade agreements apply
(see Subpart 25.4), substitute the clause
at FAR 52.225–3, Buy American Act—
North American Free Trade Agreement—Israeli Trade Act, used with Alternate I or Alternate II, if appropriate, instead of the clause at FAR
52.225–1, Buy American Act—Supplies.
(ii) When acquiring supplies for use
outside the United States, delete
clause 52.225–1 from the clause list at
52.213–4(b).
13.302–5 Clauses.
(a) Each purchase order (and each
purchase order modification (see 13.302–
3)) shall incorporate all clauses prescribed for the particular acquisition.
(b) The contracting officer shall insert the clause at 52.213–2, Invoices, in
purchase orders that authorize advance
payments (see 31 U.S.C. 3324(d)(2)) for
subscriptions or other charges for
newspapers, magazines, periodicals, or
other publications (i.e., any publication
printed, microfilmed, photocopied, or
magnetically or otherwise recorded for
auditory or visual usage).
(c) The contracting officer shall insert the clause at 52.213–3, Notice to
Supplier, in unpriced purchase orders.
(d)(1) The contracting officer may
use the clause at 52.213–4, Terms and
Conditions—Simplified
Acquisitions
(Other Than Commercial Items), in
simplified acquisitions exceeding the
micro-purchase threshold that are for
other than commercial items (see
12.301).
(2) The clause—
(i) Is a compilation of the most commonly used clauses that apply to simplified acquisitions; and
(ii) May be modified to fit the individual acquisition to add other needed
clauses, or those clauses may be added
separately. Modifications (i.e., addi-
[62 FR 64917, Dec. 9, 1997, as amended at 64
FR 72418, Dec. 27, 1999; 67 FR 21534, Apr. 30,
2002]
13.303 Blanket purchase agreements
(BPAs).
13.303–1 General.
(a) A blanket purchase agreement
(BPA) is a simplified method of filling
anticipated repetitive needs for supplies or services by establishing
‘‘charge accounts’’ with qualified
sources of supply (see subpart 16.7 for
additional coverage of agreements).
(b) BPAs should be established for
use by an organization responsible for
providing supplies for its own operations or for other offices, installations, projects, or functions. Such organizations, for example, may be organized supply points, separate independent or detached field parties, or
one-person posts or activities.
(c) The use of BPAs does not exempt
an agency from the responsibility for
keeping obligations and expenditures
within available funds.
13.303–2 Establishment of BPAs.
(a) The following are circumstances
under which contracting officers may
establish BPAs:
(1) There is a wide variety of items in
a broad class of supplies or services
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48 CFR Ch. 1 (10–1–03 Edition)
that are generally purchased, but the
exact items, quantities, and delivery
requirements are not known in advance
and may vary considerably.
(2) There is a need to provide commercial sources of supply for one or
more offices or projects in a given area
that do not have or need authority to
purchase otherwise.
(3) The use of this procedure would
avoid the writing of numerous purchase orders.
(4) There is no existing requirements
contract for the same supply or service
that the contracting activity is required to use.
(b) After determining a BPA would be
advantageous,
contracting
officers
shall—
(1) Establish the parameters to limit
purchases to individual items or commodity groups or classes, or permit the
supplier to furnish unlimited supplies
or services; and
(2) Consider suppliers whose past performance has shown them to be dependable, who offer quality supplies or
services at consistently lower prices,
and who have provided numerous purchases at or below the simplified acquisition threshold.
(c) BPAs may be established with—
(1) More than one supplier for supplies or services of the same type to
provide maximum practicable competition;
(2) A single firm from which numerous individual purchases at or below
the simplified acquisition threshold
will likely be made in a given period;
or
(3) Federal Supply Schedule contractors, if not inconsistent with the terms
of the applicable schedule contract.
(d) BPAs should be prepared without
a purchase requisition and only after
contacting suppliers to make the necessary arrangements for—
(1) Securing maximum discounts;
(2) Documenting individual purchase
transactions;
(3) Periodic billings; and
(4) Incorporating other necessary details.
13.303–3 Preparation of BPAs.
Prepare BPAs on the forms specified
in 13.307. Do not cite accounting and
appropriation data (see 13.303–5(e)(4)).
(a) The following terms and conditions are mandatory:
(1) Description of agreement. A statement that the supplier shall furnish
supplies or services, described in general terms, if and when requested by
the contracting officer (or the authorized representative of the contracting
officer) during a specified period and
within a stipulated aggregate amount,
if any.
(2) Extent of obligation. A statement
that the Government is obligated only
to the extent of authorized purchases
actually made under the BPA.
(3) Purchase limitation. A statement
that specifies the dollar limitation for
each individual purchase under the
BPA (see 13.303–5(b)).
(4) Individuals authorized to purchase
under the BPA. A statement that a list
of individuals authorized to purchase
under the BPA, identified either by
title of position or by name of individual, organizational component, and
the dollar limitation per purchase for
each position title or individual shall
be furnished to the supplier by the contracting officer.
(5) Delivery tickets. A requirement
that all shipments under the agreement, except those for newspapers,
magazines, or other periodicals, shall
be accompanied by delivery tickets or
sales slips that shall contain the following minimum information:
(i) Name of supplier.
(ii) BPA number.
(iii) Date of purchase.
(iv) Purchase number.
(v) Itemized list of supplies or services furnished.
(vi) Quantity, unit price, and extension of each item, less applicable discounts (unit prices and extensions need
not be shown when incompatible with
the use of automated systems, provided
that the invoice is itemized to show
this information).
(vii) Date of delivery or shipment.
(6) Invoices. One of the following
statements shall be included (except
that the statement in paragraph
(a)(6)(iii) of this subsection should not
be used if the accumulation of the individual invoices by the Government materially increases the administrative
costs of this purchase method):
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(i) A summary invoice shall be submitted at least monthly or upon expiration of this BPA, whichever occurs
first, for all deliveries made during a
billing period, identifying the delivery
tickets covered therein, stating their
total dollar value, and supported by receipt copies of the delivery tickets.
(ii) An itemized invoice shall be submitted at least monthly or upon expiration of this BPA, whichever occurs
first, for all deliveries made during a
billing period and for which payment
has not been received. These invoices
need not be supported by copies of delivery tickets.
(iii) When billing procedures provide
for an individual invoice for each delivery, these invoices shall be accumulated, provided that—
(A) A consolidated payment will be
made for each specified period; and
(B) The period of any discounts will
commence on the final date of the billing period or on the date of receipt of
invoices for all deliveries accepted during the billing period, whichever is
later.
(iv) An invoice for subscriptions or
other charges for newspapers, magazines, or other periodicals shall show
the starting and ending dates and shall
state either that ordered subscriptions
have been placed in effect or will be
placed in effect upon receipt of payment.
(b) If the fast payment procedure is
used, include the requirements stated
in 13.403.
13.303–4 Clauses.
(a) The contracting officer shall insert in each BPA the clauses prescribed
elsewhere in this part that are required
for or applicable to the particular BPA.
(b) Unless a clause prescription specifies otherwise (e.g., see 22.305(a),
22.605(a)(5), or 22.1006), if the prescription includes a dollar threshold, the
amount to be compared to that threshold is that of any particular order
under the BPA.
13.303–5 Purchases under BPAs.
(a) Use a BPA only for purchases that
are otherwise authorized by law or regulation.
(b) Individual purchases shall not exceed the simplified acquisition thresh-
old. However, agency regulations may
establish a higher threshold consistent
with the following:
(1) The simplified acquisition threshold and the $5,000,000 limitation for individual purchases do not apply to
BPAs established in accordance with
13.303–2(c)(3).
(2) The limitation for individual purchases for commercial item acquisitions conducted under subpart 13.5 is
$5,000,000.
(c) The existence of a BPA does not
justify purchasing from only one
source or avoiding small business setasides. The requirements of 13.003(b)
and subpart 19.5 also apply to each
order.
(d) If, for a particular purchase greater than the micro-purchase threshold,
there is an insufficient number of BPAs
to ensure maximum practicable competition, the contracting officer shall—
(1) Solicit quotations from other
sources (see 13.105) and make the purchase as appropriate; and
(2) Establish additional BPAs to facilitate future purchases if—
(i) Recurring requirements for the
same or similar supplies or services
seem likely;
(ii) Qualified sources are willing to
accept BPAs; and
(iii) It is otherwise practical to do so.
(e) Limit documentation of purchases
to essential information and forms as
follows:
(1) Purchases generally should be
made electronically, or orally when it
is not considered economical or practical to use electronic methods.
(2) A paper purchase document may
be issued if necessary to ensure that
the supplier and the purchaser agree
concerning the transaction.
(3) Unless a paper document is issued,
record essential elements (e.g., date,
supplier, supplies or services, price, delivery date) on the purchase requisition, in an informal memorandum, or
on a form developed locally for the purpose.
(4) Cite the pertinent purchase requisitions and the accounting and appropriation data.
(5) When delivery is made or the services are performed, the supplier’s sales
document, delivery document, or invoice may (if it reflects the essential
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13.303–6
48 CFR Ch. 1 (10–1–03 Edition)
elements) be used for the purpose of recording receipt and acceptance of the
supplies or services. However, if the
purchase is assigned to another activity for administration, the authorized
Government representative shall document receipt and acceptance of supplies or services by signing and dating
the agency specified form after
verification and after notation of any
exceptions.
13.303–6
Review procedures.
(a) The contracting officer placing
orders under a BPA, or the designated
representative of the contracting officer, shall review a sufficient random
sample of the BPA files at least annually to ensure that authorized procedures are being followed.
(b) The contracting officer that entered into the BPA shall—
(1) Ensure that each BPA is reviewed
at least annually and, if necessary, updated at that time; and
(2) Maintain awareness of changes in
market conditions, sources of supply,
and other pertinent factors that may
warrant making new arrangements
with different suppliers or modifying
existing arrangements.
(c) If an office other than the purchasing office that established a BPA
is authorized to make purchases under
that BPA, the agency that has jurisdiction over the office authorized to make
the purchases shall ensure that the
procedures in paragraph (a) of this subsection are being followed.
13.303–7
Completion of BPAs.
An individual BPA is considered complete when the purchases under it
equal its total dollar limitation, if any,
or when its stated time period expires.
13.303–8
Optional clause.
The clause at 52.213–4, Terms and
Conditions—Simplified
Acquisitions
(Other Than Commercial Items), may
be used in BPAs established under this
section.
13.304
[Reserved]
13.305 Imprest funds and third party
drafts.
13.305–1 General.
Imprest funds and third party drafts
may be used to acquire and to pay for
supplies or services. Policies and regulations concerning the establishment
of and accounting for imprest funds
and third party drafts, including the
responsibilities of designated cashiers
and alternates, are contained in Part
IV of the Treasury Financial Manual
for Guidance of Departments and Agencies, Title 7 of the General Accounting
Office Policy and Procedures Manual
for Guidance of Federal Agencies, and
the agency implementing regulations.
Agencies also shall be guided by the
Manual of Procedures and Instructions
for Cashiers, issued by the Financial
Management Service, Department of
the Treasury.
13.305–2 Agency responsibilities.
Each agency using imprest funds and
third party drafts shall—
(a) Periodically review and determine
whether there is a continuing need for
each fund or third party draft account
established, and that amounts of those
funds or accounts are not in excess of
actual needs;
(b) Take prompt action to have imprest funds or third party draft accounts adjusted to a level commensurate with demonstrated needs whenever circumstances warrant such action; and
(c) Develop and issue appropriate implementing regulations. These regulations shall include (but are not limited
to) procedures covering—
(1) Designation of personnel authorized to make purchases using imprest
funds or third party drafts; and
(2) Documentation of purchases using
imprest funds or third party drafts, including documentation of—
(i) Receipt and acceptance of supplies
and services by the Government;
(ii) Receipt of cash or third party
draft payments by the suppliers; and
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(iii) Cash advances and reimbursements.
13.305–3
Conditions for use.
Imprest funds or third party drafts
may be used for purchases when—
(a) The imprest fund transaction does
not exceed $500 or such other limits as
have been approved by the agency
head;
(b) The third party draft transaction
does not exceed $2,500, unless authorized at a higher level in accordance
with Treasury restrictions;
(c) The use of imprest funds or third
party drafts is considered to be advantageous to the Government; and
(d) The use of imprest funds or third
party drafts for the transaction otherwise complies with any additional conditions established by agencies and
with the policies and regulations referenced in 13.305–1.
13.305–4
Procedures.
(a) Each purchase using imprest
funds or third party drafts shall be
based upon an authorized purchase requisition,
contracting
officer
verification statement, or other agency
approved method of ensuring that adequate funds are available for the purchase.
(b) Normally, purchases should be
placed orally and without soliciting
competition if prices are considered
reasonable.
(c) Since there is, for all practical
purposes, simultaneous placement of
the order and delivery of the items,
clauses are not required for purchases
using imprest funds or third party
drafts.
(d) Forms prescribed at 13.307(e) may
be used if a written order is considered
necessary (e.g., if required by the supplier for discount, tax exemption, or
other reasons). If a purchase order is
used, endorse it ‘‘Payment to be made
from Imprest Fund’’ (or ‘‘Payment to
be made from Third Party Draft,’’ as
appropriate).
(e) The individual authorized to
make purchases using imprest funds or
third party drafts shall—
(1) Furnish to the imprest fund or
third party draft cashier a copy of the
document required under paragraph (a)
of this subsection annotated to reflect—
(i) That an imprest fund or third
party draft purchase has been made;
(ii) The unit prices and extensions;
and
(iii) The supplier’s name and address;
and
(2) Require the supplier to include
with delivery of the supplies an invoice, packing slip, or other sales instrument giving—
(i) The supplier’s name and address;
(ii) List and quantity of items supplied;
(iii) Unit prices and extensions; and
(iv) Cash discount, if any.
13.306 SF 44, Purchase Order—Invoice—Voucher.
The SF 44, Purchase Order—Invoice—
Voucher, is a multipurpose pocket-size
purchase order form designed primarily
for on-the-spot, over-the-counter purchases of supplies and nonpersonal
services while away from the purchasing office or at isolated activities.
It also can be used as a receiving report, invoice, and public voucher.
(a) This form may be used if all of the
following conditions are satisfied:
(1) The amount of the purchase is at
or below the micro-purchase threshold,
except for purchases made under unusual and compelling urgency or in
support of contingency operations.
Agencies may establish higher dollar
limitations for specific activities or
items;
(2) The supplies or services are immediately available;
(3) One delivery and one payment will
be made; and
(4) Its use is determined to be more
economical and efficient than use of
other simplified acquisition procedures.
(b) General procedural instructions
governing the form’s use are printed on
the form and on the inside front cover
of each book of forms.
(c) Since there is, for all practical
purposes, simultaneous placement of
the order and delivery of the items,
clauses are not required for purchases
using this form.
(d) Agencies shall provide adequate
safeguards regarding the control of
forms and accounting for purchases.
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13.307
48 CFR Ch. 1 (10–1–03 Edition)
13.307 Forms.
(a) Commercial items. For use of the
SF 1449, Solicitation/Contract/Order for
Commercial Items, see 12.204.
(b) Other than commercial items.
(1) Except when quotations are solicited via FACNET, electronically, or
orally, the SF 1449; SF 18, Request for
Quotations; or an agency form/automated format may be used. Each agency request for quotations form/automated format should conform with the
SF 18 or SF 1449 to the maximum extent practicable.
(2) Both SF 1449 and OF 347, Order for
Supplies or Services, are multipurpose
forms used for negotiated purchases of
supplies or services, delivery or task
orders, inspection and receiving reports, and invoices. An agency form/
automated format also may be used.
(c) Forms used for both commercial and
other than commercial items.
(1) OF 336, Continuation Sheet, or an
agency form/automated format may be
used when additional space is needed.
(2) OF 348, Order for Supplies or Services Schedule—Continuation, or an
agency form/automated format may be
used for negotiated purchases when additional space is needed. Agencies may
print on these forms the clauses considered to be generally suitable for purchases.
(3) SF 30, Amendment of Solicitation/
Modification of Contract, or a purchase
order form may be used to modify a
purchase order, unless an agency form/
automated format is prescribed in
agency regulations.
(d) SF 44, Purchase Order—Invoice—
Voucher, is a multipurpose pocket-size
purchase order form that may be used
as outlined in 13.306.
(e) SF 1165, Receipt for Cash—Subvoucher, or an agency purchase order
form may be used for purchases using
imprest funds or third party drafts.
[62 FR 64917, Dec. 9, 1997, as amended at 63
FR 58593, Oct. 30, 1998]
Subpart 13.4—Fast Payment
Procedure
13.401 General.
(a) The fast payment procedure allows payment under limited conditions
to a contractor prior to the Govern-
ment’s verification that supplies have
been received and accepted. The procedure provides for payment for supplies
based on the contractor’s submission of
an invoice that constitutes a certification that the contractor—
(1) Has delivered the supplies to a
post office, common carrier, or point of
first receipt by the Government; and
(2) Shall replace, repair, or correct
supplies not received at destination,
damaged in transit, or not conforming
to purchase agreements.
(b) The contracting officer shall be
primarily responsible for collecting
debts resulting from failure of contractors to properly replace, repair, or correct supplies lost, damaged, or not conforming to purchase requirements (see
32.605(b) and 32.606).
13.402
Conditions for use.
If the conditions in paragraphs (a)
through (f) of this section are present,
the fast payment procedure may be
used, provided that use of the procedure is consistent with the other conditions of the purchase. The conditions
for use of the fast payment procedure
are as follows:
(a) Individual purchasing instruments do not exceed $25,000, except
that executive agencies may permit
higher dollar limitations for specified
activities or items on a case-by-case
basis.
(b) Deliveries of supplies are to occur
at locations where there is both a geographical separation and a lack of adequate communications facilities between Government receiving and disbursing activities that will make it impractical to make timely payment
based on evidence of Government acceptance.
(c) Title to the supplies passes to the
Government—
(1) Upon delivery to a post office or
common carrier for mailing or shipment to destination; or
(2) Upon receipt by the Government
if the shipment is by means other than
Postal Service or common carrier.
(d) The supplier agrees to replace, repair, or correct supplies not received at
destination, damaged in transit, or not
conforming to purchase requirements.
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Federal Acquisition Regulation
13.500
(e) The purchasing instrument is a
firm-fixed-price contract, a purchase
order, or a delivery order for supplies.
(f) A system is in place to ensure—
(1) Documentation of evidence of contractor performance under fast payment purchases;
(2) Timely feedback to the contracting officer in case of contractor
deficiencies; and
(3) Identification of suppliers that
have a current history of abusing the
fast payment procedure (also see subpart 9.1).
13.403 Preparation and execution of
orders.
Priced or unpriced contracts, purchase orders, or BPAs using the fast
payment procedure shall include the
following:
(a) A requirement that the supplies
be shipped transportation or postage
prepaid.
(b) A requirement that invoices be
submitted directly to the finance or
other office designated in the order, or
in the case of unpriced purchase orders,
to the contracting officer (see 13.302–
2(c)).
(c) The following statement on the
consignee’s copy:
Consignee’s Notification to Purchasing
Activity of Nonreceipt, Damage, or
Nonconformance
The consignee shall notify the purchasing office promptly after the specified date of delivery of supplies not received, damaged in transit, or not conforming to specifications of the purchase order. Unless extenuating circumstances exist, the notification
should be made not later than 60 days
after the specified date of delivery.
13.404
Contract clause.
The contracting officer shall insert
the clause at 52.213–1, Fast Payment
Procedure, in solicitations and contracts when the conditions in 13.402 are
applicable and it is intended that the
fast payment procedure be used in the
contract (in the case of BPAs, the contracting officer may elect to insert the
clause either in the BPA or in orders
under the BPA).
Subpart 13.5—Test Program for
Certain Commercial Items
13.500 General.
(a) This subpart authorizes, as a test
program, use of simplified procedures
for the acquisition of supplies and services in amounts greater than the simplified acquisition threshold but not
exceeding $5,000,000, including options,
if the contracting officer reasonably
expects, based on the nature of the supplies or services sought, and on market
research, that offers will include only
commercial items, except as provided
in paragraph (e) of this section. Under
this test program, contracting officers
may use any simplified acquisition procedure in this part, subject to any specific dollar limitation applicable to the
particular procedure. The purpose of
this test program is to vest contracting
officers with additional procedural discretion and flexibility, so that commercial item acquisitions in this dollar
range may be solicited, offered, evaluated, and awarded in a simplified manner that maximizes efficiency and
economy and minimizes burden and administrative costs for both the Government and industry (10 U.S.C. 2304(g)
and 2305 and 41 U.S.C. 253(g) and 253a
and 253b).
(b) For the period of this test, contracting activities must employ the
simplified procedures authorized by the
test to the maximum extent practicable.
(c) When acquiring commercial items
using the procedures in this part, the
requirements of part 12 apply subject
to the order of precedence provided at
12.102(c). This includes use of the provisions and clauses in subpart 12.3.
(d) The authority to issue solicitations under this subpart expires on
January 1, 2004. Contracting officers
may award contracts after the expiration of this authority for solicitations
issued before the expiration of the authority.
(e) The $5,000,000 limitation provided
in this subpart 13.5 does not apply to
acquisitions of supplies or services
using the authority provided by
12.102(f)(1). Notwithstanding the expiration of the test program specified in
paragraph (d) of this section, authority
to use simplified procedures under this
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13.501
48 CFR Ch. 1 (10–1–03 Edition)
paragraph applies to an acquisition
when the solicitation is issued by any
agency from January 24, 2003, through
November 24, 2003.
[62 FR 64917, Dec. 9, 1997, as amended at 64
FR 72448, Dec. 27, 1999; 67 FR 6115, Feb. 8,
2002; 67 FR 80321, Dec. 31, 2002; 68 FR 4050,
Jan. 27, 2003]
13.501 Special documentation requirements.
(a) Sole source acquisitions. (1) Acquisitions conducted under simplified acquisition procedures are exempt from
the requirements in part 6. However,
contracting officers must—
(i) Conduct sole source acquisitions,
as defined in 2.101, under this subpart
only if the need to do so is justified in
writing and approved at the levels
specified in paragraph (a)(2) of this section; and
(ii) Prepare sole source justifications
using the format at 6.303–2, modified to
reflect an acquisition under the authority of the test program for commercial items (section 4202 of the
Clinger-Cohen Act of 1996) or the authority of the Homeland Security Act
(Public Law 107–296, section 856) as implemented at 12.102(f)(1).
(2) Justifications and approvals are
required under this subpart only for
sole source acquisitions.
(i) For a proposed contract exceeding
$100,000, but not exceeding $500,000, the
contracting officer’s certification that
the justification is accurate and complete to the best of the contracting officer’s knowledge and belief will serve
as approval, unless a higher approval
level is established in accordance with
agency procedures.
(ii) For a proposed contract exceeding
$500,000
but
not
exceeding
$10,000,000, the competition advocate
for the procuring activity, designated
pursuant to 6.501, or an official described in 6.304(a)(3) or (a)(4) must approve the justification and approval.
This authority is not delegable.
(iii) For a proposed contract exceeding $10,000,000 but not exceeding
$50,000,000, the head of the procuring
activity or the official described in
6.304(a)(3) or (a)(4) must approve the
justification and approval. This authority is not delegable.
(iv) For a proposed contract exceeding $50,000,000 the official described in
6.304(a)(4) must approve the justification and approval. This authority is
not delegable except as provided in
6.304(a)(4).
(b) Contract file documentation. The
contract file must include—
(1) A brief written description of the
procedures used in awarding the contract, including the fact that the test
procedures in FAR subpart 13.5 were
used;
(2) The number of offers received;
(3) An explanation, tailored to the
size and complexity of the acquisition,
of the basis for the contract award decision; and
(4) Any justification approved under
paragraph (a) of this section.
[62 FR 64917, Dec. 9, 1997, as amended at 64
FR 72448, Dec. 27, 1999; 66 FR 2128, Jan. 10,
2001; 68 FR 4050, Jan. 27, 2003]
PART 14—SEALED BIDDING
Sec.
14.000
Scope of part.
Subpart 14.1—Use of Sealed Bidding
14.101 Elements of sealed bidding.
14.102 [Reserved]
14.103 Policy.
14.103–1 General.
14.103–2 Limitations.
14.104 Types of contracts.
14.105 Solicitations for informational
planning purposes.
Subpart 14.2—Solicitation of Bids
14.201 Preparation of invitations for bids.
14.201–1 Uniform contract format.
14.201–2 Part I—The Schedule.
14.201–3 Part II—Contract clauses.
14.201–4 Part III—Documents, exhibits, and
other attachments.
14.201–5 Part IV—Representations and instructions.
14.201–6 Solicitation provisions.
14.201–7 Contract clauses.
14.201–8 Price-related factors.
14.201–9 Simplified contract format.
14.202 General rules for solicitation of bids.
14.202–1 Bidding time.
14.202–2 Telegraphic bids.
14.202–3 Bid envelopes.
14.202–4 Bid samples.
14.202–5 Descriptive literature.
14.202–6 Final review of invitations for bids.
14.202–7 Facsimile bids.
14.202–8 Electronic bids.
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Federal Acquisition Regulation
14.101
14.203 Methods of soliciting bids.
14.203–1 Transmittal to prospective bidders.
14.203–2 Dissemination of information concerning invitations for bids.
14.203–3 Master solicitation.
14.204 Records of invitations for bids and
records of bids.
14.205 Presolicitation notices.
14.206 [Reserved]
14.207 Pre-bid conference.
14.208 Amendment of invitation for bids.
14.209 Cancellation of invitations before
opening.
14.210 Qualified products.
14.211 Release of acquisition information.
14.212 Economic purchase quantities (supplies).
14.213 Annual submission of representations
and certifications.
14.214 [Reserved]
Subpart 14.3—Submission of Bids
14.301 Responsiveness of bids.
14.302 Bid submission.
14.303 Modification or withdrawal of bids.
14.304 Submission, modification, and withdrawal of bids.
Subpart 14.4—Opening of Bids and Award
of Contract
14.400 Scope of subpart.
14.401 Receipt and safeguarding of bids.
14.402 Opening of bids.
14.402–1 Unclassified bids.
14.402–2 Classified bids.
14.402–3 Postponement of openings.
14.403 Recording of bids.
14.404 Rejection of bids.
14.404–1 Cancellation of invitations after
opening.
14.404–2 Rejection of individual bids.
14.404–3 Notice to bidders of rejection of all
bids.
14.404–4 Restrictions on disclosure of descriptive literature.
14.404–5 All or none qualifications.
14.405 Minor informalities or irregularities
in bids.
14.406 Receipt of an unreadable electronic
bid.
14.407 Mistakes in bids.
14.407–1 General.
14.407–2 Apparent clerical mistakes.
14.407–3 Other mistakes disclosed before
award.
14.407–4 Mistakes after awards.
14.408 Award.
14.408–1 General.
14.408–2 Responsible bidder—reasonableness
of price.
14.408–3 Prompt payment discounts.
14.408–4 Economic price adjustment.
14.408–5 [Reserved]
14.408–6 Equal low bids.
14.408–7 Documentation of award.
14.408–8 Protests against award.
14.409 Information to bidders.
14.409–1 Award of unclassified contracts.
14.409–2 Award of classified contracts.
Subpart 14.5—Two-Step Sealed Bidding
14.501 General.
14.502 Conditions for use.
14.503 Procedures.
14.503–1 Step one.
14.503–2 Step two.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42171, Sept. 19, 1983, unless
otherwise noted.
14.000
Scope of part.
This part prescribes (a) the basic requirements of contracting for supplies
and services (including construction)
by sealed bidding, (b) the information
to be included in the solicitation (invitation for bids), (c) procedures concerning the submission of bids, (d) requirements for opening and evaluating
bids and awarding contracts, and (e)
procedures for two-step sealed bidding.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
Subpart 14.1—Use of Sealed
Bidding
14.101
Elements of sealed bidding.
Sealed bidding is a method of contracting that employs competitive
bids, public opening of bids, and
awards. The following steps are involved:
(a) Preparation of invitations for bids.
Invitations must describe the requirements of the Government clearly, accurately, and completely. Unnecessarily
restrictive specifications or requirements that might unduly limit the
number of bidders are prohibited. The
invitation includes all documents
(whether attached or incorporated by
reference) furnished prospective bidders for the purpose of bidding.
(b) Publicizing the invitation for bids.
Invitations must be publicized through
distribution to prospective bidders,
posting in public places, and such other
means as may be appropriate. Publicizing must occur a sufficient time before public opening of bids to enable
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14.102
48 CFR Ch. 1 (10–1–03 Edition)
prospective bidders to prepare and submit bids.
(c) Submission of bids. Bidders must
submit sealed bids to be opened at the
time and place stated in the solicitation for the public opening of bids.
(d) Evaluation of bids. Bids shall be
evaluated without discussions.
(e) Contract award. After bids are publicly opened, an award will be made
with reasonable promptness to that responsible bidder whose bid, conforming
to the invitation for bids, will be most
advantageous to the Government, considering only price and the price-related factors included in the invitation.
in the invitation, as provided in subpart 14.4.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
14.102
[Reserved]
14.105 Solicitations for informational
or planning purposes.
14.103
Policy.
14.103–1
14.104
Types of contracts.
Firm-fixed-price contracts shall be
used when the method of contracting is
sealed bidding, except that fixed-price
contracts with economic price adjustment clauses may be used if authorized
in accordance with 16.203 when some
flexibility is necessary and feasible.
Such clauses must afford all bidders an
equal opportunity to bid.
See 15.201(e).
General.
(a) Sealed bidding shall be used
whenever the conditions in 6.401(a) are
met. This requirement applies to any
proposed contract action under part 6.
(b) Sealed bidding may be used for
classified acquisitions if its use does
not violate agency security requirements.
(c) The policy for pricing modifications of sealed bid contracts appears in
15.403–4(a)(1)(iii).
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 62 FR 51270, Sept. 30, 1997; 67 FR 6114,
Feb. 8, 2002; 68 FR 43856, July 24, 2003]
14.103–2
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
Limitations.
No awards shall be made as a result
of sealed bidding unless—
(a) Bids have been solicited as required by subpart 14.2;
(b) Bids have been submitted as required by subpart 14.3;
(c) The requirements of 1.602–1(b) and
part 6 have been met; and
(d) An award is made to the responsible bidder (see 9.1) whose bid is responsive to the terms of the invitation
for bids and is most advantageous to
the Government, considering only price
and the price-related factors included
[48 FR 42171, Sept. 19, 1983, as amended at 62
FR 51270, Sept. 30, 1997]
Subpart 14.2—Solicitation of Bids
14.201 Preparation of invitations for
bids.
14.201–1
Uniform contract format.
(a) Contracting officers shall prepare
invitations for bids and contracts using
the uniform contract format outlined
in Table 14–1 to the maximum practicable extent. The use of the format
facilitates preparation of the solicitation and contract as well as reference
to, and use of, those documents by bidders and contractors. It need not be
used for acquisition of the following:
(1) Construction (see part 36).
(2) Shipbuilding (including design,
construction, and conversion), ship
overhaul, and ship repair.
(3) Subsistence items.
(4) Supplies or services requiring special contract forms prescribed elsewhere in this regulation that are inconsistent with the uniform contract
format.
(5) Firm-fixed-price or fixed-price
with economic price adjustment acquisitions that use the simplified contract
format (see 14.201–9).
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Federal Acquisition Regulation
14.201–2
(b) Information suitable for inclusion
in invitations for bids under the uniform contract format shall also be included in invitations for bids not subject to that format if applicable.
(c) Solicitations to which the uniform contract format applies shall include Parts I, II, III, and IV. If any section of the uniform contract format
does not apply, the contracting officer
should so mark that section in the solicitation. Upon award, the contracting
officer shall not physically include
Part IV in the resulting contract, but
shall retain it in the contract file.
Award by acceptance of a bid on the
award portion of Standard Form 33, Solicitation Offer and Award (SF 33),
Standard Form 26, Award/Contract (SF
26), or Standard Form 1447, Solicitation/Contract (SF 1447), incorporates
Section K, Representations, certifications, and other statements of bidders, in the resultant contract even
though not physically attached.
TABLE 14–1
Uniform Contract Format
Section
Title
A
B
C
D
E
F
G
H
Part I—The Schedule
Solicitation/contract form
Supplies or services and prices
Description/specifications
Packaging and marking
Inspection and acceptance
Deliveries or performance
Contract administration data
Special contract requirements
I
Part II—Contract Clauses
Contract clauses
Part III—List of Documents, Exhibits, and Other Attachments
J
List of documents, exhibits, and other attachments
K
L
M
Part IV—Representations and Instructions
Representations, certifications, and other statements of bidders
Instructions, conditions, and notices to bidders
Evaluation factors for award
[48 FR 42171, Sept. 19, 1983, as amended at 54
FR 48982, Nov. 28, 1989]
14.201–2 Part I—The Schedule.
The contracting officer shall prepare
the Schedule as follows:
(a) Section A, Solicitation/contract form.
(1) Prepare the invitation for bids on
SF 33, or the SF 1447, unless otherwise
permitted by this regulation. The SF 33
is the first page of the solicitation and
includes Section A of the uniform con-
tract format. When the SF 1447 is used
as the solicitation document, the information in subdivisions (a)(2)(i) and
(a)(2)(iv) of this subsection shall be inserted in block 9 of the SF 1447.
(2) When the SF 33 or SF 1447 is not
used, include the following on the first
page of the invitation for bids:
(i) Name, address, and location of
issuing activity, including room and
building where bids must be submitted.
(ii) Invitation for bids number.
(iii) Date of issuance.
(iv) Time specified for receipt of bids.
(v) Number of pages.
(vi) Requisition or other purchase authority.
(vii) Requirement for bidder to provide its name and complete address, including street, city, county, State, and
ZIP code.
(viii) A statement that bidders
should include in the bid the address to
which payment should be mailed, if
that address is different from that of
the bidder.
(b) Section B, Supplies or services and
prices. Include a brief description of the
supplies or services; e.g., item number,
national stock number/part number if
applicable, title or name identifying
the supplies or services, and quantities
(see part 11). The SF 33 and SF 1447
may be supplemented as necessary by
the Optional Form 336 (OF 336), Continuation Sheet (53.302–336).
(c) Section C, Description/specifications.
Include any description or specifications needed in addition to Section B
to permit full and open competition
(see part 11).
(d) Section D, Packaging and marking.
Provide packaging, packing, preservation, and marking requirements, if
any.
(e) Section E, Inspection and acceptance. Include inspection, acceptance,
quality assurance, and reliability requirements (see part 46, Quality Assurance).
(f) Section F, Deliveries or performance.
Specify the requirements for time,
place, and method of delivery or performance (see subpart 11.4, Delivery or
Performance Schedules).
(g) Section G, Contract administration
data. Include any required accounting
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14.201–3
48 CFR Ch. 1 (10–1–03 Edition)
and appropriation data and any required contract administration information or instructions other than
those on the solicitation form.
(h) Section H, Special contract requirements. Include a clear statement of any
special contract requirements that are
not included in Section I, Contract
clauses, or in other sections of the uniform contract format.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 27119, July 29, 1986; 54 FR 48982,
Nov. 28, 1989; 55 FR 38516, Sept. 18, 1990; 60 FR
48248, Sept. 18, 1995]
14.201–3 Part II—Contract clauses.
Section I, Contract clauses. The contracting officer shall include in this
section the clauses required by law or
by this regulation and any additional
clauses expected to apply to any resulting contract, if these clauses are not
required to be included in any other
section of the uniform contract format.
[48 FR 42171, Sept. 19, 1983, as amended at 53
FR 17857, May 18, 1988]
14.201–4 Part III—Documents, exhibits, and other attachments.
Section J, List of documents, exhibits,
and other attachments. The contracting
officer shall list the title, date, and
number of pages for each attached document.
14.201–5 Part IV—Representations and
instructions.
The contracting officer shall prepare
the representations and instructions as
follows:
(a) Section K, Representations, certifications, and other statements of bidders.
Include in this section those solicitation provisions that require representations, certifications, or the submission
of other information by bidders.
(b) Section L, Instructions, conditions,
and notices to bidders. Insert in this section solicitation provisions and other
information and instructions not required elsewhere to guide bidders. Invitations shall include the time and
place for bid openings, and shall advise
bidders that bids will be evaluated
without discussions (see 52.214–10 and,
for construction contracts, 52.214–19).
(c) Section M, Evaluation factors for
award. Identify the price-related fac-
tors other than the bid price that will
be considered in evaluating bids and
awarding the contract. (See 14.201–8.)
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 53 FR 17857, May 18, 1988]
14.201–6
Solicitation provisions.
(a) The provisions prescribed in this
subsection apply to preparation and
submission of bids in general. See other
FAR parts for provisions and clauses
related to specific acquisition requirements.
(b) Insert in all invitations for bids
the provisions at—
(1) 52.214–3, Amendments to Invitations for Bids; and
(2) 52.214–4, False Statements in Bids.
(c) Insert the following provisions in
invitations for bids:
(1) 52.214–5, Submission of Bids.
(2) 52.214–6, Explanation to Prospective Bidders.
(3) 52.214–7, Late Submissions, Modifications, and Withdrawals of Bids.
(d) [Reserved]
(e) Insert in all invitations for bids,
except those for construction, the provision at 52.214–10, Contract AwardSealed Bidding.
(f) Insert in invitations for bids to
which the uniform contract format applies, the provision at 52.214–12, Preparation of Bids.
(g)(1) Insert the provision at 52.214–13,
Telegraphic Bids, in invitations for
bids if the contracting officer decides
to authorize telegraphic bids.
(2) Use the provision with its Alternate I in invitations for bids that are
for perishable subsistence, and when
the contracting officer considers that
offerors will be unwilling to provide acceptance periods long enough to allow
written confirmation.
(h) Insert the provision at 52.214–14,
Place of Performance—Sealed Bidding,
in invitations for bids except those in
which the place of performance is specified by the Government.
(i) Insert the provision at 52.214–15,
Period for Acceptance of Bids, in invitations for bids (IFB’s) that are not
issued on SF 33 or SF 1447 except IFB’s
(1) for construction work or (2) in
which the Government specifies a minimum acceptance period.
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Federal Acquisition Regulation
14.201–6
(j) Insert the provision at 52.214–16,
Minimum Bid Acceptance Period, in invitations for bids, except for construction, if the contracting officer determines that a minimum acceptance period must be specified.
(k) [Reserved]
(l) Insert the provision at 52.214–18,
Preparation of Bids—Construction, in
invitations for bids for construction
work.
(m) Insert the provision at 52.214–19,
Contract Award—Sealed Bidding—Construction, in all invitations for bids for
construction work.
(n) [Reserved]
(o)(1) Insert the provision at 52.214–20,
Bid Samples, in invitations for bids if
bid samples are required.
(2) If it appears that the conditions in
14.202–4(e)(1) will apply and the contracting officer anticipates granting
waivers and—
(i) If the nature of the required product does not necessitate limiting the
grant of a waiver to a product produced
at the same plant in which the product
previously acquired or tested was produced, use the provision with its Alternate I; or
(ii) If the nature of the required product necessitates limiting the grant of a
waiver to a product produced at the
same plant in which the product previously acquired or tested was produced, use the provision with its Alternate II.
(3)
See
14.202–4(e)(2)
regarding
waiving the requirement for all bidders.
(p)(1) Insert the provision at 52.214–21,
Descriptive Literature, in invitations
for bids if (i) descriptive literature is
required to evaluate the technical acceptability of an offered product and
(ii) the required information will not
be readily available unless it is submitted by bidders.
(2) Use the basic clause with its Alternate I if the possibility exists that
the contracting officer may waive the
requirement for furnishing descriptive
literature for a bidder offering a previously supplied product that meets
specification requirements of the current solicitation.
(3)
See
14.202–5(d)(2)
regarding
waiving the requirement for all bidders.
(q) Insert the provision at 52.214–22,
Evaluation of Bids for Multiple
Awards, in invitations for bids if the
contracting officer determines that
multiple awards might be made if
doing so is economically advantageous
to the Government.
(r) Insert the provision at 52.214–23,
Late Submissions, Modifications, Revisions, and Withdrawals of Technical
Proposals under Two-Step Sealed Bidding, in solicitations for technical proposals in step one of two-step sealed
bidding.
(s) Insert the provision at 52.214–24,
Multiple Technical Proposals, in solicitations for technical proposals in step
one of two-step sealed bidding if the
contracting officer permits the submission of multiple technical proposals.
(t) Insert the provision at 52.214–25,
Step Two of Two-Step Sealed Bidding,
in invitations for bids issued under step
two of two-step sealed bidding.
(u) Insert the provision at 52.214–30,
Annual Representations and Certifications-Sealed Bidding, in invitations
for bids if annual representations and
certifications are used (see 14.213).
(v) Insert the provision at 52.214–31,
Facsimile Bids, in solicitations if facsimile bids are authorized (see 14.202–7).
(w) Insert the provision at 52.214–34,
Submission of Offers in the English
Language, in solicitations that include
any of the clauses prescribed in 25.1101
or 25.1102. It may be included in other
solicitations when the contracting officer decides that it is necessary.
(x) Insert the provision at 52.214–35,
Submission of Offers in U.S. Currency,
in solicitations that include any of the
clauses prescribed in 25.1101 or 25.1102,
unless the contracting officer includes
the clause at 52.225–17, Evaluation of
Foreign Currency Offers, as prescribed
in 25.1103(d). It may be included in
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14.201–7
48 CFR Ch. 1 (10–1–03 Edition)
other solicitations when the contracting officer decides that it is necessary.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 2649, Jan. 17, 1986; 53 FR 43390,
Oct. 26, 1988; 54 FR 5054, Jan. 31, 1989; 54 FR
48982, Nov. 28, 1989; 55 FR 25527, June 21, 1990;
56 FR 15149, Apr. 15, 1991; 58 FR 31141, May 28,
1993; 59 FR 545, Jan. 5, 1994; 60 FR 34737, July
3, 1995; 62 FR 51230, Sept. 30, 1997; 63 FR 58589,
Oct. 30, 1998; 64 FR 10532, Mar. 4, 1999; 64 FR
51838, Sept. 24, 1999; 64 FR 72418, 72451, Dec.
27, 1999; 67 FR 13055, Mar. 20, 2002; 68 FR 43856,
July 24, 2003]
14.201–7
Contract clauses.
(a) When contracting by sealed bidding, the contracting officer shall insert the clause at 52.214–26, Audit and
Records—Sealed Bidding, in solicitations and contracts if the contract
amount is expected to exceed the
threshold at 15.403–4(a)(1) for submission of cost or pricing data.
(b)(1) When contracting by sealed
bidding, the contracting officer shall
insert the clause at 52.214–27, Price Reduction for Defective Cost or Pricing
Data—Modifications—Sealed Bidding,
in solicitations and contracts if the
contract amount is expected to exceed
the threshold for submission of cost or
pricing data at 15.403–4(a)(1).
(2) In exceptional cases, the head of
the contracting activity may waive the
requirement for inclusion of the clause
in a contract with a foreign government or agency of that government.
The authorizations for the waiver and
the reasons for granting it shall be in
writing.
(c)(1) When contracting by sealed bidding, the contracting officer shall insert the clause at 52.214–28, Subcontractor Cost or Pricing Data—Modifications—Sealed Bidding, in solicitations and contracts if the contract
amount is expected to exceed the
threshold for submission of cost or
pricing data at 15.403–4(a)(1).
(2) In exceptional cases, the head of
the contracting activity may waive the
requirement for inclusion of the clause
in a contract with a foreign government or agency of that government.
The authorizations for the waiver and
the reasons for granting it shall be in
writing.
(d) When contracting by sealed bidding, the contracting officer shall insert the clause at 52.214–29, Order of
Precedence—Sealed Bidding, in solicitations and contracts to which the uniform contract format applies.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 2649, Jan. 17, 1986; 56 FR 67413,
Dec. 30, 1991; 59 FR 62499, Dec. 5, 1994; 60 FR
42650, Aug. 16, 1995; 60 FR 48211, Sept. 18, 1995;
62 FR 51270, Sept. 30, 1997]
14.201–8 Price-related factors.
The factors set forth in paragraphs
(a) through (e) below may be applicable
in evaluation of bids for award and
shall be included in the solicitation
when applicable. (See 14.201–5(c).)
(a) Foreseeable costs or delays to the
Government resulting from such factors as differences in inspection, locations of supplies, and transportation. If
bids are on an f.o.b. origin basis (see
47.303 and 47.305), transportation costs
to the designated points shall be considered in determining the lowest cost
to the Government.
(b) Changes made, or requested by
the bidder, in any of the provisions of
the invitation for bids, if the change
does not constitute a ground for rejection under 14.404.
(c) Advantages or disadvantages to
the Government that might result
from making more than one award (see
14.201–6(q)). The contracting officer
shall assume, for the purpose of making multiple awards, that $500 would be
the administrative cost to the Government for issuing and administering
each contract awarded under a solicitation. Individual awards shall be for the
items or combinations of items that result in the lowest aggregate cost to the
Government, including the assumed administrative costs.
(d) Federal, State, and local taxes
(see part 29).
(e) Origin of supplies, and, if foreign,
the application of the Buy American
Act or any other prohibition on foreign
purchases (see part 25).
[50 FR 1738, Jan. 11, 1985, and 50 FR 52429,
Dec. 23, 1985; 55 FR 25527, June 21, 1990]
14.201–9 Simplified contract format.
Policy. For firm-fixed-price or fixedprice with economic price adjustment
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Federal Acquisition Regulation
14.202–2
acquisitions of supplies and services,
the contracting officer may use the
simplified contract format in lieu of
the uniform contract format (see
14.201–1). The contracting officer has
flexibility in preparation and organization of the simplified contract format.
However, the following format should
be used to the maximum practical extent:
(a) Solicitation/contract form. Standard
Form (SF) 1447, Solicitation/Contract,
shall be used as the first page of the solicitation.
(b) Contract schedule. Include the following for each contract line item:
(1) Contract line item number.
(2) Description of supplies or services,
or data sufficient to identify the requirement.
(3) Quantity and unit of issue.
(4) Unit price and amount.
(5) Packaging and marking requirements.
(6) Inspection and acceptance, quality assurance, and reliability requirements.
(7) Place of delivery, performance
and delivery dates, period of performance, and f.o.b. point.
(8) Other item-peculiar information
as necessary (e.g., individual fund citations).
(c) Clauses. Include the clauses required by this regulation. Additional
clauses shall be incorporated only
when considered absolutely necessary
to the particular acquisition.
(d) List of documents and attachments.
Include if necessary.
(e) Representations and instructions—
(1) Representations and certifications. Insert those solicitation provisions that
require representations, certifications,
or the submission of other information
by offerors.
(2) Instructions, conditions, and notices.
Include the solicitation provisions required by 14.201–6. Include any other information/instructions necessary to
guide offerors.
(3) Evaluation factors for award. Insert
all evaluation factors and any significant subfactors for award.
(4) Upon award, the contracting officer need not physically include the provisions in subparagraphs (e)(1), (2), and
(3) of this subsection in the resulting
contract, but shall retain them in the
contract file. Award by acceptance of a
bid on the award portion of SF 1447 incorporates the representations, certifications, and other statements of bidders in the resultant contract even
though not physically attached.
[54 FR 48983, Nov. 28, 1989, as amended at 56
FR 41733, Aug. 22, 1991]
14.202 General rules for solicitation of
bids.
14.202–1
Bidding time.
(a) Policy. A reasonable time for prospective bidders to prepare and submit
bids shall be allowed in all invitations,
consistent with the needs of the Government. (For construction contracts,
see 36.213–3(a).) A bidding time (i.e., the
time between issuance of the solicitation and opening of bids) of at least 30
calendar days shall be provided when
synopsis is required by subpart 5.2.
(b) Factors to be considered. Because of
unduly limited bidding time, some potential sources may be precluded from
bidding and others may be forced to include amounts for contingencies that,
with additional time, could be eliminated. To avoid unduly restricting
competition or paying higher-than-necessary prices, consideration shall be
given to such factors as the following
in establishing a reasonable bidding
time: (1) degree of urgency; (2) complexity of requirement; (3) anticipated
extent of subcontracting; (4) whether
use was made of presolicitation notices; (5) geographic distribution of bidders; and (6) normal transmittal time
for both invitations and bids.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 34737, July 3, 1995; 62 FR 272, Jan.
2, 1997]
14.202–2
Telegraphic bids.
(a) Telegraphic bids and mailgrams
shall be authorized only when—
(1) The date for the opening of bids
will not allow bidders sufficient time
to submit bids in the prescribed format; or
(2) Prices are subject to frequent
changes.
(b) If telegraphic bids are to be authorized, see 14.201–6(g). Unauthorized
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14.202–3
48 CFR Ch. 1 (10–1–03 Edition)
telegraphic bids shall not be considered
(see 14.301(b)).
[48 FR 42171, Sept. 19, 1983, as amended at 60
FR 34737, July 3, 1995]
14.202–3
Bid envelopes.
(a) Postage or envelopes bearing Postage and Fees Paid indicia shall not be
distributed with the invitation for bids
or otherwise supplied to prospective
bidders.
(b) To provide for ready identification and proper handling of bids, Optional Form 17, Offer Label, may be
furnished with each bid set. The form
may be obtained from the General
Services Administration (see 53.107).
[48 FR 42171, Sept. 19, 1983, as amended at 59
FR 67033, Dec. 28, 1994]
14.202–4
Bid samples.
(a) Policy. (1) Bidders shall not be required to furnish bid samples unless
there are characteristics of the product
that cannot be described adequately in
the specification or purchase description.
(2) Bid samples will be used only to
determine the responsiveness of the bid
and will not be used to determine a bidder’s ability to produce the required
items.
(3) Bid samples may be examined for
any required characteristic, whether or
not such characteristic is adequately
described in the specification, if listed
in accordance with subdivision (e)(1)(ii)
below.
(4) Bids will be rejected as nonresponsive if the sample fails to conform to
each of the characteristics listed in the
invitation.
(b) When to use. The use of bid samples would be appropriate for products
that must be suitable from the standpoint of balance, facility of use, general ‘‘feel,’’ color, pattern, or other
characteristics that cannot be described adequately in the specification.
However, when more than a minor portion of the characteristics of the product cannot be adequately described in
the specification, products should be
acquired by two-step sealed bidding or
negotiation, as appropriate.
(c) Justification. The reasons why acceptable products cannot be acquired
without the submission of bid samples
shall be set forth in the contract file,
except where the submission is required by the formal specifications
(Federal, Military, or other) applicable
to the acquisition.
(d) Requirements for samples in invitations for bids. (1) Invitations for bids
shall—
(i) State the number and, if appropriate, the size of the samples to be
submitted and otherwise fully describe
the samples required; and
(ii) List all the characteristics for
which the samples will be examined.
(2) If bid samples are required, see
14.201–6(o).
(e) Waiver of requirement for bid samples. (1) The requirement for furnishing
bid samples may be waived when a bidder offers a product previously or currently being contracted for or tested by
the Government and found to comply
with specification requirements conforming in every material respect with
those in the current invitation for bids.
When the requirement may be waived,
see 14.201–6(o)(2).
(2) Where samples required by a Federal, Military, or other formal specification are not considered necessary
and a waiver of the sample requirements of the specification has been authorized, a statement shall be included
in the invitation that notwithstanding
the requirements of the specification,
samples will not be required.
(f) Unsolicited samples. Bid samples
furnished with a bid that are not required by the invitation generally will
not be considered as qualifying the bid
and will be disregarded. However, the
bid sample will not be disregarded if it
is clear from the bid or accompanying
papers that the bidder’s intention was
to qualify the bid. (See 14.404–2(d) if the
qualification does not conform to the
solicitation.)
(g) Handling bid samples. (1) Samples
that are not destroyed in testing shall
be returned to bidders at their request
and expense, unless otherwise specified
in the invitation.
(2) Disposition instructions shall be
requested from bidders and samples
disposed of accordingly.
(3) Samples ordinarily will be returned collect to the address from
which received if disposition instructions are not received within 30 days.
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Federal Acquisition Regulation
14.202–7
Small items may be returned by mail,
postage prepaid.
(4) Samples that are to be retained
for inspection purposes in connection
with deliveries shall be transmitted to
the inspecting activity concerned, with
instructions to retain the sample until
completion of the contract or until disposition instructions are furnished.
(5) Where samples are consumed or
their usefulness is impaired by tests,
they will be disposed of as scrap unless
the bidder requests their return.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 67 FR 13055, Mar. 20, 2002]
14.202–5 Descriptive literature.
(a) Policy. Contracting officers must
not require bidders to furnish descriptive literature unless it is needed before award to determine whether the
products offered meet the specification
and to establish exactly what the bidder proposes to furnish.
(b) Justification. The contracting officer must document in the contract file
the reasons why product acceptability
cannot be determined without the submission of descriptive literature, except when the contract specifications
require submission.
(c) Requirements of invitation for bids.
(1) The invitation must clearly state—
(i) What descriptive literature the
bidders must furnish;
(ii) The purpose for requiring the literature;
(iii) The extent of its consideration
in the evaluation of bids; and
(iv) The rules that will apply if a bidder fails to furnish the literature before bid opening or if the literature
provided does not comply with the requirements of the invitation.
(2) If bidders must furnish descriptive
literature, see 14.201–6(p).
(d) Waiver of requirement for descriptive
literature. (1) The contracting officer
may waive the requirement for descriptive literature if—
(i) The bidder states in the bid that
the product being offered is the same
as a product previously or currently
being furnished to the contracting activity; and
(ii) The contracting officer determines that the product offered by the
bidder complies with the specification
requirements of the current invitation
for bids. When the contracting officer
waives the requirement, see 14.201–
6(p)(2).
(2) When descriptive literature is not
necessary and a waiver of literature requirements of a specification has been
authorized, the contracting officer
must include a statement in the invitation that, despite the requirements of
the specifications, descriptive literature will not be required.
(3) If the solicitation provides for a
waiver, a bidder may submit a bid on
the basis of either the descriptive literature furnished with the bid or a previously furnished product. If the bid is
submitted on one basis, the bidder may
not have it considered on the other
basis after bids are opened.
(e) Unsolicited descriptive literature. If
descriptive literature is furnished when
it is not required by the invitation for
bids, the procedures set forth in 14.202–
4(f) must be followed.
[67 FR 13055, Mar. 20, 2002]
14.202–6 Final review of invitations for
bids.
Each invitation for bids shall be
thoroughly reviewed before issuance to
detect and correct discrepancies or ambiguities that could limit competition
or result in the receipt of nonresponsive bids. Contracting officers are responsible for the reviews.
14.202–7
Facsimile bids.
(a) Unless prohibited or otherwise restricted by agency procedures, contracting officers may authorize facsimile bids (see 14.201–6(v)). In determining whether or not to authorize
facsimile bids, the contracting officer
shall consider factors such as—
(1) Anticipated bid size and volume;
(2) Urgency of the requirement;
(3) Frequency of price changes;
(4) Availability, reliability, speed,
and capacity of the receiving facsimile
equipment; and
(5) Adequacy of administrative procedures and controls for receiving, identifying, recording, and safeguarding facsimile bids, and ensuring their timely
delivery to the bids opening location.
(b) If facsimile bids are authorized,
contracting officers may, after the date
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14.202–8
48 CFR Ch. 1 (10–1–03 Edition)
set for bid opening, request the apparently successful offeror to provide the
complete original signed bid.
[54 FR 48983, Nov. 28, 1989, as amended at 64
FR 51838, Sept. 24, 1999]
14.202–8
[66 FR 2128, Jan. 10, 2001]
Electronic bids.
In accordance with subpart 4.5, contracting officers may authorize use of
electronic commerce for submission of
bids. If electronic bids are authorized,
the solicitation shall specify the electronic commerce method(s) that bidders may use.
[60 FR 34737, July 3, 1995
14.203
Methods of soliciting bids.
14.203–1 Transmittal
bidders.
to
(a) Make available copies of the master solicitation on request; and
(b) Provide the cognizant contract
administration activity a current copy
of the master solicitation.
prospective
Invitations for bids or presolicitation
notices must be provided in accordance
with 5.102. When a contracting office is
located in the United States, any solicitation sent to a prospective bidder located outside the United States shall
be sent by electronic data interchange
or air mail if security classification
permits.
[68 FR 28081, May 22, 2003, as amended at 68
FR 43856, July 24, 2003]
14.203–2 Dissemination of information
concerning invitations for bids.
(a) Procedures concerning display of
invitations for bids in a public place,
information releases to newspapers and
trade journals, paid advertisements,
and synopsizing through the Governmentwide point of entry (GPE) are set
forth in 5.101 and Subpart 5.2.
(b) For procedures that apply to publicizing notices through the GPE to determine whether commercial sources
are available, as prescribed by OMB
Circular A–76, see 5.205(e) and 7.303(b).
14.204 Records of invitations for bids
and records of bids.
(a) Each contracting office shall retain a record of each invitation that it
issues and each abstract or record of
bids. Contracting officers shall review
and utilize the information available in
connection with subsequent acquisitions of the same or similar items.
(b) The file for each invitation shall
show the distribution that was made
and the date the invitation was issued.
The names and addresses of prospective
bidders who requested the invitation
and were not included on the original
solicitation list shall be added to the
list and made a part of the record.
14.205
Presolicitation notices.
In lieu of initially forwarding complete bid sets, the contracting officer
may send presolicitation notices to
concerns. The notice shall—
(a) Specify the final date for receipt
of requests for a complete bid set;
(b) Briefly describe the requirement
and furnish other essential information
to enable concerns to determine whether they have an interest in the invitation; and
(c) Normally not include drawings,
plans, and specifications. The return
date of the notice must be sufficiently
in advance of the mailing date of the
invitation for bids to permit an accurate estimate of the number of bid sets
required. Bid sets shall be sent to concerns that request them in response to
the notice.
[68 FR 43856, July 24, 2003]
[66 FR 27413, May 16, 2001]
14.203–3
14.206
Master solicitation.
The master solicitation is provided
to potential sources who are requested
to retain it for continued and repetitive use. Individual solicitations must
reference the date of the current master solicitation and identify any
changes.
The
contracting
officer
must—
[Reserved]
14.207 Pre-bid conference.
A pre-bid conference may be used,
generally in a complex acquisition, as
a means of briefing prospective bidders
and explaining complicated specifications and requirements to them as
early as possible after the invitation
has been issued and before the bids are
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Federal Acquisition Regulation
14.211
opened. It shall never be used as a substitute for amending a defective or ambiguous invitation. The conference
shall be conducted in accordance with
the procedure prescribed in 15.201.
[48 FR 42171, Sept. 19, 1983, as amended at 62
FR 51270, Sept. 30, 1997]
14.208 Amendment of invitation for
bids.
(a) If it becomes necessary to make
changes in quantity, specifications, delivery schedules, opening dates, etc., or
to correct a defective or ambiguous invitation, such changes shall be accomplished by amendment of the invitation
for bids using Standard Form 30,
Amendment of Solicitation/Modification of Contract. The fact that a
change was mentioned at a pre-bid conference does not relieve the necessity
for issuing an amendment. Amendments shall be sent, before the time for
bid opening, to everyone to whom invitations have been furnished and shall
be displayed in the bid room.
(b) Before amending an invitation for
bids, the period of time remaining until
bid opening and the need to extend this
period shall be considered. When only a
short time remains before the time set
for bid opening, consideration should
be given to notifying bidders of an extension of time by telegrams or telephone. Such extension must be confirmed in the amendment.
(c) Any information given to a prospective bidder concerning an invitation for bids shall be furnished promptly to all other prospective bidders as an
amendment to the invitation (1) if such
information is necessary for bidders to
submit bids or (2) if the lack of such information would be prejudicial to uninformed bidders. The information shall
be furnished even though a pre-bid conference is held. No award shall be made
on the invitation unless such amendment has been issued in sufficient time
to permit all prospective bidders to
consider such information in submitting or modifying their bids.
14.209 Cancellation of invitations before opening.
(a) The cancellation of an invitation
for bids usually involves a loss of time,
effort, and money spent by the Government and bidders. Invitations should
not be cancelled unless cancellation is
clearly in the public interest; e.g., (1)
where there is no longer a requirement
for the supplies or services or (2) where
amendments to the invitation would be
of such magnitude that a new invitation is desirable.
(b) When an invitation issued other
than electronically is cancelled, bids
that have been received shall be returned unopened to the bidders and notice of cancellation shall be sent to all
prospective bidders to whom invitations were issued. When an invitation
issued electronically is cancelled, a
general notice of cancellation shall be
posted electronically, the bids received
shall not be viewed, and the bids shall
be purged from primary and backup
data storage systems.
(c) The notice of cancellation shall
(1) identify the invitation for bids by
number and short title or subject matter, (2) briefly explain the reason the
invitation is being cancelled, and (3)
where appropriate, assure prospective
bidders that they will be given an opportunity to bid on any resolicitation
of bids or any future requirements for
the type of supplies or services involved. Cancellations shall be recorded
in accordance with 14.403(d).
[48 FR 42171, Sept. 19, 1983, as amended at 60
FR 34737, July 3, 1995; 62 FR 12692, Mar. 17,
1997]
14.210 Qualified products.
See subpart 9.2.
14.211 Release of acquisition information.
(a) Before solicitation. Information
concerning proposed acquisitions shall
not be released outside the Government before solicitation except for
presolicitation notices in accordance
with 14.205 or 36.213–2, or long-range acquisition estimates in accordance with
5.404, or synopses in accordance with
5.201. Within the Government, such information shall be restricted to those
having a legitimate interest. Releases
of information shall be made (1) to all
prospective bidders, and (2) as nearly as
possible at the same time, so that one
prospective bidder shall not be given
unfair advantage over another. See
3.104 regarding requirements for proprietary and source selection information
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14.212
48 CFR Ch. 1 (10–1–03 Edition)
including access to and disclosure
thereof.
(b) After solicitation. Discussions with
prospective bidders regarding a solicitation shall be conducted and technical
or other information shall be transmitted only by the contracting officer
or superiors having contractual authority or by others specifically authorized. Such personnel shall not furnish any information to a prospective
bidder that alone or together with
other information may afford an advantage over others. However, general
information that would not be prejudicial to other prospective bidders may
be furnished upon request; e.g., explanation of a particular contract clause
or a particular condition of the schedule in the invitation for bids, and more
specific information or clarifications
may be furnished by amending the solicitation (see 14.208).
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 55 FR 36795, Sept. 6, 1990; 62 FR 272, Jan.
2, 1997; 68 FR 43856, July 24, 2003]
14.212 Economic purchase quantities
(supplies).
Contracting officers shall comply
with the economic purchase quantity
planning requirements for supplies in
subpart 7.2. See 7.203 for instructions
regarding use of the provision at 52.207–
4, Economic Purchase Quantity—Supplies, and 7.204 for guidance on handling responses to that provision.
[50 FR 35479, Aug. 30, 1985]
14.213 Annual submission of representations and certifications.
(a) Submission of offeror representations and certifications on an annual
basis, as an alternative to submission
in each solicitation, may be authorized
by agencies subject to the requirements of this section. The decision to
use annual representations and certifications shall be made in accordance
with agency procedures.
(b) In accordance with agency procedures, each contracting office utilizing
annual representations and certifications shall establish procedures and
assign responsibilities for centrally requesting, receiving, storing, verifying
and updating offeror’s annual submissions. Generally, the representations
and certifications shall be effective for
a period of 1 year from date of signature.
(c) The contracting officer shall not
include in individual solicitations the
full text of provisions that are contained in the annual representations
and certifications.
(d) Offerors shall make changes that
affect only one solicitation by completing the appropriate section of the
provision at 52.214–30, Annual Representations and Certifications—Sealed
Bidding.
[54 FR 48983, Nov. 28, 1989]
14.214
[Reserved]
Subpart 14.3—Submission of Bids
14.301
Responsiveness of bids.
(a) To be considered for award, a bid
must comply in all material respects
with the invitation for bids. Such compliance enables bidders to stand on an
equal footing and maintain the integrity of the sealed bidding system.
(b) Telegraphic bids shall not be considered unless permitted by the invitation. The term telegraphic bids means
bids submitted by telegram or by
mailgram.
(c) Facsimile bids shall not be considered unless permitted by the solicitation (see 14.202–7).
(d) Bids should be filled out, executed, and submitted in accordance
with the instructions in the invitation.
If a bidder uses its own bid form or a
letter to submit a bid, the bid may be
considered only if (1) the bidder accepts
all the terms and conditions of the invitation and (2) award on the bid would
result in a binding contract with terms
and conditions that do not vary from
the terms and conditions of the invitation.
(e) Bids submitted by electronic commerce shall be considered only if the
electronic commerce method was specifically stipulated or permitted by the
solicitation.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 54 FR 48983, Nov. 28, 1989; 60 FR 34738,
July 3, 1995]
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Federal Acquisition Regulation
14.304
14.302 Bid submission.
(a) Bids shall be submitted so that
they will be received in the office designated in the invitation for bids (referred to in paragraphs (b) and (c)
below as the designated office) not later
than the exact time set for opening of
bids.
(b) Except as specified in paragraph
(c) below, if telegraphic bids are authorized, a telegraphic bid that is communicated by means of a telephone call
to the designated office shall be considered if—
(1) Agency regulations authorize such
consideration;
(2) The telephone call is made by the
telegraph office that received the telegraphic bid;
(3) The telephone call is received by
the designated office not later than the
time set for the bid opening;
(4) The telegraph office that received
the telegraphic bid sends the designated office the telegram that
formed the basis for the telephone call;
(5) The telegram indicates on its face
that it was received in the telegraph
office before the telephone call was received by the designated office; and
(6) The bid in the telegram is identical in all essential respects to the bid
received in the telephone call from the
telegraph office.
(c) If the conditions in paragraph (b)
above apply and the bid received by
telephone is the apparent low bid,
award may not be made until the telegram is received by the designated office; however, if the telegram is not received by the designated office within 5
days after the bid opening date, the bid
shall be rejected.
14.303 Modification or withdrawal of
bids.
(a) Bids may be modified or withdrawn by any method authorized by
the solicitation, if notice is received in
the office designated in the solicitation
not later than the exact time set for
opening of bids. Unless proscribed by
agency regulations, a telegraphic
modification or withdrawal of a bid received in such office by telephone from
the receiving telegraph office shall be
considered. However, the message shall
be confirmed by the telegraph company
by sending a copy of the written tele-
gram that formed the basis for the
telephone call. If the solicitation authorizes facsimile bids, bids may be
modified or withdrawn via facsimile received at any time before the exact
time set for receipt of bids, subject to
the conditions specified in the provision prescribed in 14.201–6(v). Modifications received by telephone (including
a record of those telephoned by the
telegraph company) or facsimile shall
be sealed in an envelope by a proper official. The official shall write on the
envelope (1) the date and time of receipt and by whom, and (2) the number
of the invitation for bids, and shall
sign the envelope. No information contained in the envelope shall be disclosed before the time set for bid opening.
(b) A bid may be withdrawn in person
by a bidder or its authorized representative if, before the exact time set for
opening of bids, the identity of the persons requesting withdrawal is established and that person signs a receipt
for the bid.
(c) Upon withdrawal of an electronically transmitted bid, the data received shall not be viewed and shall be
purged from primary and backup data
storage systems.
[48 FR 42171, Sept. 19, 1983, as amended at 54
FR 48983, Nov. 28, 1989; 60 FR 34738, July 3,
1995; 64 FR 51838, Sept. 24, 1999]
14.304 Submission, modification, and
withdrawal of bids.
(a) Bidders are responsible for submitting bids, and any modifications or
withdrawals, so as to reach the Government office designated in the invitation for bid (IFB) by the time specified
in the IFB. They may use any transmission method authorized by the IFB
(i.e., regular mail, electronic commerce, or facsimile). If no time is specified in the IFB, the time for receipt is
4:30 p.m., local time, for the designated
Government office on the date that
bids are due.
(b)(1) Any bid, modification, or withdrawal of a bid received at the Government office designated in the IFB after
the exact time specified for receipt of
bids is ‘‘late’’ and will not be considered unless it is received before award
is made, the contracting officer determines that accepting the late bid
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14.400
48 CFR Ch. 1 (10–1–03 Edition)
would not unduly delay the acquisition; and—
(i) If it was transmitted through an
electronic commerce method authorized by the IFB, it was received at the
initial point of entry to the Government infrastructure not later than 5:00
p.m. one working day prior to the date
specified for receipt of bids; or
(ii) There is acceptable evidence to
establish that it was received at the
Government installation designated for
receipt of bids and was under the Government’s control prior to the time set
for receipt of bids.
(2) However, a late modification of an
otherwise successful bid, that makes
its terms more favorable to the Government, will be considered at any
time it is received and may be accepted.
(c) Acceptable evidence to establish
the time of receipt at the Government
installation includes the time/date
stamp of that installation on the bid
wrapper, other documentary evidence
of receipt maintained by the installation, or oral testimony or statements
of Government personnel.
(d) If an emergency or unanticipated
event interrupts normal Government
processes so that bids cannot be received at the Government office designated for receipt of bids by the exact
time specified in the IFB, and urgent
Government requirements preclude
amendment of the bid opening date,
the time specified for receipt of bids
will be deemed to be extended to the
same time of day specified in the IFB
on the first work day on which normal
Government processes resume.
(e) Bids may be withdrawn by written
notice received at any time before the
exact time set for receipt of bids. If the
IFB authorizes facsimile bids, bids may
be withdrawn via facsimile received at
any time before the exact time set for
receipt of bids, subject to the conditions specified in the provision at
52.214–31, Facsimile Bids. A bid may be
withdrawn in person by a bidder or its
authorized representative if, before the
exact time set for receipt of bids, the
identity of the person requesting withdrawal is established and the person
signs a receipt for the bid. Upon withdrawal of an electronically transmitted
bid, the data received must not be
viewed and, where practicable, must be
purged from primary and backup data
storage systems.
(f) The contracting officer must
promptly notify any bidder if its bid,
modification, or withdrawal was received late, and must inform the bidder
whether its bid will be considered, unless contract award is imminent and
the notices prescribed in 14.409 would
suffice.
(g) Late bids and modifications that
are not considered must be held unopened, unless opened for identification, until after award and then retained with other unsuccessful bids.
However, any bid bond or guarantee
must be returned.
(h) If available, the following must be
included in the contract files for each
late bid, modification, or withdrawal:
(1) The date and hour of receipt.
(2) A statement, with supporting rationale, regarding whether the bid was
considered for award.
(3) The envelope, wrapper, or other
evidence of the date of receipt.
[64 FR 51838, Sept. 24, 1999]
Subpart 14.4—Opening of Bids
and Award of Contract
14.400 Scope of subpart.
This subpart contains procedures for
the receipt, handling, opening, and disposition of bids including mistakes in
bids, and subsequent award of contracts.
[48 FR 42171, Sept. 19, 1983, as amended at 63
FR 58594, Oct. 30, 1998].
14.401 Receipt and safeguarding of
bids.
(a) All bids (including modifications)
received before the time set for the
opening of bids shall be kept secure.
Except as provided in paragraph (b) of
this section, the bids shall not be
opened or viewed, and shall remain in a
locked bid box, a safe, or in a secured,
restricted-access electronic bid box. If
an invitation for bids is cancelled, bids
shall be returned to the bidders. Necessary precautions shall be taken to
ensure the security of the bid box or
safe. Before bid opening, information
concerning the identity and number of
bids received shall be made available
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Federal Acquisition Regulation
14.402–3
only to Government employees. Such
disclosure shall be only on a need to
know basis. When bid samples are submitted, they shall be handled with sufficient care to prevent disclosure of
characteristics before bid opening.
(b) Envelopes marked as bids but not
identifying the bidder or the solicitation may be opened solely for the purpose of identification, and then only by
an official designated for this purpose.
If a sealed bid is opened by mistake
(e.g., because it is not marked as being
a bid), the envelope shall be signed by
the opener, whose position shall also be
written thereon, and delivered to the
designated official. This official shall
immediately write on the envelope (1)
an explanation of the opening, (2) the
date and time opened, and (3) the invitation for bids number, and shall sign
the envelope. The official shall then
immediately reseal the envelope.
[48 FR 42171, Sept. 19, 1983, as amended at 60
FR 34738, July 3, 1995]
14.402
Opening of bids.
14.402–1 Unclassified bids.
(a) The bid opening officer shall decide when the time set for opening bids
has arrived and shall inform those
present of that decision. The officer
shall then (1) personally and publicly
open all bids received before that time,
(2) if practical, read the bids aloud to
the persons present, and (3) have the
bids recorded. The original of each bid
shall be carefully safeguarded, particularly until the abstract of bids required
by 14.403 has been made and its accuracy verified.
(b) Performance of the procedure in
paragraph (a) above may be delegated
to an assistant, but the bid opening officer remains fully responsible for the
actions of the assistant.
(c) Examination of bids by interested
persons shall be permitted if it does
not interfere unduly with the conduct
of Government business. Original bids
shall not be allowed to pass out of the
hands of a Government official unless a
duplicate bid is not available for public
inspection. The original bid may be examined by the public only under the
immediate supervision of a Government official and under conditions that
preclude possibility of a substitution,
addition, deletion, or alteration in the
bid.
14.402–2 Classified bids.
The general public may not attend
bid openings for classified acquisitions.
A bidder or its representative may attend and record the results if the individual has the appropriate security
clearance. The contracting officer also
may make the bids available at a later
time to properly cleared individuals
who represent bidders. No public record
shall be made of bids or bid prices received in response to classified invitations for bids.
[67 FR 6114, Feb. 8, 2002]
14.402–3 Postponement of openings.
(a) A bid opening may be postponed
even after the time scheduled for bid
opening (but otherwise in accordance
with 14.208) and—
(1) The contracting officer has reason
to believe that the bids of an important
segment of bidders have been delayed
in the mails, or in the communications
system specified for transmission of
bids, for causes beyond their control
and without their fault or negligence
(e.g., flood, fire, accident, weather conditions, strikes, or Government equipment blackout or malfunction when
bids are due); or
(2) Emergency or unanticipated
events interrupt normal governmental
processes so that the conduct of bid
openings as scheduled is impractical.
(b) At the time of a determination to
postpone a bid opening under subparagraph (a)(1) above, an announcement of
the determination shall be publicly
posted. If practical before issuance of a
formal amendment of the invitation,
the determination shall be otherwise
communicated to prospective bidders
who are likely to attend the scheduled
bid opening.
(c) In the case of paragraph (a)(2) of
this section, and when urgent Government requirements preclude amendment of the solicitation as prescribed
in 14.208, the time specified for opening
of bids will be deemed to be extended
to the same time of day specified in the
solicitation on the first work day on
which normal Government processes
resume. In such cases, the time of actual bid opening shall be deemed to be
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14.403
48 CFR Ch. 1 (10–1–03 Edition)
the time set for bid opening for the
purpose of determining ‘‘late bids’’
under 14.304. A note should be made on
the abstract of bids or otherwise added
to the file explaining the circumstances of the postponement.
[48 FR 42171, Sept. 19, 1983, as amended at 60
FR 34738, July 3, 1995; 61 FR 31619, June 20,
1996]
14.403
Recording of bids.
(a) Standard Form 1409, Abstract of
Offers, or Optional Form 1419, Abstract
of Offers—Construction (or automated
equivalent), shall be completed and
certified as to its accuracy by the bid
opening officer as soon after bid opening as practicable. Where bid items are
too numerous to warrant complete recording of all bids, abstract entries for
individual bids may be limited to item
numbers and bid prices. In preparing
these forms, the extra columns and SF
1410, Abstract of Offers—Continuation,
and OF 1419A, Abstract of Offers—Construction, Continuation Sheet, may be
used to label and record such information as the contracting activity deems
necessary.
(b) Abstracts of offers for unclassified
acquisitions shall be available for public inspection. Such abstracts shall not
contain information regarding failure
to meet minimum standards of responsibility, apparent collusion of bidders,
or other notations properly exempt
from disclosure to the public in accordance with agency regulations implementing subpart 24.2.
(c) The forms identified in paragraph
(a) above need not be used by the Defense Fuel Supply Center for acquisitions of coal or petroleum products or
by the Defense Personnel Support Center for perishable subsistence items.
(d) If an invitation for bids is cancelled before the time set for bid opening, this fact shall be recorded together
with a statement of the number of bids
invited and the number of bids received.
[48 FR 42171, Sept. 19, 1983, as amended at 54
FR 29280, July 11, 1989]
14.404
Rejection of bids.
14.404–1 Cancellation
after opening.
of
invitations
(a)(1) Preservation of the integrity of
the competitive bid system dictates
that, after bids have been opened,
award must be made to that responsible bidder who submitted the lowest
responsive bid, unless there is a compelling reason to reject all bids and
cancel the invitation.
(2) Every effort shall be made to anticipate changes in a requirement before the date of opening and to notify
all prospective bidders of any resulting
modification or cancellation. This will
permit bidders to change their bids and
prevent unnecessary exposure of bid
prices.
(3) As a general rule, after the opening of bids, an invitation should not be
cancelled and resolicited due solely to
increased requirements for the items
being acquired. Award should be made
on the initial invitation for bids and
the additional quantity should be
treated as a new acquisition.
(b) When it is determined before
award but after opening that the requirements of 11.201 (relating to the
availability and identification of specifications) have not been met, the invitation shall be cancelled.
(c) Invitations may be cancelled and
all bids rejected before award but after
opening when, consistent with paragraph (a)(1) above, the agency head determines in writing that—
(1) Inadequate or ambiguous specifications were cited in the invitation;
(2) Specifications have been revised;
(3) The supplies or services being contracted for are no longer required;
(4) The invitation did not provide for
consideration of all factors of cost to
the Government, such as cost of transporting Government-furnished property to bidders’ plants;
(5) Bids received indicate that the
needs of the Government can be satisfied by a less expensive article differing
from that for which the bids were invited;
(6) All otherwise acceptable bids received are at unreasonable prices, or
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Federal Acquisition Regulation
14.404–2
only one bid is received and the contracting officer cannot determine the
reasonableness of the bid price;
(7) The bids were not independently
arrived at in open competition, were
collusive, or were submitted in bad
faith (see subpart 3.3 for reports to be
made to the Department of Justice);
(8) No responsive bid has been received from a responsible bidder.
(9) A cost comparison as prescribed in
OMB Circular A–76 and subpart 7.3
shows that performance by the Government is more economical; or
(10) For other reasons, cancellation is
clearly in the public’s interest.
(d) Should administrative difficulties
be encountered after bid opening that
may delay award beyond bidders’ acceptance periods, the several lowest
bidders whose bids have not expired (irrespective of the acceptance period
specified in the bid) should be requested, before expiration of their bids,
to extend in writing the bid acceptance
period (with consent of sureties, if any)
in order to avoid the need for resoliciting.
(e) Under some circumstances, completion of the acquisition after cancellation of the invitation for bids may
be appropriate.
(1) If the invitation for bids has been
cancelled for the reasons specified in
subparagraphs (c) (6), (7), or (8) of this
subsection, and the agency head has
authorized, in the determination in
paragraph (c) of this subsection, the
completion of the acquisition through
negotiation, the contracting officer
shall proceed in accordance with paragraph (f) of this subsection.
(2) If the invitation for bids has been
cancelled for the reasons specified in
subparagraphs (c) (1), (2), (4), (5), or (10)
of this subsection, or for the reasons in
subparagraphs (c) (6), (7), or (8) of this
subsection and completion through negotiation is not authorized under subparagraph (e)(1) of this subsection, the
contracting officer shall proceed with a
new acquisition.
(f) When the agency head has determined, in accordance with paragraph
(e)(1) of this subsection, that an invitation for bids should be canceled and
that use of negotiation is in the Government’s interest, the contracting officer may negotiate (in accordance
with part 15, as appropriate) and make
award without issuing a new solicitation provided—
(1) Each responsible bidder in the
sealed bid acquisition has been given
notice that negotiations will be conducted and has been given an opportunity to participate in negotiations;
and
(2) The award is made to the responsible bidder offering the lowest negotiated price.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 55 FR 52790, Dec. 21, 1990; 60 FR 48248,
Sept. 18, 1995; 62 FR 51230, Sept. 30, 1997]
14.404–2 Rejection of individual bids.
(a) Any bid that fails to conform to
the essential requirements of the invitation for bids shall be rejected.
(b) Any bid that does not conform to
the applicable specifications shall be
rejected unless the invitation authorized the submission of alternate bids
and the supplies offered as alternates
meet the requirements specified in the
invitation.
(c) Any bid that fails to conform to
the delivery schedule or permissible alternates stated in the invitation shall
be rejected.
(d) A bid shall be rejected when the
bidder imposes conditions that would
modify requirements of the invitation
or limit the bidder’s liability to the
Government, since to allow the bidder
to impose such conditions would be
prejudicial to other bidders. For example, bids shall be rejected in which the
bidder—
(1) Protects against future changes in
conditions, such as increased costs, if
total possible costs to the Government
cannot be determined;
(2) Fails to state a price and indicates that price shall be price in effect
at time of delivery;
(3) States a price but qualifies it as
being subject to price in effect at time of
delivery;
(4) When not authorized by the invitation, conditions or qualifies a bid by
stipulating that it is to be considered
only if, before date of award, the bidder
receives (or does not receive) award
under a separate solicitation;
(5) Requires that the Government is
to determine that the bidder’s product
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14.404–3
48 CFR Ch. 1 (10–1–03 Edition)
meets applicable Government specifications; or
(6) Limits rights of the Government
under any contract clause.
(e) A low bidder may be requested to
delete objectionable conditions from a
bid provided the conditions do not go
to the substance, as distinguished from
the form, of the bid, or work an injustice on other bidders. A condition goes
to the substance of a bid where it affects price, quantity, quality, or delivery of the items offered.
(f) Any bid may be rejected if the
contracting officer determines in writing that it is unreasonable as to price.
Unreasonableness of price includes not
only the total price of the bid, but the
prices for individual line items as well.
(g) Any bid may be rejected if the
prices for any line items or subline
items are materially unbalanced (see
15.404–1(g)).
(h) Bids received from any person or
concern that is suspended, debarred,
proposed for debarment, or declared ineligible as of the bid opening date shall
be rejected unless a compelling reason
determination is made (see subpart
9.4).
(i) Low bids received from concerns
determined to be not responsible pursuant to subpart 9.1 shall be rejected (but
if a bidder is a small business concern,
see 19.6 with respect to certificates of
competency).
(j) When a bid guarantee is required
and a bidder fails to furnish the guarantee in accordance with the requirements of the invitation for bids, the bid
shall be rejected, except as otherwise
provided in 28.101–4.
(k) The originals of all rejected bids,
and any written findings with respect
to such rejections, shall be preserved
with the papers relating to the acquisition.
(l) After submitting a bid, if all of a
bidder’s assets or that part related to
the bid are transferred during the period between the bid opening and the
award, the transferee may not be able
to take over the bid. Accordingly, the
contracting officer shall reject the bid
unless the transfer is effected by merger, operation of law, or other means
not barred by 41 U.S.C. 15 or 31 U.S.C.
3727.
[48 FR 42171, Sept. 19, 1983, as amended at 51
FR 2649, Jan. 17, 1986; 55 FR 25527, June 21,
1990; 55 FR 36795, Sept. 6, 1990; 56 FR 29127,
June 25, 1991; 62 FR 232, Jan. 2, 1997; 62 FR
51270, Sept. 30, 1997; 65 FR 80265, Dec. 20, 2000;
66 FR 17756, Apr. 3, 2001; 66 FR 66986, 66989,
Dec. 27, 2001]
14.404–3 Notice to bidders of rejection
of all bids.
When it is determined necessary to
reject all bids, the contracting officer
shall notify each bidder that all bids
have been rejected and shall state the
reason for such action.
14.404–4 Restrictions on disclosure of
descriptive literature.
When a bid is accompanied by descriptive literature (as defined in 2.101),
and the bidder imposes a restriction
that prevents the public disclosure of
such literature, the restriction may
render the bid nonresponsive. The restriction renders the bid nonresponsive
if it prohibits the disclosure of sufficient information to permit competing
bidders to know the essential nature
and type of the products offered or
those elements of the bid that relate to
quantity, price, and delivery terms.
The provisions of this paragraph do not
apply to unsolicited descriptive literature submitted by a bidder if such
literature does not qualify the bid (see
14.202–5(e)).
[48 FR 42171, Sept. 19, 1983, as amended at 67
FR 13056, Mar. 20, 2002]
14.404–5 All or none qualifications.
Unless the solicitation provides otherwise, a bid may be responsive notwithstanding that the bidder specifies
that award will be accepted only on all,
or a specified group, of the items. Bidders shall not be permitted to withdraw or modify all or none qualifications after bid opening since such
qualifications are substantive and affect the rights of other bidders.
14.405 Minor informalities or irregularities in bids.
A minor informality or irregularity
is one that is merely a matter of form
and not of substance. It also pertains
to some immaterial defect in a bid or
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Federal Acquisition Regulation
14.407–2
variation of a bid from the exact requirements of the invitation that can
be corrected or waived without being
prejudicial to other bidders. The defect
or variation is immaterial when the effect on price, quantity, quality, or delivery is negligible when contrasted
with the total cost or scope of the supplies or services being acquired. The
contracting officer either shall give the
bidder an opportunity to cure any deficiency resulting from a minor informality or irregularity in a bid or waive
the deficiency, whichever is to the advantage of the Government. Examples
of minor informalities or irregularities
include failure of a bidder to—
(a) Return the number of copies of
signed bids required by the invitation;
(b) Furnish required information concerning the number of its employees;
(c) Sign its bid, but only if—
(1) The unsigned bid is accompanied
by other material indicating the bidder’s intention to be bound by the unsigned bid (such as the submission of a
bid guarantee or a letter signed by the
bidder, with the bid, referring to and
clearly identifying the bid itself); or
(2) The firm submitting a bid has formally adopted or authorized, before the
date set for opening of bids, the execution of documents by typewritten,
printed, or stamped signature and submits evidence of such authorization
and the bid carries such a signature;
(d) Acknowledge receipt of an amendment to an invitation for bids, but only
if—
(1) The bid received clearly indicates
that the bidder received the amendment, such as where the amendment
added another item to the invitation
and the bidder submitted a bid on the
item; or
(2) The amendment involves only a
matter of form or has either no effect
or merely a negligible effect on price,
quantity, quality, or delivery of the
item bid upon; and
(e) Execute the representations with
respect to Equal Opportunity and Affirmative Action Programs, as set
forth in the clauses at 52.222–22, Previous Contracts and Compliance Re-
ports, and 52.222–25, Affirmative Action
Compliance.
[48 FR 42171, Sept. 19, 1983, as amended at 55
FR 25527, June 21, 1990; 62 FR 236, Jan. 2, 1997;
64 FR 10532, Mar. 4, 1999]
14.406 Receipt of an unreadable electronic bid.
If a bid received at the Government
facility by electronic data interchange
is unreadable to the degree that conformance to the essential requirements
of the invitation for bids cannot be
ascertained, the contracting officer immediately shall notify the bidder that
the bid will be rejected unless the bidder provides clear and convincing evidence—
(a) Of the content of the bid as originally submitted; and
(b) That the unreadable condition of
the bid was caused by Government
software or hardware error, malfunction, or other Government mishandling.
[60 FR 34738, July 3, 1995]
14.407
Mistakes in bids.
14.407–1
General.
After the opening of bids, contracting
officers shall examine all bids for mistakes. In cases of apparent mistakes
and in cases where the contracting officer has reason to believe that a mistake may have been made, the contracting officer shall request from the
bidder a verification of the bid, calling
attention to the suspected mistake. If
the bidder alleges a mistake, the matter shall be processed in accordance
with this section 14.407. Such actions
shall be taken before award.
[48 FR 42171, Sept. 19, 1983. Redesignated and
amended at 60 FR 34738, July 3, 1995]
14.407–2
Apparent clerical mistakes.
(a) Any clerical mistake, apparent on
its face in the bid, may be corrected by
the contracting officer before award.
The contracting officer first shall obtain from the bidder a verification of
the bid intended. Examples of apparent
mistakes are—
(1) Obvious misplacement of a decimal point;
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14.407–3
48 CFR Ch. 1 (10–1–03 Edition)
(2) Obviously incorrect discounts (for
example, 1 percent 10 days, 2 percent 20
days, 5 percent 30 days);
(3) Obvious reversal of the price f.o.b.
destination and price f.o.b. origin; and
(4) Obvious mistake in designation of
unit.
(b) Correction of the bid shall be effected by attaching the verification to
the original bid and a copy of the
verification to the duplicate bid. Correction shall not be made on the face of
the bid; however, it shall be reflected
in the award document.
(c) Correction of bids submitted by
electronic data interchange shall be effected by including in the electronic
solicitation file the original bid, the
verification request, and the bid
verification.
[48 FR 42171, Sept. 19, 1983. Redesignated and
amended at 60 FR 34738, July 3, 1995]
14.407–3 Other mistakes disclosed before award.
In order to minimize delays in contract awards, administrative determinations may be made as described in
this 14.407–3 in connection with mistakes in bids alleged after opening of
bids and before award. The authority
to permit correction of bids is limited
to bids that, as submitted, are responsive to the invitation and may not be
used to permit correction of bids to
make them responsive. This authority
is in addition to that in 14.407–2 or that
may be otherwise available.
(a) If a bidder requests permission to
correct a mistake and clear and convincing evidence establishes both the
existence of the mistake and the bid
actually intended, the agency head
may make a determination permitting
the bidder to correct the mistake; provided, that if this correction would result in displacing one or more lower
bids, such a determination shall not be
made unless the existence of the mistake and the bid actually intended are
ascertainable substantially from the
invitation and the bid itself.
(b) If (1) a bidder requests permission
to withdraw a bid rather than correct
it, (2) the evidence is clear and convincing both as to the existence of a
mistake and as to the bid actually intended, and (3) the bid, both as uncorrected and as corrected, is the lowest
received, the agency head may make a
determination to correct the bid and
not permit its withdrawal.
(c) If, under paragraph (a) or (b) of
this subsection,
(1) The evidence of a mistake is clear
and convincing only as to the mistake
but not as to the intended bid, or
(2) The evidence reasonably supports
the existence of a mistake but is not
clear and convincing, an official above
the contracting officer, unless otherwise provided by agency procedures,
may make a determination permitting
the bidder to withdraw the bid.
(d) If the evidence does not warrant a
determination under paragraph (a), (b),
or (c) above, the agency head may
make a determination that the bid be
neither withdrawn nor corrected.
(e) Heads of agencies may delegate
their authority to make the determinations under paragraphs (a), (b), (c), and
(d) of this 14.407–3 to a central authority, or a limited number of authorities
as necessary, in their agencies, without
power of redelegation.
(f) Each proposed determination shall
have the concurrence of legal counsel
within the agency concerned before
issuance.
(g) Suspected or alleged mistakes in
bids shall be processed as follows. A
mere statement by the administrative
officials that they are satisfied that an
error was made is insufficient.
(1) The contracting officer shall immediately request the bidder to verify
the bid. Action taken to verify bids
must be sufficient to reasonably assure
the contracting officer that the bid as
confirmed is without error, or to elicit
the allegation of a mistake by the bidder. To assure that the bidder will be
put on notice of a mistake suspected by
the contracting officer, the bidder
should be advised as appropriate—
(i) That its bid is so much lower than
the other bids or the Government’s estimate as to indicate a possibility of
error;
(ii) Of important or unusual characteristics of the specifications;
(iii) Of changes in requirements from
previous purchases of a similar item; or
(iv) Of any other information, proper
for disclosure, that leads the contracting officer to believe that there is
a mistake in bid.
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14.407–3
(2) If the bid is verified, the contracting officer shall consider the bid
as originally submitted. If the time for
acceptance of bids is likely to expire
before a decision can be made, the contracting officer shall request all bidders whose bids may become eligible
for award to extend the time for acceptance of their bids in accordance
with 14.404–1(d). If the bidder whose bid
is believed erroneous does not (or cannot) grant an extension of time, the bid
shall be considered as originally submitted (but see subparagraph (5)
below). If the bidder alleges a mistake,
the contracting officer shall advise the
bidder to make a written request to
withdraw or modify the bid. The request must be supported by statements
(sworn statements, if possible) and
shall include all pertinent evidence
such as the bidder’s file copy of the bid,
the original worksheets and other data
used in preparing the bid, subcontractors’ quotations, if any, published price
lists, and any other evidence that establishes the existence of the error, the
manner in which it occurred, and the
bid actually intended.
(3) When the bidder furnishes evidence supporting an alleged mistake,
the contracting officer shall refer the
case to the appropriate authority (see
paragraph (e) above) together with the
following data:
(i) A signed copy of the bid involved.
(ii) A copy of the invitation for bids
and any specifications or drawings relevant to the alleged mistake.
(iii) An abstract or record of the bids
received.
(iv) The written request by the bidder
to withdraw or modify the bid, together with the bidder’s written statement and supporting evidence.
(v) A written statement by the contracting officer setting forth—
(A) A description of the supplies or
services involved;
(B) The expiration date of the bid in
question and of the other bids submitted;
(C) Specific information as to how
and when the mistake was alleged;
(D) A summary of the evidence submitted by the bidder;
(E) In the event only one bid was received, a quotation of the most recent
contract price for the supplies or serv-
ices involved or, in the absence of a recent comparable contract, the contracting officer’s estimate of a fair
price for the supplies or services;
(F) Any additional pertinent evidence; and
(G) A recommendation that either
the bid be considered for award in the
form submitted, or the bidder be authorized to withdraw or modify the bid.
(4) When time is of the essence because of the expiration of bids or otherwise, the contracting officer may refer
the case by telegraph or telephone to
the appropriate authority. Ordinarily,
the contracting officer will not refer
mistake in bid cases by telegraph or
telephone to the appropriate authority
when the determination set forth in
paragraphs (a) or (b) above is applicable, since actual examination is generally necessary to determine whether
the evidence presented is clear and
convincing.
(5) Where the bidder fails or refuses
to furnish evidence in support of a suspected or alleged mistake, the contracting officer shall consider the bid
as submitted unless (i) the amount of
the bid is so far out of line with the
amounts of other bids received, or with
the amount estimated by the agency or
determined by the contracting officer
to be reasonable, or (ii) there are other
indications of error so clear, as to reasonably justify the conclusion that acceptance of the bid would be unfair to
the bidder or to other bona fide bidders. Attempts made to obtain the information required and the action
taken with respect to the bid shall be
fully documented.
(h) Each agency shall maintain
records of all determinations made in
accordance with this subsection 14.407–
3, the facts involved, and the action
taken in each case. Copies of all such
determinations shall be included in the
file.
(i) Nothing contained in this subsection 14.407–3 prevents an agency
from submitting doubtful cases to the
Comptroller General for advance decision.
[48 FR 42171, Sept. 19, 1983, as amended at 53
FR 17857, May 18, 1988; 54 FR 13023, Mar. 29,
1989. Redesignated and amended at 60 FR
34738, July 3, 1995]
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14.407–4
48 CFR Ch. 1 (10–1–03 Edition)
14.407–4 Mistakes after award.
If a contractor’s discovery and request for correction of a mistake in bid
is not made until after the award, it
shall be processed under the procedures
of subpart 33.2 and the following:
(a) When a mistake in a contractor’s
bid is not discovered until after award,
the mistake may be corrected by contract modification if correcting the
mistake would be favorable to the Government without changing the essential requirements of the specifications.
(b) In addition to the cases contemplated in paragraph (a) above or as
otherwise authorized by law, agencies
are authorized to make a determination—
(1) To rescind a contract;
(2) To reform a contract (i) to delete
the items involved in the mistake or
(ii) to increase the price if the contract
price, as corrected, does not exceed
that of the next lowest acceptable bid
under the original invitation for bids;
or
(3) That no change shall be made in
the contract as awarded, if the evidence does not warrant a determination under subparagraphs (1) or (2)
above.
(c) Determinations under subparagraphs (b)(1) and (2) above may be made
only on the basis of clear and convincing evidence that a mistake in bid
was made. In addition, it must be clear
that the mistake was (1) mutual, or (2)
if unilaterally made by the contractor,
so apparent as to have charged the contracting officer with notice of the probability of the mistake.
(d) Each proposed determination
shall be coordinated with legal counsel
in accordance with agency procedures.
(e) Mistakes alleged or disclosed
after award shall be processed as follows:
(1) The contracting officer shall request the contractor to support the alleged mistake by submission f written
statements and pertinent evidence,
such as (i) the contractor’s file copy of
the bid, (ii) the contractor’s original
worksheets and other data used in preparing the bid, (iii) subcontractors’ and
suppliers’ quotations, if any, (iv) published price lists, and (v) any other evidence that will serve to establish the
mistake, the manner in which the mis-
take occurred, and the bid actually intended.
(2) The case file concerning an alleged mistake shall contain the following:
(i) All evidence furnished by the contractor in support of the alleged mistake.
(ii) A signed statement by the contracting officer—
(A) Describing the supplies or services involved;
(B) Specifying how and when the mistake was alleged or disclosed;
(C) Summarizing the evidence submitted by the contractor and any additional evidence considered pertinent;
(D) Quoting, in cases where only one
bid was received, the most recent contract price for the supplies or services
involved, or in the absence of a recent
comparable contract, the contracting
officer’s estimate of a fair price for the
supplies or services and the basis for
the estimate;
(E) Setting forth the contracting officer’s opinion whether a bona fide mistake was made and whether the contracting officer was, or should have
been, on constructive notice of the mistake before the award, together with
the reasons for, or data in support of,
such opinion;
(F) Setting forth the course of action
with respect to the alleged mistake
that the contracting officer considers
proper on the basis of the evidence, and
if other than a change in contract price
is recommended, the manner by which
the supplies or services will otherwise
be acquired; and
(G) Disclosing the status of performance and payments under the contract,
including contemplated performance
and payments.
(iii) A signed copy of the bid involved.
(iv) A copy of the invitation for bids
and any specifications or drawings relevant to the alleged mistake.
(v) An abstract of written record of
the bids received.
(vi) A written request by the contractor to reform or rescind the contract, and copies of all other relevant
correspondence
between
the
contracting officer and the contractor concerning the alleged mistake.
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14.408–3
(vii) A copy of the contract and any
related change orders or supplemental
agreements.
(f) Each agency shall include in the
contract file a record of (1) all determinations made in accordance with
this 14.407–4, (2) the facts involved, and
(3) the action taken in each case.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985. Redesignated and amended at 60 FR
34738, July 3, 1995; 63 FR 58602, Oct. 30, 1998]
14.408
Award.
14.408–1 General.
(a) The contracting officer shall
make a contract award (1) by written
or electronic notice, (2) within the time
for acceptance specified in the bid or
an extension (see 14.404–1(d)), and (3) to
that responsible bidder whose bid, conforming to the invitation, will be most
advantageous to the Government, considering only price and the price-related factors (see 14.201–8) included in
the invitation. Award shall not be
made until all required approvals have
been obtained and the award otherwise
conforms with 14.103–2.
(b) If less than three bids have been
received, the contracting officer shall
examine the situation to ascertain the
reasons for the small number of responses. Award shall be made notwithstanding the limited number of bids.
However, the contracting officer shall
initiate, if appropriate, corrective action to increase competition in future
solicitations for the same or similar
items, and include a notation of such
action in the records of the invitation
for bids (see 14.204).
(c)(1) Award shall be made by mailing
or otherwise furnishing a properly executed award document to the successful bidder.
(2) When a notice of award is issued,
it shall be followed as soon as possible
by the formal award.
(3) When more than one award results
from any single invitation for bids, separate award documents shall be suitably numbered and executed.
(4) When an award is made to a bidder for less than all of the items that
may be awarded to that bidder and additional items are being withheld for
subsequent award, the award shall
state that the Government may make
subsequent awards on those additional
items within the bid acceptance period.
(5) All provisions of the invitation for
bids, including any acceptable additions or changes made by a bidder in
the bid, shall be clearly and accurately
set forth (either expressly or by reference) in the award document. The
award is an acceptance of the bid, and
the bid and the award constitute the
contract.
(d)(1) Award is generally made by
using the Award portion of Standard
Form (SF) 33, Solicitation, Offer, and
Award, or SF 1447, Solicitation/Contract (see 53.214). If an offer on an SF 33
leads to further changes, the resulting
contract shall be prepared as a bilateral document on SF 26, Award/Contract.
(2) Use of the Award portion of SF 33,
SF 26, or SF 1447, does not preclude the
additional use of informal documents,
including telegrams or electronic
transmissions, as notices of awards.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 54 FR 48984, Nov. 28, 1989; 55 FR 3881,
Feb. 5, 1990. Redesignated at 60 FR 34738,
July 3, 1995; 60 FR 42654, Aug. 16, 1995]
14.408–2 Responsible
ableness of price.
bidder—reason-
(a) The contracting officer shall determine that a prospective contractor
is responsible (see subpart 9.1) and that
the prices offered are reasonable before
awarding the contract. The price analysis techniques in 15.404–1(b) may be
used as guidelines. In each case the determination shall be made in the light
of all prevailing circumstances. Particular care must be taken in cases
where only a single bid is received.
(b) The price analysis shall consider
whether bids are materially unbalanced (see 15.404–1(g)).
[48 FR 42171, Sept. 19, 1983, as amended at 55
FR 25527, June 21, 1990. Redesignated at 60
FR 34738, July 3, 1995, as amended at 62 FR
51270, Sept. 30, 1997]
14.408–3
Prompt payment discounts.
(a) Prompt payment discounts shall
not be considered in the evaluation of
bids. However, any discount offered
will form a part of the award, and will
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14.408–4
48 CFR Ch. 1 (10–1–03 Edition)
be taken by the payment center if payment is made within the discount period specified by the bidder. As an alternative to indicating a discount in
conjunction with the offer, bidders may
prefer to offer discounts on individual
invoices.
(b) See 32.111(c)(1), which prescribes
the contract clause at 52.232–8, Discounts for Prompt Payment.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 26903, June 28, 1985. Redesignated at 60
FR 34738, July 3, 1995]
14.408–4 Economic price adjustment.
(a) Bidder proposes economic price adjustment.
(1) When a solicitation does not contain an economic price adjustment
clause but a bidder proposes one with a
ceiling that the price will not exceed,
the bid shall be evaluated on the basis
of the maximum possible economic
price adjustment of the quoted base
price.
(2) If the bid is eligible for award, the
contracting officer shall request the
bidder to agree to the inclusion in the
award of an approved economic price
adjustment clause (see 16.203) that is
subject to the same ceiling. If the bidder will not agree to an approved
clause, the award may be made on the
basis of the bid as originally submitted.
(3) Bids that contain economic price
adjustments with no ceiling shall be rejected unless a clear basis for evaluation exists.
(b) Government proposes economic price
adjustment.
(1) When an invitation contains an
economic price adjustment clause and
no bidder takes exception to the provisions, bids shall be evaluated on the
basis of the quoted prices without the
allowable economic price adjustment
being added.
(2) When a bidder increases the maximum percentage of economic price adjustment stipulated in the invitation
or limits the downward economic price
adjustment provisions of the invitation, the bid shall be rejected as nonresponsive.
(3) When a bid indicates deletion of
the economic price adjustment clause,
the bid shall be rejected as nonresponsive since the downward economic
price adjustment provisions are thereby limited.
(4) When a bidder decreases the maximum percentage of economic price adjustment stipulated in the invitation,
the bid shall be evaluated at the base
price on an equal basis with bids that
do not reduce the stipulated ceiling.
However, after evaluation, if the bidder
offering the lower ceiling is in a position to receive the award, the award
shall reflect the lower ceiling.
[48 FR 42171, Sept. 19, 1983. Redesignated at
60 FR 34738, July 3, 1995]
14.408–5
[Reserved]
14.408–6 Equal low bids.
(a) Contracts shall be awarded in the
following order of priority when two or
more low bids are equal in all respects:
(1) Small business concerns that are
also labor surplus area concerns.
(2) Other small business concerns.
(3) Other business concerns.
(b) If two or more bidders still remain equally eligible after application
of paragraph (a) above, award shall be
made by a drawing by lot limited to
those bidders. If time permits, the bidders involved shall be given an opportunity to attend the drawing. The
drawing shall be witnessed by at least
three persons, and the contract file
shall contain the names and addresses
of the witnesses and the person supervising the drawing.
(c) When an award is to be made by
using the priorities under this 14.408–6,
the contracting officer shall include a
written agreement in the contract that
the contractor will perform, or cause
to be performed, the contract in accordance with the circumstances justifying the priority used to break the tie
or select bids for a drawing by lot.
[48 FR 42171, Sept. 19, 1983. Redesignated and
amended at 60 FR 34738, July 3, 1995; 60 FR
48260, Sept. 18, 1995]
14.408–7 Documentation of award.
(a) The contracting officer shall document compliance with 14.103–2 in the
contract file.
(b) The documentation shall either
state that the accepted bid was the
lowest bid received, or list all lower
bids with reasons for their rejection in
sufficient detail to justify the award.
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14.501
(c) When an award is made after receipt of equal low bids, the documentation shall describe how the tie was broken.
[48 FR 42171, Sept. 19, 1983. Redesignated at
60 FR 34738, July 3, 1995]
14.408–8 Protests against award.
See subpart 33.1, Protests.
[50 FR 23606, June 4, 1985. Redesignated at 60
FR 34738, July 3, 1995]
14.409
Information to bidders.
14.409–1 Award of unclassified contracts.
(a)(1) The contracting officer shall as
a minimum (subject to any restrictions
in Subpart 9.4)—
(i) Notify each unsuccessful bidder in
writing or electronically within three
days after contract award, that its bid
was not accepted. ‘‘Day,’’ for purposes
of the notification process, means calendar day, except that the period will
run until a day which is not a Saturday, Sunday, or legal holiday;
(ii) Extend appreciation for the interest the unsuccessful bidder has shown
in submitting a bid; and
(iii) When award is made to other
than a low bidder, state the reason for
rejection in the notice to each of the
unsuccessful low bidders.
(2) For acquisitions subject to the
Trade Agreements Act or the North
American
Free
Trade
Agreement
(NAFTA) Implementation Act (see
25.408(a)(5)), agencies must include in
notices given unsuccessful bidders from
designated or NAFTA countries—
(i) The dollar amount of the successful bid; and
(ii) The name and address of the successful bidder.
(b) Information included in paragraph (a)(2) of this subsection shall be
provided to any unsuccessful bidder
upon request except when multiple
awards have been made and furnishing
information on the successful bids
would require so much work as to
interfere with normal operations of the
contracting
office.
In
such
circumstances, only information concerning location of the abstract of offers need be given.
(c) When a request is received concerning an unclassified invitation from
an inquirer who is neither a bidder nor
a representative of a bidder, the contracting officer should make every effort to furnish the names of successful
bidders and, if requested, the prices at
which awards were made. However,
when such requests require so much
work as to interfere with the normal
operations of the contracting office,
the inquirer will be advised where a
copy of the abstract of offers may be
seen.
(d) Requests for records shall be governed by agency regulations implementing Subpart 24.2.
[60 FR 42654, Aug. 16, 1995, as amended at 64
FR 72418, Dec. 27, 1999; 67 FR 6120, Feb. 8,
2002]
14.409–2
Award of classified contracts.
In addition to 14.409–1, if classified information was furnished or created in
connection with the solicitation, the
contracting officer shall advise the unsuccessful bidders, including any who
did not bid, to take disposition action
in accordance with agency procedures.
The name of the successful bidder and
the contract price will be furnished to
unsuccessful bidders only upon request.
Information regarding a classified
award shall not be furnished by telephone.
[48 FR 42171, Sept. 19, 1983. Redesignated and
amended at 60 FR 34738, July 3, 1995]
Subpart 14.5—Two-Step Sealed
Bidding
14.501
General.
Two-step sealed bidding is a combination of competitive procedures designed to obtain the benefits of sealed
bidding when adequate specifications
are not available. An objective is to
permit the development of a sufficiently descriptive and not unduly restrictive statement of the Government’s requirements, including an adequate technical data package, so that
subsequent acquisitions may be made
by conventional sealed bidding. This
method is especially useful in acquisitions requiring technical proposals,
particularly those for complex items.
It is conducted in two steps:
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48 CFR Ch. 1 (10–1–03 Edition)
(a) Step one consists of the request
for, submission, evaluation, and (if necessary) discussion of a technical proposal. No pricing is involved. The objective is to determine the acceptability of the supplies or services offered. As used in this context, the word
technical has a broad connotation and
includes, among other things, the engineering approach, special manufacturing processes, and special testing
techniques. It is the proper step for
clarification of questions relating to
technical requirements. Conformity to
the technical requirements is resolved
in this step, but not responsibility as
defined in 9.1.
(b) Step two involves the submission
of sealed priced bids by those who submitted acceptable technical proposals
in step one. Bids submitted in step two
are evaluated and the awards made in
accordance with subparts 14.3 and 14.4.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
14.502
Conditions for use.
(a) Unless other factors require the
use of sealed bidding, two-step sealed
bidding may be used in preference to
negotiation when all of the following
conditions are present:
(1) Available specifications or purchase descriptions are not definite or
complete or may be too restrictive
without technical evaluation, and any
necessary discussion, of the technical
aspects of the requirement to ensure
mutual understanding between each
source and the Government.
(2) Definite criteria exist for evaluating technical proposals.
(3) More than one technically qualified source is expected to be available.
(4) Sufficient time will be available
for use of the two-step method.
(5) A firm-fixed-price contract or a
fixed-price contract with economic
price adjustment will be used.
(b) None of the following precludes
the use of two-step sealed bidding:
(1) Multi-year contracting.
(2) Government-owned facilities or
special tooling to be made available to
the successful bidder.
(3) A total small business set-aside
(see 19.502–2).
(4) The use of the price evaluation adjustment for small disadvantaged business concerns (see Subpart 19.11).
(5) The use of a set-aside or price
evaluation preference for HUBZone
small business concerns (see subpart
19.13).
(6) A first or subsequent production
quantity is being acquired under a performance specification.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 48260, Sept. 18, 1995; 63 FR 35721,
June 30, 1998; 63 FR 70267, Dec. 18, 1998]
14.503
Procedures.
14.503–1 Step one.
(a) Requests for technical proposals
shall be synopsized in accordance with
Part 5. The request must include, as a
minimum, the following:
(1) A description of the supplies or
services required.
(2) A statement of intent to use the
two step method.
(3) The requirements of the technical
proposal.
(4) The evaluation criteria, to include
all factors and any significant subfactors.
(5) A statement that the technical
proposals shall not include prices or
pricing information.
(6) The date, or date and hour, by
which the proposal must be received
(see 14.201–6(r)).
(7) A statement that (i) in the second
step, only bids based upon technical
proposals determined to be acceptable,
either initially or as a result of discussions, will be considered for awards and
(ii) each bid in the second step must be
based on the bidder’s own technical
proposals.
(8) A statement that (i) offerors
should submit proposals that are acceptable without additional explanation or information, (ii) the Government may make a final determination
regarding a proposal’s acceptability
solely on the basis of the proposal as
submitted, and (iii) the Government
may proceed with the second step without requesting further information
from any offeror; however, the Government may request additional information from offerors of proposals that it
considers reasonably susceptible of
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14.503–1
being made acceptable, and may discuss proposals with their offerors.
(9) A statement that a notice of
unacceptability will be forwarded to
the offeror upon completion of the proposal evaluation and final determination of unacceptability.
(10) A statement either that only one
technical proposal may be submitted
by each offeror or that multiple technical proposals may be submitted.
When specifications permit different
technical approaches, it is generally in
the Government’s interest to authorize
multiple proposals. If multiple proposals are authorized, see 14.201–6(s).
(b) Information on delivery or performance requirements may be of assistance to bidders in determining
whether or not to submit a proposal
and may be included in the request.
The request shall also indicate that the
information is not binding on the Government and that the actual delivery
or performance requirements will be
contained in the invitation issued
under step two.
(c) Upon receipt, the contracting officer shall—
(1) Safeguard proposals against disclosure to unauthorized persons;
(2) Accept and handle data marked in
accordance with 15.609 as provided in
that section; and
(3) Remove any reference to price or
cost.
(d) The contracting officer shall establish a time period for evaluating
technical proposals. The period may
vary with the complexity and number
of proposals involved. However, the
evaluation should be completed quickly.
(e)(1) Evaluations shall be based on
the criteria in the request for proposals
but not consideration of responsibility
as defined in 9.1. Proposals shall be categorized as—
(i) Acceptable;
(ii) Reasonably susceptible of being
made acceptable; or
(iii) Unacceptable.
(2) Any proposal which modifies, or
fails to conform to the essential requirements or specifications of, the request for technical proposals shall be
considered nonresponsive and categorized as unacceptable.
(f)(1) The contracting officer may
proceed directly with step two if there
are sufficient acceptable proposals to
ensure adequate price competition
under step two, and if further time, effort and delay to make additional proposals acceptable and thereby increase
competition would not be in Government’s interest. If this is not the case,
the contracting officer shall request
bidders whose proposals may be made
acceptable to submit additional clarifying or supplementing information.
The contracting officer shall identify
the nature of the deficiencies in the
proposal or the nature of the additional
information required. The contracting
officer may also arrange discussions for
this purpose. No proposal shall be discussed with any offeror other than the
submitter.
(2) In initiating requests for additional information, the contracting officer shall fix an appropriate time for
bidders to conclude discussions, if any,
submit all additional information, and
incorporate such additional information as part of their proposals submitted. Such time may be extended in
the discretion of the contracting officer. If the additional information incorporated as part of a proposal within
the final time fixed by the contracting
officer establishes that the proposal is
acceptable, it shall be so categorized.
Otherwise, it shall be categorized as
unacceptable.
(g) When a technical proposal is
found unacceptable (either initially or
after clarification), the contracting officer shall promptly notify the offeror
of the basis of the determination and
that a revision of the proposal will not
be considered. Upon written request,
the contracting officer shall debrief unsuccessful offerors (see 15.505 and
15.506).
(h) Late technical proposals are governed by 15.208 (b), (c), and (f).
(i) If it is necessary to discontinue
two-step sealed bidding, the contracting officer shall include a statement of the facts and circumstances in
the contract file. Each offeror shall be
notified in writing. When step one results in no acceptable technical proposal or only one acceptable technical
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14.503–2
48 CFR Ch. 1 (10–1–03 Edition)
proposal, the acquisition may be continued by negotiation.
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 2649, Jan. 17, 1986; 56 FR 41733,
Aug. 22, 1991; 60 FR 42654, Aug. 16, 1995; 61 FR
69289, Dec. 31, 1996; 62 FR 51270, Sept. 30, 1997;
64 FR 51839, Sept. 24, 1999; 68 FR 43856, July
24, 2003]
14.503–2 Step two.
(a) Sealed bidding procedures shall be
followed except that invitations for
bids shall—
(1) Be issued only to those offerors
submitting acceptable technical proposals in step one;
(2) Include the provision prescribed in
14.201–6(t);
(3) Prominently state that the bidder
shall comply with the specifications
and the bidder’s technical proposal;
and
(4) Not be synopsized through the
Governmentwide point of entry (GPE)
as an acquisition opportunity nor publicly posted (see 5.101(a)).
(b) The names of firms that submitted acceptable proposals in step one
will be listed through the GPE for the
benefit of prospective subcontractors
(see 5.207).
[48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 56 FR 15149, Apr. 15, 1991; 66 FR 27413,
May 16, 2001; 68 FR 56679, Oct. 1, 2003]
PART 15—CONTRACTING BY
NEGOTIATION
Sec.
15.000
15.001
15.002
Scope of part.
Definitions.
Types of negotiated acquisition.
Subpart 15.1—Source Selection Processes
and Techniques
15.100 Scope of subpart.
15.101 Best value continuum.
15.101–1 Tradeoff process.
15.101–2 Lowest price technically acceptable
source selection process.
15.102 Oral presentations.
Subpart 15.2—Solicitation and Receipt of
Proposals and Information
15.200 Scope of subpart.
15.201 Exchanges with industry before receipt of proposals.
15.202 Advisory multi-step process.
15.203 Requests for proposals.
15.204 Contract format.
15.204–1 Uniform contract format.
TABLE 15–1—UNIFORM CONTRACT FORMAT
15.204–2 Part I—The Schedule.
15.204–3 Part II—Contract Clauses.
15.204–4 Part III—List of Documents, Exhibits, and Other Attachments.
15.204–5 Part IV—Representations and Instructions.
15.205 Issuing solicitations.
15.206 Amending the solicitation.
15.207 Handling proposals and information.
15.208 Submission, modification, revision,
and withdrawal of proposals.
15.209 Solicitation provisions and contract
clauses.
15.210 Forms.
Subpart 15.3—Source Selection
15.300 Scope of subpart.
15.301 [Reserved]
15.302 Source selection objective.
15.303 Responsibilities.
15.304 Evaluation factors and significant
subfactors.
15.305 Proposal evaluation.
15.306 Exchanges with offerors after receipt
of proposals.
15.307 Proposal revisions.
15.308 Source selection decision.
Subpart 15.4—Contract Pricing
15.400 Scope of subpart.
15.401 Definitions.
15.402 Pricing policy.
15.403 Obtaining cost or pricing data.
15.403–1 Prohibition on obtaining cost or
pricing data (10 U.S.C. 2306a and 41 U.S.C.
254b).
15.403–2 Other circumstances where cost or
pricing data are not required.
15.403–3 Requiring information other than
cost or pricing data.
15.403–4 Requiring cost or pricing data (10
U.S.C. 2306a and 41 U.S.C. 254b).
15.403–5 Instructions for submission of cost
or pricing data or information other than
cost or pricing data.
15.404 Proposal analysis.
15.404–1 Proposal analysis techniques.
15.404–2 Information to support proposal
analysis.
15.404–3 Subcontract pricing considerations.
15.404–4 Profit.
15.405 Price negotiation.
15.406 Documentation.
15.406–1 Prenegotiation objectives.
15.406–2 Certificate of current cost or pricing data.
15.406–3 Documenting the negotiation.
15.407 Special cost or pricing areas.
15.407–1 Defective cost or pricing data.
15.407–2 Make-or-buy programs.
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15.101
15.407–3 Forward pricing rate agreements.
15.407–4 Should-cost review.
15.407–5 Estimating systems.
15.408 Solicitation provisions and contract
clauses.
TABLE 15–2—INSTRUCTIONS FOR SUBMITTING
COST PRICING PROPOSALS WHEN COST OR
PRICING DATA ARE REQUIRED
Subpart 15.5—Preaward, Award, and
Postaward Notifications, Protests, and
Mistakes
15.501 Definition.
15.502 Applicability.
15.503 Notifications to unsuccessful offerors.
15.504 Award to successful offeror.
15.505 Preaward debriefing of offerors.
15.506 Postaward debriefing of offerors.
15.507 Protests against award.
15.508 Discovery of mistakes.
15.509 Forms.
Subpart 15.6—Unsolicited Proposals
15.600 Scope of subpart.
15.601 Definitions.
15.602 Policy.
15.603 General.
15.604 Agency points of contact.
15.605 Content of unsolicited proposals.
15.606 Agency procedures.
15.606–1 Receipt and initial review.
15.606–2 Evaluation.
15.607 Criteria for acceptance and negotiation of an unsolicited proposal.
15.608 Prohibitions.
15.609 Limited use of data.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 62 FR 51230, Sept. 30, 1997, unless
otherwise noted.
15.000 Scope of part.
This part prescribes policies and procedures governing competitive and
noncompetitive negotiated acquisitions. A contract awarded using other
than sealed bidding procedures is a negotiated contract (see 14.101).
15.001 Definitions.
As used in this part—
Deficiency is a material failure of a
proposal to meet a Government requirement or a combination of significant weaknesses in a proposal that increases the risk of unsuccessful contract performance to an unacceptable
level.
Proposal modification is a change
made to a proposal before the solicitation closing date and time, or made in
response to an amendment, or made to
correct a mistake at any time before
award.
Proposal revision is a change to a proposal made after the solicitation closing date, at the request of or as allowed
by a contracting officer, as the result
of negotiations.
Weakness means a flaw in the proposal that increases the risk of unsuccessful contract performance. A ‘‘significant weakness’’ in the proposal is a
flaw that appreciably increases the
risk of unsuccessful contract performance.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001]
15.002 Types of negotiated acquisition.
(a) Sole source acquisitions. When contracting in a sole source environment,
the request for proposals (RFP) should
be tailored to remove unnecessary information and requirements; e.g., evaluation criteria and voluminous proposal preparation instructions.
(b) Competitive acquisitions. When contracting in a competitive environment,
the procedures of this part are intended
to minimize the complexity of the solicitation, the evaluation, and the
source selection decision, while maintaining a process designed to foster an
impartial and comprehensive evaluation of offerors’ proposals, leading to
selection of the proposal representing
the best value to the Government (see
2.101).
Subpart 15.1—Source Selection
Processes and Techniques
15.100 Scope of subpart.
This subpart describes some of the
acquisition processes and techniques
that may be used to design competitive
acquisition strategies suitable for the
specific circumstances of the acquisition.
15.101 Best value continuum.
An agency can obtain best value in
negotiated acquisitions by using any
one or a combination of source selection approaches. In different types of
acquisitions, the relative importance
of cost or price may vary. For example,
in acquisitions where the requirement
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15.101–1
48 CFR Ch. 1 (10–1–03 Edition)
is clearly definable and the risk of unsuccessful contract performance is
minimal, cost or price may play a dominant role in source selection. The less
definitive the requirement, the more
development work required, or the
greater the performance risk, the more
technical or past performance considerations may play a dominant role in
source selection.
15.101–1 Tradeoff process.
(a) A tradeoff process is appropriate
when it may be in the best interest of
the Government to consider award to
other than the lowest priced offeror or
other than the highest technically
rated offeror.
(b) When using a tradeoff process, the
following apply:
(1) All evaluation factors and significant subfactors that will affect contract award and their relative importance shall be clearly stated in the solicitation; and
(2) The solicitation shall state whether all evaluation factors other than
cost or price, when combined, are significantly more important than, approximately equal to, or significantly
less important than cost or price.
(c) This process permits tradeoffs
among cost or price and non-cost factors and allows the Government to accept other than the lowest priced proposal. The perceived benefits of the
higher priced proposal shall merit the
additional cost, and the rationale for
tradeoffs must be documented in the
file in accordance with 15.406.
15.101–2 Lowest price technically acceptable source selection process.
(a) The lowest price technically acceptable source selection process is appropriate when best value is expected
to result from selection of the technically acceptable proposal with the
lowest evaluated price.
(b) When using the lowest price technically acceptable process, the following apply:
(1) The evaluation factors and significant subfactors that establish the requirements of acceptability shall be set
forth in the solicitation. Solicitations
shall specify that award will be made
on the basis of the lowest evaluated
price of proposals meeting or exceeding
the acceptability standards for noncost factors. If the contracting officer
documents the file pursuant to
15.304(c)(3)(iv), past performance need
not be an evaluation factor in lowest
price technically acceptable source selections. If the contracting officer
elects to consider past performance as
an evaluation factor, it shall be evaluated in accordance with 15.305. However, the comparative assessment in
15.305(a)(2)(i) does not apply. If the contracting officer determines that a
small business’ past performance is not
acceptable, the matter shall be referred
to the Small Business Administration
for a Certificate of Competency determination, in accordance with the procedures contained in subpart 19.6 and 15
U.S.C. 637(b)(7)).
(2) Tradeoffs are not permitted.
(3) Proposals are evaluated for acceptability but not ranked using the
non-cost/price factors.
(4) Exchanges may occur (see 15.306).
[62 FR 51230, Sept. 30, 1997, as amended at 64
FR 72443, Dec. 27, 1999]
15.102 Oral presentations.
(a) Oral presentations by offerors as
requested by the Government may substitute for, or augment, written information. Use of oral presentations as a
substitute for portions of a proposal
can be effective in streamlining the
source selection process. Oral presentations may occur at any time in the
acquisition process, and are subject to
the same restrictions as written information, regarding timing (see 15.208)
and content (see 15.306). Oral presentations provide an opportunity for dialogue among the parties. Pre-recorded
videotaped presentations that lack
real-time interactive dialogue are not
considered oral presentations for the
purposes of this section, although they
may be included in offeror submissions,
when appropriate.
(b) The solicitation may require each
offeror to submit part of its proposal
through oral presentations. However,
certifications, representations, and a
signed offer sheet (including any exceptions to the Government’s terms and
conditions) shall be submitted in writing.
(c) Information pertaining to areas
such as an offeror’s capability, past
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15.201
performance, work plans or approaches, staffing resources, transition
plans, or sample tasks (or other types
of tests) may be suitable for oral presentations. In deciding what information to obtain through an oral presentation, consider the following:
(1) The Government’s ability to adequately evaluate the information;
(2) The need to incorporate any information into the resultant contract;
(3) The impact on the efficiency of
the acquisition; and
(4) The impact (including cost) on
small businesses. In considering the
costs of oral presentations, contracting
officers should also consider alternatives to on-site oral presentations
(e.g., teleconferencing, video teleconferencing).
(d) When oral presentations are required, the solicitation shall provide
offerors with sufficient information to
prepare them. Accordingly, the solicitation may describe—
(1) The types of information to be
presented orally and the associated
evaluation factors that will be used;
(2) The qualifications for personnel
that will be required to provide the
oral presentation(s);
(3) The requirements for, and any
limitations and/or prohibitions on, the
use of written material or other media
to supplement the oral presentations;
(4) The location, date, and time for
the oral presentations;
(5) The restrictions governing the
time permitted for each oral presentation; and
(6) The scope and content of exchanges that may occur between the
Government’s participants and the
offeror’s representatives as part of the
oral presentations, including whether
or not discussions (see 15.306(d)) will be
permitted during oral presentations.
(e) The contracting officer shall
maintain a record of oral presentations
to document what the Government relied upon in making the source selection decision. The method and level of
detail of the record (e.g., videotaping,
audio tape recording, written record,
Government notes, copies of offeror
briefing slides or presentation notes)
shall be at the discretion of the source
selection authority. A copy of the
record placed in the file may be provided to the offeror.
(f) When an oral presentation includes information that the parties intend to include in the contract as material terms or conditions, the information shall be put in writing. Incorporation by reference of oral statements is
not permitted.
(g) If, during an oral presentation,
the Government conducts discussions
(see 15.306(d)), the Government must
comply with 15.306 and 15.307.
Subpart 15.2—Solicitation and Receipt of Proposals and Information
15.200
Scope of subpart.
This subpart prescribes policies and
procedures for—
(a) Exchanging information with industry prior to receipt of proposals;
(b) Preparing and issuing requests for
proposals (RFPs) and requests for information (RFIs); and
(c) Receiving proposals and information.
15.201 Exchanges with industry before
receipt of proposals.
(a) Exchanges of information among
all interested parties, from the earliest
identification
of
a
requirement
through receipt of proposals, are encouraged. Any exchange of information
must be consistent with procurement
integrity requirements (see 3.104). Interested parties include potential
offerors, end users, Government acquisition and supporting personnel, and
others involved in the conduct or outcome of the acquisition.
(b) The purpose of exchanging information is to improve the understanding of Government requirements
and industry capabilities, thereby allowing potential offerors to judge
whether or how they can satisfy the
Government’s requirements, and enhancing the Government’s ability to
obtain quality supplies and services,
including construction, at reasonable
prices, and increase efficiency in proposal preparation, proposal evaluation,
negotiation, and contract award.
(c) Agencies are encouraged to promote early exchanges of information
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15.202
48 CFR Ch. 1 (10–1–03 Edition)
about future acquisitions. An early exchange of information among industry
and the program manager, contracting
officer, and other participants in the
acquisition process can identify and resolve concerns regarding the acquisition strategy, including proposed contract type, terms and conditions, and
acquisition planning schedules; the feasibility of the requirement, including
performance requirements, statements
of work, and data requirements; the
suitability of the proposal instructions
and evaluation criteria, including the
approach for assessing past performance information; the availability of
reference documents; and any other industry concerns or questions. Some
techniques to promote early exchanges
of information are—
(1) Industry or small business conferences;
(2) Public hearings;
(3) Market research, as described in
part 10;
(4) One-on-one meetings with potential offerors (any that are substantially
involved with potential contract terms
and conditions should include the contracting officer; also see paragraph (f)
of this section regarding restrictions
on disclosure of information);
(5) Presolicitation notices;
(6) Draft RFPs;
(7) RFIs;
(8) Presolicitation or preproposal
conferences; and
(9) Site visits.
(d) The special notices of procurement matters at 5.205(c), or electronic
notices, may be used to publicize the
Government’s requirement or solicit
information from industry.
(e) RFIs may be used when the Government does not presently intend to
award a contract, but wants to obtain
price, delivery, other market information, or capabilities for planning purposes. Responses to these notices are
not offers and cannot be accepted by
the Government to form a binding contract. There is no required format for
RFIs.
(f) General information about agency
mission needs and future requirements
may be disclosed at any time. After release of the solicitation, the contracting officer must be the focal point
of any exchange with potential
offerors. When specific information
about a proposed acquisition that
would be necessary for the preparation
of proposals is disclosed to one or more
potential offerors, that information
must be made available to the public as
soon as practicable, but no later than
the next general release of information, in order to avoid creating an unfair competitive advantage. Information provided to a potential offeror in
response to its request must not be disclosed if doing so would reveal the potential offeror’s confidential business
strategy, and is protected under 3.104
or subpart 24.2. When conducting a
presolicitation or preproposal conference, materials distributed at the
conference should be made available to
all potential offerors, upon request.
[62 FR 51230, Sept. 30, 1997, as amended at 67
FR 13056, Mar. 20, 2002]
15.202
Advisory multi-step process.
(a) The agency may publish a
presolicitation notice (see 5.204) that
provides a general description of the
scope or purpose of the acquisition and
invites potential offerors to submit information that allows the Government
to advise the offerors about their potential to be viable competitors. The
presolicitation notice should identify
the information that must be submitted and the criteria that will be
used in making the initial evaluation.
Information sought may be limited to
a statement of qualifications and other
appropriate information (e.g., proposed
technical concept, past performance,
and limited pricing information). At a
minimum, the notice shall contain sufficient information to permit a potential offeror to make an informed decision about whether to participate in
the acquisition. This process should
not be used for multi-step acquisitions
where it would result in offerors being
required to submit identical information in response to the notice and in response to the initial step of the acquisition.
(b) The agency shall evaluate all responses in accordance with the criteria
stated in the notice, and shall advise
each respondent in writing either that
it will be invited to participate in the
resultant acquisition or, based on the
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information submitted, that it is unlikely to be a viable competitor. The
agency shall advise respondents considered not to be viable competitors of the
general basis for that opinion. The
agency shall inform all respondents
that, notwithstanding the advice provided by the Government in response
to their submissions, they may participate in the resultant acquisition.
15.203 Requests for proposals.
(a) Requests for proposals (RFPs) are
used in negotiated acquisitions to communicate Government requirements to
prospective contractors and to solicit
proposals. RFPs for competitive acquisitions shall, at a minimum, describe
the—
(1) Government’s requirement;
(2) Anticipated terms and conditions
that will apply to the contract:
(i) The solicitation may authorize
offerors to propose alternative terms
and conditions, including the contract
line item number (CLIN) structure; and
(ii) When alternative CLIN structures
are permitted, the evaluation approach
should consider the potential impact
on other terms and conditions or the
requirement (e.g., place of performance
or payment and funding requirements)
(see 15.206);
(3) Information required to be in the
offeror’s proposal; and
(4) Factors and significant subfactors
that will be used to evaluate the proposal and their relative importance.
(b) An RFP may be issued for OMB
Circular A–76 studies. See subpart 7.3
for additional information regarding
cost comparisons between Government
and contractor performance.
(c) Electronic commerce may be used
to issue RFPs and to receive proposals,
modifications, and revisions. In this
case, the RFP shall specify the electronic
commerce
method(s)
that
offerors may use (see subpart 4.5).
(d) Contracting officers may issue
RFPs and/or authorize receipt of proposals, modifications, or revisions by
facsimile.
(1) In deciding whether or not to use
facsimiles, the contracting officer
should consider factors such as—
(i) Anticipated proposal size and volume;
(ii) Urgency of the requirement;
(iii) Availability and suitability of
electronic commerce methods; and
(iv) Adequacy of administrative procedures and controls for receiving,
identifying,
recording,
and
safeguarding facsimile proposals, and ensuring their timely delivery to the designated proposal delivery location.
(2) If facsimile proposals are authorized, contracting officers may request
offeror(s) to provide the complete,
original signed proposal at a later date.
(e) Letter RFPs may be used in sole
source acquisitions and other appropriate circumstances. Use of a letter
RFP does not relieve the contracting
officer from complying with other FAR
requirements. Letter RFPs should be
as complete as possible and, at a minimum, should contain the following:
(1) RFP number and date;
(2) Name, address (including electronic address and facsimile address, if
appropriate), and telephone number of
the contracting officer;
(3) Type of contract contemplated;
(4) Quantity, description, and required delivery dates for the item;
(5) Applicable certifications and representations;
(6) Anticipated contract terms and
conditions;
(7) Instructions to offerors and evaluation criteria for other than sole
source actions;
(8) Proposal due date and time; and
(9) Other relevant information; e.g.,
incentives, variations in delivery
schedule, cost proposal support, and
data requirements.
(f) Oral RFPs are authorized when
processing a written solicitation would
delay the acquisition of supplies or
services to the detriment of the Government and a notice is not required
under 5.202 (e.g., perishable items and
support of contingency operations or
other emergency situations). Use of an
oral RFP does not relieve the contracting officer from complying with
other FAR requirements.
(1) The contract files supporting oral
solicitations should include—
(i) A description of the requirement;
(ii) Rationale for use of an oral solicitation;
(iii) Sources solicited, including the
date, time, name of individuals contacted, and prices offered; and
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15.204
48 CFR Ch. 1 (10–1–03 Edition)
TABLE 15–1—UNIFORM CONTRACT FORMAT—
Continued
(iv) The solicitation number provided
to the prospective offerors.
(2) The information furnished to potential offerors under oral solicitations
should include appropriate items from
paragraph (e) of this section.
Section
15.204
J .........
Contract format.
The use of a uniform contract format
facilitates preparation of the solicitation and contract as well as reference
to, and use of, those documents by
offerors, contractors, and contract administrators. The uniform contract
format need not be used for the following:
(a) Construction and architect-engineer contracts (see part 36).
(b) Subsistence contracts.
(c) Supplies or services contracts requiring special contract formats prescribed elsewhere in this part that are
inconsistent with the uniform format.
(d) Letter requests for proposals (see
15.203(e)).
(e) Contracts exempted by the agency
head or designee.
15.204–1
Uniform contract format.
(a) Contracting officers shall prepare
solicitations and resulting contracts
using the uniform contract format outlined in Table 15–1 of this subsection.
(b) Solicitations using the uniform
contract format shall include Parts I,
II, III, and IV (see 15.204–2 through
15.204–5). Upon award, contracting officers shall not physically include Part
IV in the resulting contract, but shall
retain it in the contract file. Section K
shall be incorporated by reference in
the contract.
TABLE 15–1—UNIFORM CONTRACT FORMAT
Section
Title
Part I—The Schedule
A
B
C
D
E
F
G
H
........
........
........
........
........
........
........
........
Solicitation/contract form.
Supplies or services and prices/costs.
Description/specifications/statement of work.
Packaging and marking.
Inspection and acceptance.
Deliveries or performance.
Contract administration data.
Special contract requirements.
Part II—Contract Clauses
I ..........
Contract clauses.
Title
Part III—List of Documents, Exhibits, and Other
Attachments
List of attachments.
Part IV—Representations and Instructions
K ........
L .........
M ........
Representations, certifications, and other statements of offerors or respondents.
Instructions, conditions, and notices to offerors or
respondents.
Evaluation factors for award.
15.204–2
Part I—The Schedule.
The contracting officer shall prepare
the contract Schedule as follows:
(a) Section A, Solicitation/contract form.
(1) Optional Form (OF) 308, Solicitation and Offer-Negotiated Acquisition,
or Standard Form (SF) 33, Solicitation,
Offer and Award, may be used to prepare RFPs.
(2) When other than OF 308 or SF 33
is used, include the following information on the first page of the solicitation:
(i) Name, address, and location of
issuing activity, including room and
building where proposals or information must be submitted.
(ii) Solicitation number.
(iii) Date of issuance.
(iv) Closing date and time.
(v) Number of pages.
(vi) Requisition or other purchase authority.
(vii) Brief description of item or service.
(viii) Requirement for the offeror to
provide its name and complete address,
including street, city, county, state,
and zip code, and electronic address
(including facsimile address), if appropriate.
(ix) Offer expiration date.
(b) Section B, Supplies or services and
prices/costs. Include a brief description
of the supplies or services; e.g., item
number, national stock number/part
number if applicable, nouns, nomenclature, and quantities. (This includes
incidental deliverables such as manuals and reports.)
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15.206
(c) Section C, Description/specifications/
statement of work. Include any description or specifications needed in addition to Section B (see part 11, Describing Agency Needs).
(d) Section D, Packaging and marking.
Provide packaging, packing, preservation, and marking requirements, if
any.
(e) Section E, Inspection and acceptance. Include inspection, acceptance,
quality assurance, and reliability requirements (see part 46, Quality Assurance).
(f) Section F, Deliveries or performance.
Specify the requirements for time,
place, and method of delivery or performance (see subpart 11.4, Delivery or
Performance Schedules, and 47.301–1).
(g) Section G, Contract administration
data. Include any required accounting
and appropriation data and any required contract administration information or instructions other than
those on the solicitation form. Include
a statement that the offeror should include the payment address in the proposal, if it is different from that shown
for the offeror.
(h) Section H, Special contract requirements. Include a clear statement of any
special contract requirements that are
not included in Section I, Contract
clauses, or in other sections of the uniform contract format.
15.204–3
Part II—Contract Clauses.
Section I, Contract clauses. The contracting officer shall include in this
section the clauses required by law or
by this part and any additional clauses
expected to be included in any resulting contract, if these clauses are not
required in any other section of the
uniform contract format. An index
may be inserted if this section’s format
is particularly complex.
15.204–4 Part III—List of Documents,
Exhibits, and Other Attachments.
Section J, List of attachments. The contracting officer shall list the title,
date, and number of pages for each attached document, exhibit, and other
attachment. Cross-references to material in other sections may be inserted,
as appropriate.
15.204–5 Part IV—Representations and
Instructions.
The contracting officer shall prepare
the representations and instructions as
follows:
(a) Section K, Representations, certifications, and other statements of offerors.
Include in this section those solicitation provisions that require representations, certifications, or the submission
of other information by offerors.
(b) Section L, Instructions, conditions,
and notices to offerors or respondents. Insert in this section solicitation provisions and other information and instructions not required elsewhere to
guide offerors or respondents in preparing proposals or responses to requests for information. Prospective
offerors or respondents may be instructed to submit proposals or information in a specific format or severable parts to facilitate evaluation. The
instructions may specify further organization of proposal or response parts,
such as—
(1) Administrative;
(2) Management;
(3) Technical;
(4) Past performance; and
(5) Cost or pricing data (see Table 15–
2 of 15.408) or information other than
cost or pricing data.
(c) Section M, Evaluation factors for
award. Identify all significant factors
and any significant subfactors that will
be considered in awarding the contract
and their relative importance (see
15.304(d)). The contracting officer shall
insert one of the phrases in 15.304(e).
15.205
Issuing solicitations.
(a) The contracting officer shall issue
solicitations to potential sources in accordance with the policies and procedures in 5.102, 19.202–4, and part 6.
(b) A master solicitation, as described in 14.203–3, may also be used for
negotiated acquisitions.
15.206
Amending the solicitation.
(a) When, either before or after receipt of proposals, the Government
changes its requirements or terms and
conditions, the contracting officer
shall amend the solicitation.
(b) Amendments issued before the established time and date for receipt of
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15.207
48 CFR Ch. 1 (10–1–03 Edition)
proposals shall be issued to all parties
receiving the solicitation.
(c) Amendments issued after the established time and date for receipt of
proposals shall be issued to all offerors
that have not been eliminated from the
competition.
(d) If a proposal of interest to the
Government involves a departure from
the stated requirements, the contracting officer shall amend the solicitation, provided this can be done without revealing to the other offerors the
alternate solution proposed or any
other information that is entitled to
protection (see 15.207(b) and 15.306(e)).
(e) If, in the judgment of the contracting officer, based on market research or otherwise, an amendment
proposed for issuance after offers have
been received is so substantial as to exceed what prospective offerors reasonably could have anticipated, so that additional sources likely would have submitted offers had the substance of the
amendment been known to them, the
contracting officer shall cancel the
original solicitation and issue a new
one, regardless of the stage of the acquisition.
(f) Oral notices may be used when
time is of the essence. The contracting
officer shall document the contract file
and formalize the notice with an
amendment (see subpart 4.5, Electronic
Commerce in Contracting).
(g) At a minimum, the following information should be included in each
amendment:
(1) Name and address of issuing activity.
(2) Solicitation number and date.
(3) Amendment number and date.
(4) Number of pages.
(5) Description of the change being
made.
(6) Government point of contact and
phone number (and electronic or facsimile address, if appropriate).
(7) Revision to solicitation closing
date, if applicable.
15.207 Handling proposals and information.
(a) Upon receipt at the location specified in the solicitation, proposals and
information received in response to a
request for information (RFI) shall be
marked with the date and time of re-
ceipt and shall be transmitted to the
designated officials.
(b) Proposals shall be safeguarded
from unauthorized disclosure throughout the source selection process. (See
3.104 regarding the disclosure of source
selection information (41 U.S.C. 423)).
Information received in response to an
RFI shall be safeguarded adequately
from unauthorized disclosure.
(c) If any portion of a proposal received by the contracting officer electronically
or
by
facsimile
is
unreadable, the contracting officer immediately shall notify the offeror and
permit the offeror to resubmit the
unreadable portion of the proposal. The
method and time for resubmission shall
be prescribed by the contracting officer
after consultation with the offeror, and
documented in the file. The resubmission shall be considered as if it were received at the date and time of the
original unreadable submission for the
purpose of determining timeliness
under 15.208(a), provided the offeror
complies with the time and format requirements for resubmission prescribed
by the contracting officer.
15.208 Submission, modification, revision, and withdrawal of proposals.
(a) Offerors are responsible for submitting proposals, and any revisions,
and modifications, so as to reach the
Government office designated in the
solicitation by the time specified in
the solicitation. Offerors may use any
transmission method authorized by the
solicitation (i.e., regular mail, electronic commerce, or facsimile). If no
time is specified in the solicitation, the
time for receipt is 4:30 p.m., local time,
for the designated Government office
on the date that proposals are due.
(b)(1) Any proposal, modification, or
revision, that is received at the designated Government office after the
exact time specified for receipt of proposals is ‘‘late’’ and will not be considered unless it is received before award
is made, the contracting officer determines that accepting the late proposal
would not unduly delay the acquisition; and—
(i) If it was transmitted through an
electronic commerce method authorized by the solicitation, it was received
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Federal Acquisition Regulation
15.209
at the initial point of entry to the Government infrastructure not later than
5:00 p.m. one working day prior to the
date specified for receipt of proposals;
or
(ii) There is acceptable evidence to
establish that it was received at the
Government installation designated for
receipt of proposals and was under the
Government’s control prior to the time
set for receipt of proposals; or
(iii) It was the only proposal received.
(2) However, a late modification of an
otherwise successful proposal, that
makes its terms more favorable to the
Government, will be considered at any
time it is received and may be accepted.
(c) Acceptable evidence to establish
the time of receipt at the Government
installation includes the time/date
stamp of that installation on the proposal wrapper, other documentary evidence of receipt maintained by the installation, or oral testimony or statements of Government personnel.
(d) If an emergency or unanticipated
event interrupts normal Government
processes so that proposals cannot be
received at the Government office designated for receipt of proposals by the
exact time specified in the solicitation,
and urgent Government requirements
preclude amendment of the solicitation
closing date, the time specified for receipt of proposals will be deemed to be
extended to the same time of day specified in the solicitation on the first
work day on which normal Government
processes resume.
(e) Proposals may be withdrawn by
written notice at any time before
award. Oral proposals in response to
oral solicitations may be withdrawn
orally. The contracting officer must
document the contract file when oral
withdrawals are made. One copy of
withdrawn proposals should be retained
in the contract file (see 4.803(a)(10)).
Extra copies of the withdrawn proposals may be destroyed or returned to
the offeror at the offerors request.
Where
practicable,
electronically
transmitted proposals that are withdrawn must be purged from primary
and backup data storage systems after
a copy is made for the file. Extremely
bulky proposals must only be returned
at the offeror’s request and expense.
(f) The contracting officer must
promptly notify any offeror if its proposal, modification, or revision was received late, and must inform the offeror whether its proposal will be considered, unless contract award is imminent and the notice prescribed in
15.503(b) would suffice.
(g) Late proposals and modifications
that are not considered must be held
unopened, unless opened for identification, until after award and then retained with other unsuccessful proposals.
(h) If available, the following must be
included in the contracting office files
for each late proposal, modification,
revision, or withdrawal:
(1) The date and hour of receipt.
(2) A statement regarding whether
the proposal was considered for award,
with supporting rationale.
(3) The envelope, wrapper, or other
evidence of date of receipt.
[64 FR 51839, Sept. 24, 1999, as amended at 64
FR 72451, Dec. 27, 1999]
15.209 Solicitation provisions and contract clauses.
When contracting by negotiation—
(a) The contracting officer shall insert the provision at 52.215–1, Instructions to Offerors—Competitive Acquisition, in all competitive solicitations
where the Government intends to
award a contract without discussions.
(1) If the Government intends to
make award after discussions with
offerors within the competitive range,
the contracting officer shall use the
basic provision with its Alternate I.
(2) If the Government would be willing to accept alternate proposals, the
contracting officer shall alter the basic
clause to add a paragraph (c)(9) substantially the same as Alternate II.
(b)(1) The contracting officer shall
insert the clause at 52.215–2, Audit and
Records-Negotiation (10 U.S.C. 2313, 41
U.S.C. 254d, and OMB Circular No. A–
133), in solicitations and contracts except those for—
(i) Acquisitions not exceeding the
simplified acquisition threshold;
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15.210
48 CFR Ch. 1 (10–1–03 Edition)
(ii) The acquisition of utility services
at rates not exceeding those established to apply uniformly to the general public, plus any applicable reasonable connection charge; or
(iii) The acquisition of commercial
items exempted under 15.403–1.
(2) For facilities acquisitions, the
contracting officer shall use the clause
with its Alternate I.
(3) For cost-reimbursement contracts
with State and local Governments,
educational institutions, and other
nonprofit
organizations,
the
contracting officer shall use the clause
with its Alternate II.
(4) When the head of the agency has
waived the examination of records by
the Comptroller General in accordance
with 25.1001, use the clause with its Alternate III.
(c) When issuing a solicitation for information or planning purposes, the
contracting officer shall insert the provision at 52.215–3, Request for Information or Solicitation for Planning Purposes, and clearly mark on the face of
the solicitation that it is for information or planning purposes.
(d) [Reserved]
(f) The contracting officer shall insert the provision at 52.215–6, Place of
Performance, in solicitations unless
the place of performance is specified by
the Government.
(g) The contracting officer shall insert the provision at 52.215–7, Annual
Representations and Certifications—
Negotiation, in solicitations if annual
representations and certifications are
used (see 14.213).
(h) The contracting officer shall insert the clause at 52.215–8, Order of
Precedence—Uniform Contract Format, in solicitations and contracts
using the format at 15.204.
[62 FR 51230, Sept. 30, 1997, as amended at 63
FR 9055, Feb. 23, 1998; 63 FR 58589, Oct. 30,
1998; 64 FR 72418, Dec. 27, 1999]
15.210 Forms.
Prescribed forms are not required to
prepare solicitations described in this
part. The following forms may be used
at the discretion of the contracting officer:
(a) Standard Form 33, Solicitation,
Offer, and Award, and Optional Form
308, Solicitation and Offer— Negotiated
Acquisition, may be used to issue RFPs
and RFIs.
(b) Standard Form 30, Amendment of
Solicitation/Modification of Contract,
and Optional Form 309, Amendment of
Solicitation, may be used to amend solicitations of negotiated contracts.
(c) Optional Form 17, Offer Label,
may be furnished with each request for
proposal.
Subpart 15.3—Source Selection
15.300
Scope of subpart.
This subpart prescribes policies and
procedures for selection of a source or
sources in competitive negotiated acquisitions.
15.301
[Reserved]
15.302
Source selection objective.
The objective of source selection is
to select the proposal that represents
the best value.
15.303
Responsibilities.
(a) Agency heads are responsible for
source selection. The contracting officer is designated as the source selection authority, unless the agency head
appoints another individual for a particular acquisition or group of acquisitions.
(b) The source selection authority
shall—
(1) Establish an evaluation team, tailored for the particular acquisition,
that includes appropriate contracting,
legal, logistics, technical, and other expertise to ensure a comprehensive evaluation of offers;
(2) Approve the source selection
strategy or acquisition plan, if applicable, before solicitation release;
(3) Ensure consistency among the solicitation requirements, notices to
offerors, proposal preparation instructions, evaluation factors and subfactors, solicitation provisions or contract
clauses, and data requirements;
(4) Ensure that proposals are evaluated based solely on the factors and
subfactors contained in the solicitation
(10 U.S.C. 2305(b)(1) and 41 U.S.C.
253b(d)(3));
(5) Consider the recommendations of
advisory boards or panels (if any); and
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15.304
(6) Select the source or sources whose
proposal is the best value to the Government (10 U.S.C. 2305(b)(4)(B) and 41
U.S.C. 253b(d)(3)).
(c) The contracting officer shall—
(1) After release of a solicitation,
serve as the focal point for inquiries
from actual or prospective offerors;
(2) After receipt of proposals, control
exchanges with offerors in accordance
with 15.306; and
(3) Award the contract(s).
15.304 Evaluation factors and significant subfactors.
(a) The award decision is based on
evaluation factors and significant subfactors that are tailored to the acquisition.
(b) Evaluation factors and significant
subfactors must—
(1) Represent the key areas of importance and emphasis to be considered in
the source selection decision; and
(2) Support meaningful comparison
and discrimination between and among
competing proposals.
(c) The evaluation factors and significant subfactors that apply to an acquisition and their relative importance
are within the broad discretion of agency acquisition officials, subject to the
following requirements:
(1) Price or cost to the Government
shall be evaluated in every source selection (10 U.S.C. 2305(a)(3)(A) (ii) and
41 U.S.C. 253a(c)(1)(B)) (also see part 36
for architect-engineer contracts);
(2) The quality of the product or service shall be addressed in every source
selection through consideration of one
or more non-cost evaluation factors
such as past performance, compliance
with solicitation requirements, technical excellence, management capability, personnel qualifications, and
prior experience (10 U.S.C. 2305(a)(3)
(A)(i) and 41 U.S.C. 253a(c)(1)(A)); and
(3)(i) Except as set forth in paragraph
(c)(3)(iv) of this section, past performance shall be evaluated in all source selections for negotiated competitive acquisitions expected to exceed $1,000,000.
(ii) Except as set forth in paragraph
(c)(3)(iv) of this section, past performance shall be evaluated in all source selections for negotiated competitive acquisitions issued on or after January 1,
1999, for acquisitions expected to ex-
ceed $100,000. Agencies should develop
phase-in schedules that meet or exceed
this schedule.
(iii) For solicitations involving bundling that offer a significant opportunity for subcontracting, the contracting officer must include a factor
to evaluate past performance indicating the extent to which the offeror
attained applicable goals for small
business participation under contracts
that required subcontracting plans (15
U.S.C. 637(d)(4)(G)(ii)).
(iv) Past performance need not be
evaluated if the contracting officer
documents the reason past performance is not an appropriate evaluation
factor for the acquisition.
(4) The extent of participation of
small disadvantaged business concerns
in performance of the contract shall be
evaluated in unrestricted acquisitions
expected to exceed $500,000 ($1,000,000
for construction) subject to certain
limitations (see 19.201 and 19.1202).
(5) For solicitations involving bundling that offer a significant opportunity for subcontracting, the contracting officer must include proposed
small business subcontracting participation in the subcontracting plan as an
evaluation
factor
(15
U.S.C.
637(d)(4)(G)(i)).
(d) All factors and significant subfactors that will affect contract award
and their relative importance shall be
stated clearly in the solicitation (10
U.S.C. 2305(a)(2)(A)(i) and 41 U.S.C.
253a(b)(1)(A)) (see 15.204-5(c)). The rating method need not be disclosed in the
solicitation. The general approach for
evaluating past performance information shall be described.
(e) The solicitation shall also state,
at a minimum, whether all evaluation
factors other than cost or price, when
combined, are—
(1) Significantly more important
than cost or price;
(2) Approximately equal to cost or
price; or
(3) Significantly less important than
cost or price (10 U.S.C. 2305(a)(3)(A)(iii)
and 41 U.S.C. 253a(c)(1)(C)).
[62 FR 51230, Sept. 30, 1997, as amended at 63
FR 36121, July 1, 1998; 64 FR 72443, Dec. 27,
1999; 65 FR 36014, June 6, 2000]
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15.305
15.305
48 CFR Ch. 1 (10–1–03 Edition)
Proposal evaluation.
(a) Proposal evaluation is an assessment of the proposal and the offeror’s
ability to perform the prospective contract successfully. An agency shall
evaluate competitive proposals and
then assess their relative qualities
solely on the factors and subfactors
specified in the solicitation. Evaluations may be conducted using any rating method or combination of methods,
including color or adjectival ratings,
numerical
weights,
and
ordinal
rankings. The relative strengths, deficiencies, significant weaknesses, and
risks supporting proposal evaluation
shall be documented in the contract
file.
(1) Cost or price evaluation. Normally,
competition establishes price reasonableness. Therefore, when contracting
on a firm-fixed-price or fixed-price with
economic price adjustment basis, comparison of the proposed prices will usually satisfy the requirement to perform
a price analysis, and a cost analysis
need not be performed. In limited situations, a cost analysis (see 15.403–
1(c)(1)(i)(B)) may be appropriate to establish reasonableness of the otherwise
successful offeror’s price. When contracting on a cost-reimbursement
basis, evaluations shall include a cost
realism analysis to determine what the
Government should realistically expect
to pay for the proposed effort, the
offeror’s understanding of the work,
and the offeror’s ability to perform the
contract. Cost realism analyses may
also be used on fixed-price incentive
contracts or, in exceptional cases, on
other competitive fixed-price-type contracts (see 15.404-1(d)(3)). (See 37.115 for
uncompensated overtime evaluation.)
The contracting officer shall document
the cost or price evaluation.
(2) Past performance evaluation. (i)
Past performance information is one
indicator of an offeror’s ability to perform the contract successfully. The
currency and relevance of the information, source of the information, context of the data, and general trends in
contractor’s performance shall be considered. This comparative assessment
of past performance information is separate from the responsibility determination required under subpart 9.1.
(ii) The solicitation shall describe
the approach for evaluating past performance, including evaluating offerors
with no relevant performance history,
and shall provide offerors an opportunity to identify past or current contracts (including Federal, State, and
local government and private) for efforts similar to the Government requirement. The solicitation shall also
authorize offerors to provide information on problems encountered on the
identified contracts and the offeror
corrective actions. The Government
shall consider this information, as well
as information obtained from any
other sources, when evaluating the offeror past performance. The source selection authority shall determine the
relevance of similar past performance
information.
(iii) The evaluation should take into
account past performance information
regarding predecessor companies, key
personnel who have relevant experience, or subcontractors that will perform major or critical aspects of the
requirement when such information is
relevant to the instant acquisition.
(iv) In the case of an offeror without
a record of relevant past performance
or for whom information on past performance is not available, the offeror
may not be evaluated favorably or unfavorably on past performance.
(v) The evaluation should include the
past performance of offerors in complying with subcontracting plan goals
for small disadvantaged business (SDB)
concerns (see Subpart 19.7), monetary
targets for SDB participation (see
19.1202), and notifications submitted
under 19.1202–4(b).
(3) Technical evaluation. When tradeoffs are performed (see 15.101–1), the
source selection records shall include—
(i) An assessment of each offeror’s
ability to accomplish the technical requirements; and
(ii) A summary, matrix, or quantitative ranking, along with appropriate supporting narrative, of each
technical proposal using the evaluation
factors.
(4) Cost information. Cost information
may be provided to members of the
technical evaluation team in accordance with agency procedures.
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15.306
(5) Small business subcontracting evaluation. Solicitations must be structured to give offers from small business
concerns the highest rating for the
evaluation factors in 15.304(c)(3)(iii)
and (c)(5).
(b) The source selection authority
may reject all proposals received in response to a solicitation, if doing so is
in the best interest of the Government.
(c) For restrictions on the use of support contractor personnel in proposal
evaluation, see 37.203(d).
[62 FR 51230, Sept. 30, 1997, as amended at 63
FR 36121, July 1, 1998; 64 FR 51842, 51850, Sept.
24, 1999; 65 FR 46054, July 26, 2000]
15.306 Exchanges with offerors after
receipt of proposals.
(a) Clarifications and award without
discussions. (1) Clarifications are limited exchanges, between the Government and offerors, that may occur
when award without discussions is contemplated.
(2) If award will be made without
conducting discussions, offerors may be
given the opportunity to clarify certain aspects of proposals (e.g., the relevance of an offeror’s past performance
information and adverse past performance information to which the offeror
has not previously had an opportunity
to respond) or to resolve minor or clerical errors.
(3) Award may be made without discussions if the solicitation states that
the Government intends to evaluate
proposals and make award without discussions. If the solicitation contains
such a notice and the Government determines it is necessary to conduct discussions, the rationale for doing so
shall be documented in the contract
file (see the provision at 52.215–1) (10
U.S.C. 2305(b)(4)(A)(ii) and 41 U.S.C.
253b(d)(1)(B)).
(b) Communications with offerors before
establishment of the competitive range.
Communications are exchanges, between the Government and offerors,
after receipt of proposals, leading to
establishment of the competitive
range. If a competitive range is to be
established, these communications—
(1) Shall be limited to the offerors described in paragraphs (b)(1)(i) and
(b)(1)(ii) of this section and—
(i) Shall be held with offerors whose
past performance information is the
determining factor preventing them
from being placed within the competitive range. Such communications shall
address adverse past performance information to which an offeror has not had
a prior opportunity to respond; and
(ii) May only be held with those
offerors (other than offerors under
paragraph (b)(1)(i) of this section)
whose exclusion from, or inclusion in,
the competitive range is uncertain;
(2) May be conducted to enhance Government understanding of proposals;
allow reasonable interpretation of the
proposal; or facilitate the Government’s evaluation process. Such communications shall not be used to cure
proposal deficiencies or material omissions, materially alter the technical or
cost elements of the proposal, and/or
otherwise revise the proposal. Such
communications may be considered in
rating proposals for the purpose of establishing the competitive range;
(3) Are for the purpose of addressing
issues that must be explored to determine whether a proposal should be
placed in the competitive range. Such
communications shall not provide an
opportunity for the offeror to revise its
proposal, but may address—
(i) Ambiguities in the proposal or
other concerns (e.g., perceived deficiencies, weaknesses, errors, omissions,
or mistakes (see 14.407)); and
(ii) Information relating to relevant
past performance; and
(4) Shall address adverse past performance information to which the offeror has not previously had an opportunity to comment.
(c) Competitive range. (1) Agencies
shall evaluate all proposals in accordance with 15.305(a), and, if discussions
are to be conducted, establish the competitive range. Based on the ratings of
each proposal against all evaluation
criteria, the contracting officer shall
establish a competitive range comprised of all of the most highly rated
proposals, unless the range is further
reduced for purposes of efficiency pursuant to paragraph (c)(2) of this section.
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15.306
48 CFR Ch. 1 (10–1–03 Edition)
(2) After evaluating all proposals in
accordance with 15.305(a) and paragraph (c)(1) of this section, the contracting officer may determine that
the number of most highly rated proposals that might otherwise be included in the competitive range exceeds the number at which an efficient
competition can be conducted. Provided the solicitation notifies offerors
that the competitive range can be limited for purposes of efficiency (see
52.215–1(f)(4)), the contracting officer
may limit the number of proposals in
the competitive range to the greatest
number that will permit an efficient
competition among the most highly
rated proposals (10 U.S.C. 2305(b)(4) and
41 U.S.C. 253b(d)).
(3) If the contracting officer, after
complying with paragraph (d)(3) of this
section, decides that an offeror’s proposal should no longer be included in
the competitive range, the proposal
shall be eliminated from consideration
for award. Written notice of this decision shall be provided to unsuccessful
offerors in accordance with 15.503.
(4) Offerors excluded or otherwise
eliminated from the competitive range
may request a debriefing (see 15.505 and
15.506).
(d) Exchanges with offerors after establishment of the competitive range. Negotiations are exchanges, in either a competitive or sole source environment,
between the Government and offerors,
that are undertaken with the intent of
allowing the offeror to revise its proposal. These negotiations may include
bargaining. Bargaining includes persuasion, alteration of assumptions and
positions, give-and-take, and may
apply to price, schedule, technical requirements, type of contract, or other
terms of a proposed contract. When negotiations are conducted in a competitive acquisition, they take place after
establishment of the competitive range
and are called discussions.
(1) Discussions are tailored to each
offeror’s proposal, and must be conducted by the contracting officer with
each offeror within the competitive
range.
(2) The primary objective of discussions is to maximize the Government’s
ability to obtain best value, based on
the requirement and the evaluation
factors set forth in the solicitation.
(3) At a minimum, the contracting
officer must, subject to paragraphs
(d)(5) and (e) of this section and
15.307(a), indicate to, or discuss with,
each offeror still being considered for
award, deficiencies, significant weaknesses, and adverse past performance
information to which the offeror has
not yet had an opportunity to respond.
The contracting officer also is encouraged to discuss other aspects of the
offeror’s proposal that could, in the
opinion of the contracting officer, be
altered or explained to enhance materially the proposal’s potential for award.
However, the contracting officer is not
required to discuss every area where
the proposal could be improved. The
scope and extent of discussions are a
matter of contracting officer judgment.
(4) In discussing other aspects of the
proposal, the Government may, in situations where the solicitation stated
that evaluation credit would be given
for technical solutions exceeding any
mandatory minimums, negotiate with
offerors for increased performance beyond any mandatory minimums, and
the Government may suggest to
offerors that have exceeded any mandatory minimums (in ways that are not
integral to the design), that their proposals would be more competitive if
the excesses were removed and the offered price decreased.
(5) If, after discussions have begun,
an offeror originally in the competitive
range is no longer considered to be
among the most highly rated offerors
being considered for award, that offeror
may be eliminated from the competitive range whether or not all material
aspects of the proposal have been discussed, or whether or not the offeror
has been afforded an opportunity to
submit a proposal revision (see 15.307(a)
and 15.503(a)(1)).
(e) Limits on exchanges. Government
personnel involved in the acquisition
shall not engage in conduct that—
(1) Favors one offeror over another;
(2) Reveals an offeror’s technical solution, including unique technology,
innovative and unique uses of commercial items, or any information that
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Federal Acquisition Regulation
15.402
would compromise an offeror’s intellectual property to another offeror;
(3) Reveals an offerors price without
that offeror’s permission. However, the
contracting officer may inform an offeror that its price is considered by the
Government to be too high, or too low,
and reveal the results of the analysis
supporting that conclusion. It is also
permissible, at the Government’s discretion, to indicate to all offerors the
cost or price that the Government’s
price analysis, market research, and
other reviews have identified as reasonable (41 U.S.C. 423(h)(1)(2));
(4) Reveals the names of individuals
providing reference information about
an offeror’s past performance; or
(5) Knowingly furnishes source selection information in violation of 3.104
and 41 U.S.C. 423(h)(1)(2).
for any business judgments and tradeoffs made or relied on by the SSA, including benefits associated with additional costs. Although the rationale for
the selection decision must be documented, that documentation need not
quantify the tradeoffs that led to the
decision.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 65369, Dec. 18, 2001]
As used in this subpart—
Price means cost plus any fee or profit applicable to the contract type.
Subcontract (except as used in 15.407–
2) also includes a transfer of commercial items between divisions, subsidiaries, or affiliates of a contractor or a
subcontractor (10 U.S.C. 2306a(h)(2) and
41 U.S.C. 254b(h)(2)).
15.307 Proposal revisions.
(a) If an offerors proposal is eliminated or otherwise removed from the
competitive range, no further revisions
to that offeror’s proposal shall be accepted or considered.
(b) The contracting officer may request or allow proposal revisions to
clarify and document understandings
reached during negotiations. At the
conclusion of discussions, each offeror
still in the competitive range shall be
given an opportunity to submit a final
proposal revision. The contracting officer is required to establish a common
cut-off date only for receipt of final
proposal revisions. Requests for final
proposal revisions shall advise offerors
that the final proposal revisions shall
be in writing and that the Government
intends to make award without obtaining further revisions.
15.308 Source selection decision.
The source selection authority’s
(SSA) decision shall be based on a comparative
assessment
of
proposals
against all source selection criteria in
the solicitation. While the SSA may
use reports and analyses prepared by
others, the source selection decision
shall represent the SSA’s independent
judgment. The source selection decision shall be documented, and the documentation shall include the rationale
Subpart 15.4—Contract Pricing
15.400
Scope of subpart.
This subpart prescribes the cost and
price negotiation policies and procedures for pricing negotiated prime contracts (including subcontracts) and
contract
modifications,
including
modifications to contracts awarded by
sealed bidding.
15.401
Definitions.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001; 66 FR 65369, Dec. 18,
2001]
15.402
Pricing policy.
Contracting officers must—
(a) Purchase supplies and services
from responsible sources at fair and
reasonable prices. In establishing the
reasonableness of the offered prices,
the contracting officer must not obtain
more information than is necessary. To
the extent that cost or pricing data are
not required by 15.403–4, the contracting officer must generally use the
following order of preference in determining the type of information required:
(1) No additional information from
the offeror, if the price is based on adequate price competition, except as provided by 15.403–3(b).
(2) Information other than cost or
pricing data:
(i) Information related to prices (e.g.,
established catalog or market prices or
previous contract prices), relying first
on information available within the
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15.403
48 CFR Ch. 1 (10–1–03 Edition)
Government; second, on information
obtained from sources other than the
offeror; and, if necessary, on information obtained from the offeror. When
obtaining information from the offeror
is necessary, unless an exception under
15.403–1(b) (1) or (2) applies, such information submitted by the offeror shall
include, at a minimum, appropriate information on the prices at which the
same or similar items have been sold
previously, adequate for evaluating the
reasonableness of the price.
(ii) Cost information, that does not
meet the definition of cost or pricing
data at 2.101.
(3) Cost or pricing data. The contracting officer should use every means
available to ascertain whether a fair
and reasonable price can be determined
before requesting cost or pricing data.
Contracting officers must not require
unnecessarily the submission of cost or
pricing data, because it leads to increased proposal preparation costs,
generally extends acquisition lead
time, and consumes additional contractor and Government resources.
(b) Price each contract separately
and independently and not—
(1) Use proposed price reductions
under other contracts as an evaluation
factor; or
(2) Consider losses or profits realized
or anticipated under other contracts.
(c) Not include in a contract price
any amount for a specified contingency
to the extent that the contract provides for a price adjustment based upon
the occurrence of that contingency.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001]
15.403
Obtaining cost or pricing data.
15.403–1 Prohibition on obtaining cost
or pricing data (10 U.S.C. 2306a and
41 U.S.C. 254b).
(a) Cost or pricing data shall not be
obtained for acquisitions at or below
the simplified acquisition threshold.
(b) Exceptions to cost or pricing data requirements. The contracting officer
shall not require submission of cost or
pricing data to support any action
(contracts, subcontracts, or modifications) (but may require information
other than cost or pricing data to sup-
port a determination of price reasonableness or cost realism)—
(1) When the contracting officer determines that prices agreed upon are
based on adequate price competition
(see standards in paragraph (c)(1) of
this subsection);
(2) When the contracting officer determines that prices agreed upon are
based on prices set by law or regulation
(see standards in paragraph (c)(2) of
this subsection);
(3) When a commercial item is being
acquired (see standards in paragraph
(c)(3) of this subsection);
(4) When a waiver has been granted
(see standards in paragraph (c)(4) of
this subsection); or
(5) When modifying a contract or subcontract for commercial items (see
standards in paragraph (c)(3) of this
subsection).
(c) Standards for exceptions from cost
or pricing data requirements—(1) Adequate price competition. A price is based
on adequate price competition if—
(i) Two or more responsible offerors,
competing
independently,
submit
priced offers that satisfy the Government’s expressed requirement and if—
(A) Award will be made to the offeror
whose proposal represents the best
value (see 2.101) where price is a substantial factor in source selection; and
(B) There is no finding that the price
of the otherwise successful offeror is
unreasonable. Any finding that the
price is unreasonable must be supported by a statement of the facts and
approved at a level above the contracting officer;
(ii) There was a reasonable expectation, based on market research or
other assessment, that two or more responsible offerors, competing independently, would submit priced offers in response to the solicitation’s expressed
requirement, even though only one
offer is received from a responsible offeror and if—
(A) Based on the offer received, the
contracting officer can reasonably conclude that the offer was submitted with
the expectation of competition, e.g.,
circumstances indicate that—
(1) The offeror believed that at least
one other offeror was capable of submitting a meaningful offer; and
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Federal Acquisition Regulation
15.403–3
(2) The offeror had no reason to believe that other potential offerors did
not intend to submit an offer; and
(B) The determination that the proposed price is based on adequate price
competition, is reasonable, and is approved at a level above the contracting
officer; or
(iii) Price analysis clearly demonstrates that the proposed price is
reasonable in comparison with current
or recent prices for the same or similar
items, adjusted to reflect changes in
market conditions, economic conditions, quantities, or terms and conditions under contracts that resulted
from adequate price competition.
(2) Prices set by law or regulation. Pronouncements in the form of periodic
rulings, reviews, or similar actions of a
governmental body, or embodied in the
laws, are sufficient to set a price.
(3) Commercial items. Any acquisition
for an item that meets the commercial
item definition in 2.101, or any modification, as defined in paragraph (3)(i)
or (ii) of that definition, that does not
change the item from a commercial
item to a noncommercial item, is exempt from the requirement for cost or
pricing data. If the contracting officer
determines that an item claimed to be
commercial is, in fact, not commercial
and that no other exception or waiver
applies, the contracting officer must
require submission of cost or pricing
data.
(4) Waivers. The head of the contracting activity (HCA) may, without
power of delegation, waive the requirement for submission of cost or pricing
data in exceptional cases. The authorization for the waiver and the supporting rationale shall be in writing.
The HCA may consider waiving the requirement if the price can be determined to be fair and reasonable without submission of cost or pricing data.
For example, if cost or pricing data
were furnished on previous production
buys and the contracting officer determines such data are sufficient, when
combined with updated information, a
waiver may be granted. If the HCA has
waived the requirement for submission
of cost or pricing data, the contractor
or higher-tier subcontractor to whom
the waiver relates shall be considered
as having been required to provide cost
or pricing data. Consequently, award of
any lower-tier subcontract expected to
exceed the cost or pricing data threshold requires the submission of cost or
pricing data unless—
(i) An exception otherwise applies to
the subcontract; or
(ii) The waiver specifically includes
the subcontract and the rationale supporting the waiver for that subcontract.
[62 FR 51230, Sept. 30, 1997, as amended at 64
FR 10545, Mar. 4, 1999; 64 FR 51836, Sept. 24,
1999; 66 FR 2129, Jan. 10, 2001]
15.403–2 Other circumstances where
cost or pricing data are not required.
(a) The exercise of an option at the
price established at contract award or
initial negotiation does not require
submission of cost or pricing data.
(b) Cost or pricing data are not required for proposals used solely for
overrun funding or interim billing
price adjustments.
15.403–3 Requiring information other
than cost or pricing data.
(a) General. (1) The contracting officer is responsible for obtaining information that is adequate for evaluating
the reasonableness of the price or determining cost realism, but the contracting officer should not obtain more
information than is necessary (see
15.402(a)). If the contracting officer
cannot obtain adequate information
from sources other than the offeror,
the contracting officer must require
submission of information other than
cost or pricing data from the offeror
that is adequate to determine a fair
and
reasonable
price
(10
U.S.C.
2306a(d)(1) and 41 U.S.C. 254b(d)(1)). Unless an exception under 15.403–1(b) (1) or
(2) applies, the contracting officer
must require that the information submitted by the offeror include, at a minimum, appropriate information on the
prices at which the same item or similar items have previously been sold,
adequate for determining the reasonableness of the price. To determine the
information an offeror should be required to submit, the contracting officer should consider the guidance in
Section 3.3, Chapter 3, Volume I, of the
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15.403–4
48 CFR Ch. 1 (10–1–03 Edition)
Contract Pricing Reference Guide cited
at 15.404–1(a)(7).
(2) The contractor’s format for submitting the information should be used
(see 15.403–5(b)(2)).
(3) The contracting officer must ensure that information used to support
price negotiations is sufficiently current to permit negotiation of a fair and
reasonable price. Requests for updated
offeror information should be limited
to information that affects the adequacy of the proposal for negotiations,
such as changes in price lists.
(4) As specified in Section 808 of Public Law 105–261, an offeror who does not
comply with a requirement to submit
information for a contract or subcontract in accordance with paragraph
(a)(1) of this subsection is ineligible for
award unless the HCA determines that
it is in the best interest of the Government to make the award to that offeror, based on consideration of the following:
(i) The effort made to obtain the
data.
(ii) The need for the item or service.
(iii) Increased cost or significant
harm to the Government if award is
not made.
(b) Adequate price competition. When
adequate price competition exists (see
15.403–1(c)(1)), generally no additional
information is necessary to determine
the reasonableness of price. However, if
there are unusual circumstances where
it is concluded that additional information is necessary to determine the
reasonableness of price, the contracting officer shall, to the maximum
extent practicable, obtain the additional information from sources other
than the offeror. In addition, the contracting officer may request information to determine the cost realism of
competing offers or to evaluate competing approaches.
(c) Commercial items. (1) At a minimum, the contracting officer must use
price analysis to determine whether
the price is fair and reasonable whenever the contracting officer acquires a
commercial item (see 15.404–1(b)). The
fact that a price is included in a catalog does not, in and of itself, make it
fair and reasonable. If the contracting
officer cannot determine whether an
offered price is fair and reasonable,
even after obtaining additional information from sources other than the offeror, then the contracting officer must
require the offeror to submit information other than cost or pricing data to
support further analysis (see 15.404–1).
(2) Limitations relating to commercial
items (10 U.S.C. 2306a(d)(2) and 41 U.S.C.
254b(d)). (i) The contracting officer
must limit requests for sales data relating to commercial items to data for
the same or similar items during a relevant time period.
(ii) The contracting officer must, to
the maximum extent practicable, limit
the scope of the request for information relating to commercial items to
include only information that is in the
form regularly maintained by the offeror as part of its commercial operations.
(iii) The Government must not disclose outside the Government information obtained relating to commercial
items that is exempt from disclosure
under 24.202(a) or the Freedom of Information Act (5 U.S.C. 552(b)).
[62 FR 51230, Sept. 30, 1997, as amended at 64
FR 51836, Sept. 24, 1999; 65 FR 24321, Apr. 25,
2000]
15.403–4 Requiring cost or pricing
data (10 U.S.C. 2306a and 41 U.S.C.
254b).
(a)(1) The contracting officer must
obtain cost or pricing data only if the
contracting officer concludes that none
of the exceptions in 15.403–1(b) applies.
However, if the contracting officer has
sufficient information available to determine price reasonableness, then the
contracting officer should consider requesting a waiver under the exception
at 15.403–1(b)(4). The threshold for obtaining cost or pricing data is $550,000.
Unless an exception applies, cost or
pricing data are required before accomplishing any of the following actions
expected to exceed the current threshold or, for existing contracts, the
threshold specified in the contract:
(i) The award of any negotiated contract (except for undefinitized actions
such as letter contracts).
(ii) The award of a subcontract at
any tier, if the contractor and each
higher-tier subcontractor were required to submit cost or pricing data
(but see waivers at 15.403–1(c)(4)).
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15.403–5
(iii) The modification of any sealed
bid or negotiated contract (whether or
not cost or pricing data were initially
required) or any subcontract covered
by paragraph (a)(1)(ii) of this subsection. Price adjustment amounts
must consider both increases and decreases (e.g., a $200,000 modification resulting from a reduction of $400,000 and
an increase of $200,000 is a pricing adjustment exceeding $550,000). This requirement does not apply when unrelated and separately priced changes for
which cost or pricing data would not
otherwise be required are included for
administrative convenience in the
same modification. Negotiated final
pricing actions (such as termination
settlements and total final price agreements for fixed-price incentive and redeterminable contracts) are contract
modifications requiring cost or pricing
data if—
(A) The total final price agreement
for such settlements or agreements exceeds the pertinent threshold set forth
at paragraph (a)(1) of this subsection;
or
(B) The partial termination settlement plus the estimate to complete the
continued portion of the contract exceeds the pertinent threshold set forth
at paragraph (a)(1) of this subsection
(see 49.105(c)(15)).
(2) Unless prohibited because an exception at 15.403–1(b) applies, the head
of the contracting activity, without
power of delegation, may authorize the
contracting officer to obtain cost or
pricing data for pricing actions below
the pertinent threshold in paragraph
(a)(1) of this subsection, provided the
action exceeds the simplified acquisition threshold. The head of the contracting activity shall justify the requirement for cost or pricing data. The
documentation shall include a written
finding that cost or pricing data are
necessary to determine whether the
price is fair and reasonable and the
facts supporting that finding.
(b) When cost or pricing data are required, the contracting officer shall require the contractor or prospective
contractor to submit to the contracting officer (and to have any subcontractor or prospective subcontractor submit to the prime contractor
or appropriate subcontractor tier) the
following in support of any proposal:
(1) The cost or pricing data.
(2) A certificate of current cost or
pricing data, in the format specified in
15.406–2, certifying that to the best of
its knowledge and belief, the cost or
pricing data were accurate, complete,
and current as of the date of agreement
on price or, if applicable, an earlier
date agreed upon between the parties
that is as close as practicable to the
date of agreement on price.
(c) If cost or pricing data are requested and submitted by an offeror,
but an exception is later found to
apply, the data must not be considered
cost or pricing data as defined in 2.101
and must not be certified in accordance
with 15.406–2.
(d) The requirements of this subsection also apply to contracts entered
into by an agency on behalf of a foreign
government.
[62 FR 51230, Sept. 30, 1997, as amended at 65
FR 60553, Oct. 11, 2000; 66 FR 2129, Jan. 10,
2001]
15.403–5 Instructions for submission of
cost or pricing data or information
other than cost or pricing data.
(a) Taking into consideration the policy at 15.402, the contracting officer
shall specify in the solicitation (see
15.408 (l) and (m))—
(1) Whether cost or pricing data are
required;
(2) That, in lieu of submitting cost or
pricing data, the offeror may submit a
request for exception from the requirement to submit cost or pricing data;
(3) Any information other than cost
or pricing data that is required; and
(4) Necessary preaward or postaward
access to offeror’s records.
(b)(1) Unless required to be submitted
on one of the termination forms specified in Subpart 49.6, the contracting officer may require submission of cost or
pricing data in the format indicated in
Table 15–2 of 15.408, specify an alternative format, or permit submission in
the contractor’s format.
(2) Information other than cost or
pricing data may be submitted in the
offeror’s own format unless the contracting officer decides that use of a
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48 CFR Ch. 1 (10–1–03 Edition)
specific format is essential and the format has been described in the solicitation.
(3) Data supporting forward pricing
rate agreements or final indirect cost
proposals shall be submitted in a form
acceptable to the contracting officer.
15.404
Proposal analysis.
15.404–1
Proposal analysis techniques.
(a) General. The objective of proposal
analysis is to ensure that the final
agreed-to price is fair and reasonable.
(1) The contracting officer is responsible for evaluating the reasonableness
of the offered prices. The analytical
techniques and procedures described in
this section may be used, singly or in
combination with others, to ensure
that the final price is fair and reasonable.
The
complexity
and
circumstances of each acquisition should
determine the level of detail of the
analysis required.
(2) Price analysis shall be used when
cost or pricing data are not required
(see paragraph (b) of this subsection
and 15.404–3).
(3) Cost analysis shall be used to
evaluate the reasonableness of individual cost elements when cost or pricing data are required. Price analysis
should be used to verify that the overall price offered is fair and reasonable.
(4) Cost analysis may also be used to
evaluate information other than cost
or pricing data to determine cost reasonableness or cost realism.
(5) The contracting officer may request the advice and assistance of
other experts to ensure that an appropriate analysis is performed.
(6) Recommendations or conclusions
regarding the Government’s review or
analysis of an offeror’s or contractor’s
proposal shall not be disclosed to the
offeror or contractor without the concurrence of the contracting officer.
Any discrepancy or mistake of fact
(such as duplications, omissions, and
errors in computation) contained in
the cost or pricing data or information
other than cost or pricing data submitted in support of a proposal shall be
brought to the contracting officer’s attention for appropriate action.
(7) The Air Force Institute of Technology (AFIT) and the Federal Acquisi-
tion Institute (FAI) jointly prepared a
five-volume set of Contract Pricing
Reference Guides to guide pricing and
negotiation personnel. The five guides
are: I Price Analysis, II Quantitative
Techniques for Contract Pricing, III
Cost Analysis, IV Advanced Issues in
Contract Pricing, and V Federal Contract Negotiation Techniques. These
references provide detailed discussion
and examples applying pricing policies
to pricing problems. They are to be
used for instruction and professional
guidance. However, they are not directive and should be considered informational only. They are available via the
internet at http://www.acq.osd.mil/dp/
cpf.
(b) Price analysis. (1) Price analysis is
the process of examining and evaluating a proposed price without evaluating its separate cost elements and
proposed profit.
(2) The Government may use various
price analysis techniques and procedures to ensure a fair and reasonable
price. Examples of such techniques include, but are not limited to, the following:
(i) Comparison of proposed prices received in response to the solicitation.
Normally, adequate price competition
establishes price reasonableness (see
15.403–1(c)(1)).
(ii) Comparison of previously proposed prices and previous Government
and commercial contract prices with
current proposed prices for the same or
similar items, if both the validity of
the comparison and the reasonableness
of the previous price(s) can be established.
(iii) Use of parametric estimating
methods/application
of
rough
yardsticks (such as dollars per pound
or per horsepower, or other units) to
highlight significant inconsistencies
that warrant additional pricing inquiry.
(iv) Comparison with competitive
published price lists, published market
prices of commodities, similar indexes,
and discount or rebate arrangements.
(v) Comparison of proposed prices
with independent Government cost estimates.
(vi) Comparison of proposed prices
with prices obtained through market
research for the same or similar items.
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(vii) Analysis of pricing information
provided by the offeror.
(3) The first two techniques at 15.404–
1(b)(2) are the preferred techniques.
However, if the contracting officer determines that information on competitive proposed prices or previous contract prices is not available or is insufficient to determine that the price is
fair and reasonable, the contracting officer may use any of the remaining
techniques as appropriate to the circumstances applicable to the acquisition.
(4) Value analysis can give insight
into the relative worth of a product
and the Government may use it in conjunction with the price analysis techniques listed in paragraph (b)(2) of this
section.
(c) Cost analysis. (1) Cost analysis is
the review and evaluation of the separate cost elements and profit in an
offeror’s or contractor’s proposal (including cost or pricing data or information other than cost or pricing data),
and the application of judgment to determine how well the proposed costs
represent what the cost of the contract
should be, assuming reasonable economy and efficiency.
(2) The Government may use various
cost analysis techniques and procedures to ensure a fair and reasonable
price, given the circumstances of the
acquisition. Such techniques and procedures include the following:
(i) Verification of cost or pricing
data and evaluation of cost elements,
including—
(A) The necessity for, and reasonableness of, proposed costs, including allowances for contingencies;
(B) Projection of the offeror’s cost
trends, on the basis of current and historical cost or pricing data;
(C) Reasonableness of estimates generated by appropriately calibrated and
validated parametric models or cost-estimating relationships; and
(D) The application of audited or negotiated indirect cost rates, labor
rates, and cost of money or other factors.
(ii) Evaluating the effect of the
offeror’s current practices on future
costs. In conducting this evaluation,
the contracting officer shall ensure
that the effects of inefficient or uneco-
nomical past practices are not projected into the future. In pricing production of recently developed complex
equipment, the contracting officer
should perform a trend analysis of
basic labor and materials, even in periods of relative price stability.
(iii) Comparison of costs proposed by
the offeror for individual cost elements
with—
(A) Actual costs previously incurred
by the same offeror;
(B) Previous cost estimates from the
offeror or from other offerors for the
same or similar items;
(C) Other cost estimates received in
response to the Government’s request;
(D) Independent Government cost estimates by technical personnel; and
(E) Forecasts of planned expenditures.
(iv) Verification that the offeror’s
cost submissions are in accordance
with the contract cost principles and
procedures in part 31 and, when applicable, the requirements and procedures
in 48 CFR Chapter 99 (Appendix to the
FAR looseleaf edition), Cost Accounting Standards.
(v) Review to determine whether any
cost or pricing data necessary to make
the contractor’s proposal accurate,
complete, and current have not been either submitted or identified in writing
by the contractor. If there are such
data, the contracting officer shall attempt to obtain them and negotiate,
using them or making satisfactory allowance for the incomplete data.
(vi) Analysis of the results of any
make-or-buy program reviews, in evaluating subcontract costs (see 15.407–2).
(d) Cost realism analysis. (1) Cost realism analysis is the process of independently reviewing and evaluating specific
elements of each offeror’s proposed
cost estimate to determine whether the
estimated proposed cost elements are
realistic for the work to be performed;
reflect a clear understanding of the requirements; and are consistent with
the unique methods of performance and
materials described in the offeror’s
technical proposal.
(2) Cost realism analyses shall be performed on cost-reimbursement contracts to determine the probable cost
of performance for each offeror.
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48 CFR Ch. 1 (10–1–03 Edition)
(i) The probable cost may differ from
the proposed cost and should reflect
the Government’s best estimate of the
cost of any contract that is most likely
to result from the offeror’s proposal.
The probable cost shall be used for purposes of evaluation to determine the
best value.
(ii) The probable cost is determined
by adjusting each offeror’s proposed
cost, and fee when appropriate, to reflect any additions or reductions in
cost elements to realistic levels based
on the results of the cost realism analysis.
(3) Cost realism analyses may also be
used on competitive fixed-price incentive contracts or, in exceptional cases,
on other competitive fixed-price-type
contracts when new requirements may
not be fully understood by competing
offerors, there are quality concerns, or
past experience indicates that contractors proposed costs have resulted in
quality or service shortfalls. Results of
the analysis may be used in performance risk assessments and responsibility determinations. However, proposals shall be evaluated using the criteria in the solicitation, and the offered prices shall not be adjusted as a
result of the analysis.
(e) Technical analysis. (1) The contracting officer may request that personnel having specialized knowledge,
skills, experience, or capability in engineering, science, or management perform a technical analysis of the proposed types and quantities of materials, labor, processes, special tooling,
facilities, the reasonableness of scrap
and spoilage, and other associated factors set forth in the proposal(s) in
order to determine the need for and
reasonableness of the proposed resources, assuming reasonable economy
and efficiency.
(2) At a minimum, the technical
analysis should examine the types and
quantities of material proposed and the
need for the types and quantities of
labor hours and the labor mix. Any
other data that may be pertinent to an
assessment of the offeror’s ability to
accomplish the technical requirements
or to the cost or price analysis of the
service or product being proposed
should also be included in the analysis.
(f) Unit prices. (1) Except when pricing
an item on the basis of adequate price
competition or catalog or market
price, unit prices shall reflect the intrinsic value of an item or service and
shall be in proportion to an item’s base
cost (e.g., manufacturing or acquisition
costs). Any method of distributing
costs to line items that distorts the
unit prices shall not be used. For example, distributing costs equally among
line items is not acceptable except
when there is little or no variation in
base cost.
(2) Except for the acquisition of commercial items, contracting officers
shall require that offerors identify in
their proposals those items of supply
that they will not manufacture or to
which they will not contribute significant value, unless adequate price competition is expected (10 U.S.C. 2304 and
41 U.S.C. 254(d)(5)(A)(i)). Such information shall be used to determine whether the intrinsic value of an item has
been distorted through application of
overhead and whether such items
should be considered for breakout. The
contracting officer may require such
information in all other negotiated
contracts when appropriate.
(g) Unbalanced pricing. (1) Unbalanced
pricing may increase performance risk
and could result in payment of unreasonably high prices. Unbalanced pricing exists when, despite an acceptable
total evaluated price, the price of one
or more contract line items is significantly over or understated as indicated
by the application of cost or price analysis techniques. The greatest risks associated with unbalanced pricing occur
when—
(i) Startup work, mobilization, first
articles, or first article testing are separate line items;
(ii) Base quantities and option quantities are separate line items; or
(iii) The evaluated price is the aggregate of estimated quantities to be ordered under separate line items of an
indefinite-delivery contract.
(2) All offers with separately priced
line items or subline items shall be
analyzed to determine if the prices are
unbalanced. If cost or price analysis
techniques indicate that an offer is unbalanced,
the
contracting
officer
shall—
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Federal Acquisition Regulation
15.404–2
(i) Consider the risks to the Government associated with the unbalanced
pricing in determining the competitive
range and in making the source selection decision; and
(ii) Consider whether award of the
contract will result in paying unreasonably high prices for contract performance.
(3) An offer may be rejected if the
contracting officer determines that the
lack of balance poses an unacceptable
risk to the Government.
[62 FR 51230, Sept. 30, 1997, as amended at 63
FR 58602, Oct. 30, 1998; 64 FR 51837, Sept. 24,
1999; 65 FR 16286, Mar. 27, 2000]
15.404–2 Information to support proposal analysis.
(a) Field pricing assistance. (1) The
contracting officer should request field
pricing assistance when the information available at the buying activity is
inadequate to determine a fair and reasonable price. The contracting officer
must tailor requests to reflect the minimum essential supplementary information needed to conduct a technical
or cost or pricing analysis.
(2) The contracting officer must tailor the type of information and level of
detail requested in accordance with the
specialized resources available at the
buying activity and the magnitude and
complexity of the required analysis.
Field pricing assistance is generally
available to provide—
(i) Technical, audit, and special reports associated with the cost elements
of a proposal, including subcontracts;
(ii) Information on related pricing
practices and history;
(iii) Information to help contracting
officers determine commerciality and
price reasonableness, including—
(A) Verifying sales history to source
documents;
(B) Identifying special terms and
conditions;
(C) Identifying customarily granted
or offered discounts for the item;
(D) Verifying the item to an existing
catalog or price list;
(E) Verifying historical data for an
item previously not determined commercial that the offeror is now trying
to qualify as a commercial item; and
(F) Identifying general market conditions affecting determinations of
commerciality and price reasonableness.
(iv) Information relative to the business, technical, production, or other
capabilities and practices of an offeror.
(3) When field pricing assistance is
requested, contracting officers are encouraged to team with appropriate
field experts throughout the acquisition process, including negotiations.
Early communication with these experts will assist in determining the extent of assistance required, the specific
areas for which assistance is needed, a
realistic review schedule, and the information necessary to perform the review.
(4) When requesting field pricing assistance on a contractor’s request for
equitable adjustment, the contracting
officer shall provide the information
listed in 43.204(b)(5).
(5) Field pricing information and
other reports may include proprietary
or source selection information (see
2.101). This information must be appropriately identified and protected accordingly.
(b) Reporting field pricing information.
(1) Depending upon the extent and complexity of the field pricing review, results, including supporting rationale,
may be reported directly to the contracting officer orally, in writing, or by
any other method acceptable to the
contracting officer.
(i) Whenever circumstances permit,
the contracting officer and field pricing experts are encouraged to use telephonic and/or electronic means to request and transmit pricing information.
(ii) When it is necessary to have written technical and audit reports, the
contracting officer shall request that
the audit agency concurrently forward
the audit report to the requesting contracting officer and the administrative
contracting officer (ACO). The completed field pricing assistance results
may reference audit information, but
need not reconcile the audit recommendations and technical recommendations. A copy of the information submitted to the contracting officer by field pricing personnel shall be
provided to the audit agency.
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48 CFR Ch. 1 (10–1–03 Edition)
(2) Audit and field pricing information, whether written or reported telephonically or electronically, shall be
made a part of the official contract file
(see 4.807(f)).
(c) Audit assistance for prime contracts
or subcontracts. (1) The contracting officer may contact the cognizant audit office directly, particularly when an
audit is the only field pricing support
required. The audit office shall send
the audit report, or otherwise transmit
the audit recommendations, directly to
the contracting officer.
(i) The auditor shall not reveal the
audit conclusions or recommendations
to the offeror/contractor without obtaining the concurrence of the contracting officer. However, the auditor
may discuss statements of facts with
the contractor.
(ii) The contracting officer should be
notified immediately of any information disclosed to the auditor after submission of a report that may significantly affect the audit findings and, if
necessary, a supplemental audit report
shall be issued.
(2) The contracting officer shall not
request a separate preaward audit of
indirect costs unless the information
already available from an existing
audit, completed within the preceding
12 months, is considered inadequate for
determining the reasonableness of the
proposed indirect costs (41 U.S.C. 254d
and 10 U.S.C. 2313).
(3) The auditor is responsible for the
scope and depth of the audit. Copies of
updated information that will significantly affect the audit should be provided to the auditor by the contracting
officer.
(4) General access to the offeror’s
books and financial records is limited
to the auditor. This limitation does not
preclude the contracting officer or the
ACO, or their representatives, from requesting that the offeror provide or
make available any data or records
necessary to analyze the offeror’s proposal.
(d) Deficient proposals. The ACO or
the auditor, as appropriate, shall notify the contracting officer immediately if the data provided for review
is so deficient as to preclude review or
audit, or if the contractor or offeror
has denied access to any records con-
sidered essential to conduct a satisfactory review or audit. Oral notifications
shall be confirmed promptly in writing,
including a description of deficient or
denied data or records. The contracting
officer immediately shall take appropriate action to obtain the required
data. Should the offeror/contractor
again refuse to provide adequate data,
or provide access to necessary data, the
contracting officer shall withhold the
award or price adjustment and refer
the contract action to a higher authority, providing details of the attempts
made to resolve the matter and a statement of the practicability of obtaining
the supplies or services from another
source.
[62 FR 51230, Sept. 30, 1997, as amended at 64
FR 51837, Sept. 24, 1999; 67 FR 13063, Mar. 20,
2002]
15.404–3 Subcontract pricing considerations.
(a) The contracting officer is responsible for the determination of price
reasonableness for the prime contract,
including subcontracting costs. The
contracting officer should consider
whether a contractor or subcontractor
has an approved purchasing system,
has performed cost or price analysis of
proposed subcontractor prices, or has
negotiated the subcontract prices before negotiation of the prime contract,
in determining the reasonableness of
the prime contract price. This does not
relieve the contracting officer from the
responsibility to analyze the contractor’s submission, including subcontractor’s cost or pricing data.
(b) The prime contractor or subcontractor shall—
(1) Conduct appropriate cost or price
analyses to establish the reasonableness of proposed subcontract prices;
(2) Include the results of these analyses in the price proposal; and
(3) When required by paragraph (c) of
this subsection, submit subcontractor
cost or pricing data to the Government
as part of its own cost or pricing data.
(c) Any contractor or subcontractor
that is required to submit cost or pricing data also shall obtain and analyze
cost or pricing data before awarding
any subcontract, purchase order, or
modification expected to exceed the
cost or pricing data threshold, unless
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an exception in 15.403–1(b) applies to
that action.
(1) The contractor shall submit, or
cause to be submitted by the subcontractor(s), cost or pricing data to the
Government for subcontracts that are
the lower of either—
(i) $10,000,000 or more; or
(ii) Both more than the pertinent
cost or pricing data threshold and more
than 10 percent of the prime contractor’s proposed price, unless the contracting officer believes such submission is unnecessary.
(2) The contracting officer may require the contractor or subcontractor
to submit to the Government (or cause
submission of) subcontractor cost or
pricing data below the thresholds in
paragraph (c)(1) of this subsection that
the contracting officer considers necessary for adequately pricing the prime
contract.
(3) Subcontractor cost or pricing data
shall be submitted in the format provided in Table 15–2 of 15.408 or the alternate format specified in the solicitation.
(4) Subcontractor cost or pricing data
shall be current, accurate, and complete as of the date of price agreement,
or, if applicable, an earlier date agreed
upon by the parties and specified on
the contractor’s Certificate of Current
Cost or Pricing Data. The contractor
shall update subcontractor’s data, as
appropriate, during source selection
and negotiations.
(5) If there is more than one prospective subcontractor for any given work,
the contractor need only submit to the
Government cost or pricing data for
the prospective subcontractor most
likely to receive the award.
15.404–4 Profit.
(a) General. This subsection prescribes policies for establishing the
profit or fee portion of the Government
prenegotiation objective in price negotiations based on cost analysis.
(1) Profit or fee prenegotiation objectives do not necessarily represent net
income to contractors. Rather, they
represent that element of the potential
total remuneration that contractors
may receive for contract performance
over and above allowable costs. This
potential remuneration element and
the Government’s estimate of allowable costs to be incurred in contract
performance together equal the Government’s total prenegotiation objective. Just as actual costs may vary
from estimated costs, the contractor’s
actual realized profit or fee may vary
from negotiated profit or fee, because
of such factors as efficiency of performance, incurrence of costs the Government does not recognize as allowable,
and the contract type.
(2) It is in the Government’s interest
to offer contractors opportunities for
financial rewards sufficient to stimulate efficient contract performance, attract the best capabilities of qualified
large and small business concerns to
Government contracts, and maintain a
viable industrial base.
(3) Both the Government and contractors should be concerned with profit as a motivator of efficient and effective contract performance. Negotiations aimed merely at reducing prices
by reducing profit, without proper recognition of the function of profit, are
not in the Government’s interest. Negotiation of extremely low profits, use
of historical averages, or automatic application of predetermined percentages
to total estimated costs do not provide
proper motivation for optimum contract performance.
(b) Policy. (1) Structured approaches
(see paragraph (d) of this subsection)
for
determining
profit
or
fee
prenegotiation objectives provide a discipline for ensuring that all relevant
factors are considered. Subject to the
authorities in 1.301(c), agencies making
noncompetitive contract awards over
$100,000 totaling $50 million or more a
year—
(i) Shall use a structured approach
for determining the profit or fee objective in those acquisitions that require
cost analysis; and
(ii) May prescribe specific exemptions for situations in which mandatory use of a structured approach
would be clearly inappropriate.
(2) Agencies may use another agency’s structured approach.
(c) Contracting officer responsibilities.
(1) When the price negotiation is not
based on cost analysis, contracting officers are not required to analyze profit.
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48 CFR Ch. 1 (10–1–03 Edition)
(2) When the price negotiation is
based on cost analysis, contracting officers in agencies that have a structured approach shall use it to analyze
profit. When not using a structured approach, contracting officers shall comply with paragraph (d)(1) of this subsection in developing profit or fee
prenegotiation objectives.
(3) Contracting officers shall use the
Government prenegotiation cost objective amounts as the basis for calculating the profit or fee prenegotiation
objective. Before applying profit or fee
factors, the contracting officer shall
exclude any facilities capital cost of
money included in the cost objective
amounts. If the prospective contractor
fails to identify or propose facilities
capital cost of money in a proposal for
a contract that will be subject to the
cost principles for contracts with commercial organizations (see subpart
31.2), facilities capital cost of money
will not be an allowable cost in any resulting contract (see 15.408(i)).
(4)(i) The contracting officer shall
not negotiate a price or fee that exceeds the following statutory limitations, imposed by 10 U.S.C. 2306(d) and
41 U.S.C. 254(b):
(A) For experimental, developmental,
or research work performed under a
cost-plus-fixed-fee contract, the fee
shall not exceed 15 percent of the contract’s estimated cost, excluding fee.
(B) For architect-engineer services
for public works or utilities, the contract price or the estimated cost and
fee for production and delivery of designs, plans, drawings, and specifications shall not exceed 6 percent of the
estimated cost of construction of the
public work or utility, excluding fees.
(C) For other cost-plus-fixed-fee contracts, the fee shall not exceed 10 percent of the contract’s estimated cost,
excluding fee.
(ii) The contracting officer’s signature on the price negotiation memorandum or other documentation supporting determination of fair and reasonable price documents the contracting officer’s determination that
the statutory price or fee limitations
have not been exceeded.
(5) The contracting officer shall not
require any prospective contractor to
submit breakouts or supporting ration-
ale for its profit or fee objective but
may consider it, if it is submitted voluntarily.
(6) If a change or modification calls
for essentially the same type and mix
of work as the basic contract and is of
relatively small dollar value compared
to the total contract value, the contracting officer may use the basic contract’s profit or fee rate as the
prenegotiation
objective
for
that
change or modification.
(d) Profit-analysis factors—(1) Common
factors. Unless it is clearly inappropriate or not applicable, each factor
outlined in paragraphs (d)(1)(i) through
(vi) of this subsection shall be considered by agencies in developing their
structured approaches and by contracting officers in analyzing profit,
whether or not using a structured approach.
(i) Contractor effort. This factor measures the complexity of the work and
the resources required of the prospective contractor for contract performance. Greater profit opportunity should
be provided under contracts requiring a
high degree of professional and managerial skill and to prospective contractors whose skills, facilities, and technical assets can be expected to lead to
efficient and economical contract performance. The subfactors in paragraphs
(d)(1)(i) (A) through (D) of this subsection shall be considered in determining contractor effort, but they may
be modified in specific situations to accommodate differences in the categories used by prospective contractors
for listing costs—
(A) Material acquisition. This subfactor measures the managerial and
technical effort needed to obtain the
required purchased parts and material,
subcontracted items, and special tooling. Considerations include the complexity of the items required, the number of purchase orders and subcontracts to be awarded and administered, whether established sources are
available or new or second sources
must be developed, and whether material will be obtained through routine
purchase orders or through complex
subcontracts requiring detailed specifications. Profit consideration should
correspond to the managerial and technical effort involved.
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(B) Conversion direct labor. This subfactor measures the contribution of direct engineering, manufacturing, and
other labor to converting the raw materials, data, and subcontracted items
into the contract items. Considerations
include the diversity of engineering,
scientific, and manufacturing labor
skills required and the amount and
quality of supervision and coordination
needed to perform the contract task.
(C) Conversion-related indirect costs.
This subfactor measures how much the
indirect costs contribute to contract
performance. The labor elements in the
allocable indirect costs should be given
the profit consideration they would receive if treated as direct labor. The
other elements of indirect costs should
be evaluated to determine whether
they merit only limited profit consideration because of their routine nature,
or are elements that contribute significantly to the proposed contract.
(D) General management. This subfactor measures the prospective contractor’s other indirect costs and general and administrative (G&A) expense,
their composition, and how much they
contribute to contract performance.
Considerations include how labor in
the overhead pools would be treated if
it were direct labor, whether elements
within the pools are routine expenses
or instead are elements that contribute
significantly to the proposed contract,
and whether the elements require routine as opposed to unusual managerial
effort and attention.
(ii) Contract cost risk. (A) This factor
measures the degree of cost responsibility and associated risk that the prospective contractor will assume as a result of the contract type contemplated
and considering the reliability of the
cost estimate in relation to the complexity and duration of the contract
task. Determination of contract type
should be closely related to the risks
involved in timely, cost-effective, and
efficient performance. This factor
should compensate contractors proportionately for assuming greater cost
risks.
(B) The contractor assumes the
greatest cost risk in a closely priced
firm-fixed-price contract under which
it agrees to perform a complex undertaking on time and at a predetermined
price. Some firm-fixed-price contracts
may entail substantially less cost risk
than others because, for example, the
contract task is less complex or many
of the contractor’s costs are known at
the time of price agreement, in which
case the risk factor should be reduced
accordingly. The contractor assumes
the least cost risk in a cost-plus-fixedfee level-of-effort contract, under
which it is reimbursed those costs determined to be allocable and allowable,
plus the fixed fee.
(C) In evaluating assumption of cost
risk, contracting officers shall, except
in unusual circumstances, treat timeand-materials, labor-hour, and firmfixed-price, level-of-effort term contracts as cost-plus-fixed-fee contracts.
(iii) Federal socioeconomic programs.
This factor measures the degree of support given by the prospective contractor to Federal socioeconomic programs, such as those involving small
business concerns, small business concerns owned and controlled by socially
and economically disadvantaged individuals, women-owned small business
concerns, handicapped sheltered workshops, and energy conservation. Greater profit opportunity should be provided contractors that have displayed
unusual initiative in these programs.
(iv) Capital investments. This factor
takes into account the contribution of
contractor investments to efficient and
economical contract performance.
(v) Cost-control and other past accomplishments. This factor allows additional profit opportunities to a prospective contractor that has previously
demonstrated its ability to perform
similar tasks effectively and economically. In addition, consideration should
be given to measures taken by the prospective contractor that result in productivity improvements, and other
cost-reduction accomplishments that
will benefit the Government in followon contracts.
(vi) Independent development. Under
this factor, the contractor may be provided additional profit opportunities in
recognition of independent development efforts relevant to the contract
end item without Government assistance. The contracting officer should
consider whether the development cost
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48 CFR Ch. 1 (10–1–03 Edition)
was recovered directly or indirectly
from Government sources.
(2) Additional factors. In order to foster achievement of program objectives,
each agency may include additional
factors in its structured approach or
take them into account in the profit
analysis of individual contract actions.
[62 FR 51230, Sept. 30, 1997, as amended at 67
FR 6120, Feb. 8, 2002]
15.405
Price negotiation.
(a) The purpose of performing cost or
price analysis is to develop a negotiation position that permits the contracting officer and the offeror an opportunity to reach agreement on a fair
and reasonable price. A fair and reasonable price does not require that agreement be reached on every element of
cost, nor is it mandatory that the
agreed price be within the contracting
officer’s initial negotiation position.
Taking into consideration the advisory
recommendations, reports of contributing specialists, and the current status of the contractor’s purchasing system, the contracting officer is responsible for exercising the requisite judgment needed to reach a negotiated settlement with the offeror and is solely
responsible for the final price agreement. However, when significant audit
or other specialist recommendations
are not adopted, the contracting officer
should provide rationale that supports
the negotiation result in the price negotiation documentation.
(b) The contracting officer’s primary
concern is the overall price the Government will actually pay. The contracting officer’s objective is to negotiate a contract of a type and with a
price providing the contractor the
greatest incentive for efficient and economical performance. The negotiation
of a contract type and a price are related and should be considered together
with the issues of risk and uncertainty
to the contractor and the Government.
Therefore, the contracting officer
should not become preoccupied with
any single element and should balance
the contract type, cost, and profit or
fee negotiated to achieve a total result—a price that is fair and reasonable
to both the Government and the contractor.
(c) The Government’s cost objective
and proposed pricing arrangement directly affect the profit or fee objective.
Because profit or fee is only one of several interrelated variables, the contracting officer shall not agree on profit or fee without concurrent agreement
on cost and type of contract.
(d) If, however, the contractor insists
on a price or demands a profit or fee
that the contracting officer considers
unreasonable, and the contracting officer has taken all authorized actions
(including determining the feasibility
of developing an alternative source)
without success, the contracting officer shall refer the contract action to a
level above the contracting officer.
Disposition of the action should be documented.
15.406
Documentation.
15.406–1
Prenegotiation objectives.
(a) The prenegotiation objectives establish the Government’s initial negotiation position. They assist in the
contracting officer’s determination of
fair and reasonable price. They should
be based on the results of the contracting officer’s analysis of the
offeror’s proposal, taking into consideration all pertinent information including field pricing assistance, audit
reports and technical analysis, factfinding results, independent Government cost estimates and price histories.
(b) The contracting officer shall establish prenegotiation objectives before the negotiation of any pricing action. The scope and depth of the analysis supporting the objectives should
be directly related to the dollar value,
importance, and complexity of the
pricing action. When cost analysis is
required, the contracting officer shall
document the pertinent issues to be negotiated, the cost objectives, and a
profit or fee objective.
15.406–2 Certificate of current cost or
pricing data.
(a) When cost or pricing data are required, the contracting officer must require the contractor to execute a Certificate of Current Cost or Pricing
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15.406–3
Data, using the format in this paragraph, and must include the executed
certificate in the contract file.
CERTIFICATE OF CURRENT COST OR
PRICING DATA
This is to certify that, to the best of my
knowledge and belief, the cost or pricing
data (as defined in section 2.101 of the Federal Acquisition Regulation (FAR) and required under FAR subsection 15.403–4) submitted, either actually or by specific identification in writing, to the Contracting Officer or to the Contracting Officer’s representative in support of ll* are accurate, complete, and current as of ll**. This certification includes the cost or pricing data supporting any advance agreements and forward
pricing rate agreements between the offeror
and the Government that are part of the proposal.
Firm llllllllllllllllllll
Signature llllllllllllllllll
Name llllllllllllllllllll
Title lllllllllllllllllllll
Date of execution*** llllllllllll
* Identify the proposal, request for price
adjustment, or other submission involved,
giving the appropriate identifying number
(e.g., RFP No.).
** Insert the day, month, and year when
price negotiations were concluded and price
agreement was reached or, if applicable, an
earlier date agreed upon between the parties
that is as close as practicable to the date of
agreement on price.
*** Insert the day, month, and year of signing, which should be as close as practicable
to the date when the price negotiations were
concluded and the contract price was agreed
to. (End of certificate)
(b) The certificate does not constitute a representation as to the accuracy of the contractor’s judgment on
the estimate f future costs or projections. It applies to the data upon which
the judgment or estimate was based.
This distinction between fact and judgment should be clearly understood. If
the contractor had information reasonably available at the time of agreement showing that the negotiated price
was not based on accurate, complete,
and current data, the contractor’s responsibility is not limited by any lack
of personal knowledge of the information on the part of its negotiators.
(c) The contracting officer and contractor are encouraged to reach a prior
agreement on criteria for establishing
closing or cutoff dates when appropriate in order to minimize delays as-
sociated with proposal updates. Closing
or cutoff dates should be included as
part of the data submitted with the
proposal and, before agreement on
price, data should be updated by the
contractor to the latest closing or cutoff dates for which the data are available. Use of cutoff dates coinciding
with reports is acceptable, as certain
data may not be reasonably available
before normal periodic closing dates
(e.g., actual indirect costs). Data within the contractor’s or a subcontractor’s
organization on matters significant to
contractor management and to the
Government will be treated as reasonably available. What is significant depends upon the circumstances of each
acquisition.
(d) Possession of a Certificate of Current Cost or Pricing Data is not a substitute for examining and analyzing
the contractor’s proposal.
(e) If cost or pricing data are requested by the Government and submitted by an offeror, but an exception
is later found to apply, the data shall
not be considered cost or pricing data
and shall not be certified in accordance
with this subsection.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001]
15.406–3
Documenting the negotiation.
(a) The contracting officer shall document in the contract file the principal
elements of the negotiated agreement.
The documentation (e.g., price negotiation memorandum (PNM)) shall include the following:
(1) The purpose of the negotiation.
(2) A description of the acquisition,
including appropriate identifying numbers (e.g., RFP No.).
(3) The name, position, and organization of each person representing the
contractor and the Government in the
negotiation.
(4) The current status of any contractor systems (e.g., purchasing, estimating, accounting, and compensation)
to the extent they affected and were
considered in the negotiation.
(5) If cost or pricing data were not required in the case of any price negotiation exceeding the cost or pricing data
threshold, the exception used and the
basis for it.
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15.407
48 CFR Ch. 1 (10–1–03 Edition)
(6) If cost or pricing data were required, the extent to which the contracting officer—
(i) Relied on the cost or pricing data
submitted and used them in negotiating the price;
(ii) Recognized as inaccurate, incomplete, or noncurrent any cost or pricing
data submitted; the action taken by
the contracting officer and the contractor as a result; and the effect of the
defective data on the price negotiated;
or
(iii) Determined that an exception
applied after the data were submitted
and, therefore, considered not to be
cost or pricing data.
(7) A summary of the contractor’s
proposal, any field pricing assistance
recommendations, including the reasons for any pertinent variances from
them, the Government’s negotiation
objective, and the negotiated position.
Where the determination of price reasonableness is based on cost analysis,
the summary shall address each major
cost element. When determination of
price reasonableness is based on price
analysis, the summary shall include
the source and type of data used to
support the determination.
(8) The most significant facts or considerations controlling the establishment of the prenegotiation objectives
and the negotiated agreement including an explanation of any significant
differences between the two positions.
(9) To the extent such direction has a
significant effect on the action, a discussion and quantification of the impact of direction given by Congress,
other agencies, and higher-level officials (i.e., officials who would not normally exercise authority during the
award and review process for the instant contract action).
(10) The basis for the profit or fee
prenegotiation objective and the profit
or fee negotiated.
(11) Documentation of fair and reasonable pricing.
(b) Whenever field pricing assistance
has been obtained, the contracting officer shall forward a copy of the negotiation documentation to the office(s)
providing assistance. When appropriate, information on how advisory
field support can be made more effective should be provided separately.
15.407
Special cost or pricing areas.
15.407–1 Defective
data.
cost
or
(a) If, before agreement on price, the
contracting officer learns that any cost
or pricing data submitted are inaccurate, incomplete, or noncurrent, the
contracting officer shall immediately
bring the matter to the attention of
the prospective contractor, whether
the defective data increase or decrease
the contract price. The contracting officer shall consider any new data submitted to correct the deficiency, or
consider the inaccuracy, incompleteness, or noncurrency of the data when
negotiating the contract price. The
price negotiation memorandum shall
reflect the adjustments made to the
data or the corrected data used to negotiate the contract price.
(b)(1) If, after award, cost or pricing
data are found to be inaccurate, incomplete, or noncurrent as of the date of
final agreement on price or an earlier
date agreed upon by the parties given
on the contractor’s or subcontractor’s
Certificate of Current Cost or Pricing
Data, the Government is entitled to a
price adjustment, including profit or
fee, of any significant amount by which
the price was increased because of the
defective data. This entitlement is ensured by including in the contract one
of the clauses prescribed in 15.408 (b)
and (c) and is set forth in the clauses at
52.215–10, Price Reduction for Defective
Cost or Pricing Data, and 52.215–11,
Price Reduction for Defective Cost or
Pricing
Data—Modifications.
The
clauses give the Government the right
to a price adjustment for defects in
cost or pricing data submitted by the
contractor, a prospective subcontractor, or an actual subcontractor.
(2) In arriving at a price adjustment,
the contracting officer shall consider
the time by which the cost or pricing
data became reasonably available to
the contractor, and the extent to which
the Government relied upon the defective data.
(3) The clauses referred to in paragraph (b)(1) of this subsection recognize
that the Government’s right to a price
adjustment is not affected by any of
the following circumstances:
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(i) The contractor or subcontractor
was a sole source supplier or otherwise
was in a superior bargaining position;
(ii) The contracting officer should
have known that the cost or pricing
data in issue were defective even
though the contractor or subcontractor
took no affirmative action to bring the
character of the data to the attention
of the contracting officer;
(iii) The contract was based on an
agreement about the total cost of the
contract and there was no agreement
about the cost of each item procured
under such contract; or
(iv) Cost or pricing data were required; however, the contractor or subcontractor did not submit a Certificate
of Current Cost or Pricing Data relating to the contract.
(4) Subject to paragraphs (b) (5) and
(6) of this subsection, the contracting
officer shall allow an offset for any understated cost or pricing data submitted in support of price negotiations,
up to the amount of the Government’s
claim for overstated pricing data arising out of the same pricing action (e.g.,
the initial pricing of the same contract
or the pricing of the same change
order).
(5) An offset shall be allowed only in
an amount supported by the facts and
if the contractor—
(i) Certifies to the contracting officer
that, to the best of the contractor’s
knowledge and belief, the contractor is
entitled to the offset in the amount requested; and
(ii) Proves that the cost or pricing
data were available before the ‘‘as of’’
date specified on the Certificate of Current Cost or Pricing Data but were not
submitted. Such offsets need not be in
the same cost groupings (e.g., material,
direct labor, or indirect costs).
(6) An offset shall not be allowed if—
(i) The understated data were known
by the contractor to be understated before the ‘‘as of’’ date specified on the
Certificate of Current Cost or Pricing
Data; or
(ii) The Government proves that the
facts demonstrate that the price would
not have increased in the amount to be
offset even if the available data had
been submitted before the ‘‘as of’’ date
specified on the Certificate of Current
Cost or Pricing Data.
(7)(i) In addition to the price adjustment, the Government is entitled to recovery of any overpayment plus interest on the overpayments. The Government is also entitled to penalty
amounts on certain of these overpayments. Overpayment occurs only when
payment is made for supplies or services accepted by the Government. Overpayments do not result from amounts
paid for contract financing, as defined
in 32.001.
(ii) In calculating the interest
amount due, the contracting officer
shall—
(A) Determine the defective pricing
amounts that have been overpaid to
the contractor;
(B) Consider the date of each overpayment (the date of overpayment for
this interest calculation shall be the
date payment was made for the related
completed
and
accepted
contract
items; or for subcontract defective
pricing, the date payment was made to
the prime contractor, based on prime
contract progress billings or deliveries,
which included payments for a completed and accepted subcontract item);
and
(C) Apply the underpayment interest
rate(s) in effect for each quarter from
the time of overpayment to the time of
repayment, utilizing rate(s) prescribed
by the Secretary of the Treasury under
26 U.S.C. 6621(a)(2).
(iii) In arriving at the amount due for
penalties on contracts where the submission of defective cost or pricing
data was a knowing submission, the
contracting officer shall obtain an
amount equal to the amount of overpayment made. Before taking any contractual actions concerning penalties,
the contracting officer shall obtain the
advice of counsel.
(iv) In the demand letter, the contracting officer shall separately include—
(A) The repayment amount;
(B) The penalty amount (if any);
(C) The interest amount through a
specified date; and
(D) A statement that interest will
continue to accrue until repayment is
made.
(c) If, after award, the contracting officer learns or suspects that the data
furnished were not accurate, complete,
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15.407–1
48 CFR Ch. 1 (10–1–03 Edition)
and current, or were not adequately
verified by the contractor as of the
time of negotiation, the contracting officer shall request an audit to evaluate
the accuracy, completeness, and currency of the data. The Government
may evaluate the profit-cost relationships only if the audit reveals that the
data certified by the contractor were
defective. The contracting officer shall
not reprice the contract solely because
the profit was greater than forecast or
because a contingency specified in the
submission failed to materialize.
(d) For each advisory audit received
based on a postaward review that indicates defective pricing, the contracting
officer shall make a determination as
to whether or not the data submitted
were defective and relied upon. Before
making such a determination, the contracting officer should give the contractor an opportunity to support the
accuracy, completeness, and currency
of the data in question. The contracting officer shall prepare a memorandum documenting both the determination and any corrective action
taken as a result. The contracting officer shall send one copy of this memorandum to the auditor and, if the contract has been assigned for administration, one copy to the administrative
contracting officer (ACO). A copy of
the memorandum or other notice of the
contracting officer’s determination
shall be provided to the contractor.
(e) If both the contractor and subcontractor submitted, and the contractor
certified, or should have certified, cost
or pricing data, the Government has
the right, under the clauses at 52.215–
10, Price Reduction for Defective Cost
or Pricing Data, and 52.215–11, Price
Reduction for Defective Cost or Pricing
Data—Modifications, to reduce the
prime contract price if it was significantly increased because a subcontractor submitted defective data. This
right applies whether these data supported subcontract cost estimates or
supported firm agreements between
subcontractor and contractor.
(f) If Government audit discloses defective subcontractor cost or pricing
data, the information necessary to support a reduction in prime contract and
subcontract prices may be available
only from the Government. To the ex-
tent necessary to secure a prime contract price reduction, the contracting
officer should make this information
available to the prime contractor or
appropriate subcontractors, upon request. If release of the information
would compromise Government security or disclose trade secrets or confidential business information, the contracting officer shall release it only
under conditions that will protect it
from improper disclosure. Information
made available under this paragraph
shall be limited to that used as the
basis for the prime contract price reduction. In order to afford an opportunity for corrective action, the contracting officer should give the prime
contractor reasonable advance notice
before determining to reduce the prime
contract price.
(1) When a prime contractor includes
defective subcontract data in arriving
at the price but later awards the subcontract to a lower priced subcontractor (or does not subcontract for the
work), any adjustment in the prime
contract price due to defective subcontract data is limited to the difference (plus applicable indirect cost
and profit markups) between the subcontract price used for pricing the
prime contract, and either the actual
subcontract price or the actual cost to
the contractor, if not subcontracted,
provided the data on which the actual
subcontract price is based are not
themselves defective.
(2) Under cost-reimbursement contracts and under all fixed-price contracts except firm-fixed-price contracts
and fixed-price contracts with economic price adjustment, payments to
subcontractors that are higher than
they would be had there been no defective subcontractor cost or pricing data
shall be the basis for disallowance or
nonrecognition of costs under the
clauses prescribed in 15.408 (b) and (c).
The Government has a continuing and
direct financial interest in such payments that is unaffected by the initial
agreement on prime contract price.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 65354, Dec. 18, 2001]
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15.407–2
15.407–2 Make-or-buy programs.
(a) General. The prime contractor is
responsible for managing contract performance, including planning, placing,
and administering subcontracts as necessary to ensure the lowest overall cost
and technical risk to the Government.
When make-or-buy programs are required, the Government may reserve
the right to review and agree on the
contractor’s
make-or-buy
program
when necessary to ensure negotiation
of reasonable contract prices, satisfactory performance, or implementation
of socioeconomic policies. Consent to
subcontracts and review of contractors’
purchasing systems are separate actions covered in part 44.
(b) Definition. Make item, as used in
this subsection, means an item or work
effort to be produced or performed by
the prime contractor or its affiliates,
subsidiaries, or divisions.
(c) Acquisitions requiring make-or-buy
programs. (1) Contracting officers may
require prospective contractors to submit make-or-buy program plans for negotiated acquisitions requiring cost or
pricing data whose estimated value is
$10 million or more, except when the
proposed contract is for research or development and, if prototypes or hardware are involved, no significant follow-on production is anticipated.
(2) Contracting officers may require
prospective contractors to submit
make-or-buy programs for negotiated
acquisitions whose estimated value is
under $10 million only if the contracting officer—
(i) Determines that the information
is necessary; and
(ii) Documents the reasons in the
contract file.
(d) Solicitation requirements. When
prospective contractors are required to
submit proposed make-or-buy programs, the solicitation shall include—
(1) A statement that the program and
required supporting information must
accompany the offer; and
(2) A description of factors to be used
in evaluating the proposed program,
such as capability, capacity, availability of small, small disadvantaged,
and women-owned small business concerns for subcontracting, establishment of new facilities in or near labor
surplus areas, delivery or performance
schedules, control of technical and
schedule interfaces, proprietary processes, technical superiority or exclusiveness, and technical risks involved.
(e) Program requirements. To support a
make-or-buy program, the following
information shall be supplied by the
contractor in its proposal:
(1) Items and work included. The information required from a contractor in a
make-or-buy program shall be confined
to those major items or work efforts
that normally would require company
management review of the make-orbuy decision because they are complex,
costly, needed in large quantities, or
require additional facilities to produce.
Raw materials, commercial items (see
2.101), and off-the-shelf items (see
46.101) shall not be included, unless
their potential impact on contract cost
or schedule is critical. Normally,
make-or-buy programs should not include items or work efforts estimated
to cost less than 1 percent of the total
estimated contract price or any minimum dollar amount set by the agency.
(2) The offeror’s program should include or be supported by the following
information:
(i) A description of each major item
or work effort.
(ii) Categorization of each major
item or work effort as ‘‘must make,’’
‘‘must buy, or ‘‘can either make or
buy.’’
(iii) For each item or work effort categorized as ‘‘can either make or buy,’’
a proposal either to ‘‘make’’ or to
‘‘buy.’’
(iv) Reasons for categorizing items
and work efforts as ‘‘must make’’ or
‘‘must buy,’’ and proposing to ‘‘make’’
or to ‘‘buy’’ those categorized as ‘‘can
either make or buy.’’ The reasons must
include the consideration given to the
evaluation factors described in the solicitation and must be in sufficient detail to permit the contracting officer
to evaluate the categorization or proposal.
(v) Designation of the plant or division proposed to make each item or
perform each work effort, and a statement as to whether the existing or proposed new facility is in or near a labor
surplus area.
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48 CFR Ch. 1 (10–1–03 Edition)
(vi) Identification of proposed subcontractors, if known, and their location and size status (also see Subpart
19.7 for subcontracting plan requirements).
(vii) Any recommendations to defer
make-or-buy
decisions
when
categorization of some items or work efforts is impracticable at the time of
submission.
(viii) Any other information the contracting officer requires in order to
evaluate the program.
(f) Evaluation, negotiation, and agreement. Contracting officers shall evaluate and negotiate proposed make-orbuy programs as soon as practicable
after their receipt and before contract
award.
(1) When the program is to be incorporated in the contract and the design
status of the product being acquired
does not permit accurate precontract
identification of major items or work
efforts, the contracting officer shall
notify the prospective contractor in
writing that these items or efforts,
when identifiable, shall be added under
the clause at 52.215–9, Changes or Additions to Make-or-Buy Program.
(2) Contracting officers normally
shall not agree to proposed ‘‘make
items’’ when the products or services
are not regularly manufactured or provided by the contractor and are available—quality, quantity, delivery, and
other essential factors considered—
from another firm at equal or lower
prices, or when they are regularly manufactured or provided by the contractor, but are available—quality,
quantity, delivery, and other essential
factors considered— from another firm
at lower prices. However, the contracting officer may agree to these as
‘‘make items’’ if an overall lower Governmentwide cost would result or it is
otherwise in the best interest of the
Government. If this situation occurs in
any fixed-price incentive or cost-plusincentive-fee contract, the contracting
officer shall specify these items in the
contract and state that they are subject to paragraph (d) of the clause at
52.215–9, Changes or Additions to Makeor-Buy Program (see 15.408(a)). If the
contractor proposes to reverse the categorization of such items during con-
tract performance, the contract price
shall be subject to equitable reduction.
(g) Incorporating make-or-buy programs
in contracts. The contracting officer
may incorporate the make-or-buy program in negotiated contracts for—
(1) Major systems (see part 34) or
their subsystems or components, regardless of contract type; or
(2) Other supplies and services if—
(i) The contract is a cost-reimbursable contract, or a cost-sharing contract in which the contractor’s share of
the cost is less than 25 percent; and
(ii) The contracting officer determines that technical or cost risks justify Government review and approval
of changes or additions to the make-orbuy program.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001]
15.407–3 Forward pricing rate agreements.
(a) When cost or pricing data are required, offerors are required to describe
any forward pricing rate agreements
(FPRA’s) in each specific pricing proposal to which the rates apply and to
identify the latest cost or pricing data
already submitted in accordance with
the agreement. All data submitted in
connection with the agreement, updated as necessary, form a part of the
total data that the offeror certifies to
be accurate, complete, and current at
the time of agreement on price for an
initial contract or for a contract modification.
(b) Contracting officers will use
FPRA rates as bases for pricing all
contracts, modifications, and other
contractual actions to be performed
during the period covered by the agreement. Conditions that may affect the
agreement’s validity shall be reported
promptly to the ACO. If the ACO determines that a changed condition invalidates the agreement, the ACO shall notify all interested parties of the extent
of its effect and status of efforts to establish a revised FPRA.
(c) Contracting officers shall not require certification at the time of agreement for data supplied in support of
FPRA’s or other advance agreements.
When a forward pricing rate agreement
or other advance agreement is used to
price a contract action that requires a
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15.407–4
certificate, the certificate supporting
that contract action shall cover the
data supplied to support the FPRA or
other advance agreement, and all other
data supporting the action.
15.407–4 Should-cost review.
(a) General. (1) Should-cost reviews
are a specialized form of cost analysis.
Should-cost reviews differ from traditional evaluation methods because
they do not assume that a contractor’s
historical costs reflect efficient and economical operation. Instead, these reviews evaluate the economy and efficiency of the contractor’s existing
work force, methods, materials, facilities, operating systems, and management. These reviews are accomplished
by a multi-functional team of Government contracting, contract administration, pricing, audit, and engineering
representatives.
The
objective
of
should-cost reviews is to promote both
short and long-range improvements in
the contractor’s economy and efficiency in order to reduce the cost of
performance of Government contracts.
In addition, by providing rationale for
any recommendations and quantifying
their impact on cost, the Government
will be better able to develop realistic
objectives for negotiation.
(2) There are two types of should-cost
reviews—program should-cost review
(see paragraph (b) of this subsection)
and overhead should-cost review (see
paragraph (c) of this subsection). These
should-cost reviews may be performed
together or independently. The scope of
a should-cost review can range from a
large-scale review examining the contractor’s entire operation (including
plant-wide overhead and selected major
subcontractors) to a small-scale tailored review examining specific portions of a contractor’s operation.
(b) Program should-cost review. (1) A
program should-cost review is used to
evaluate significant elements of direct
costs, such as material and labor, and
associated indirect costs, usually associated with the production of major
systems. When a program should-cost
review is conducted relative to a contractor proposal, a separate audit report on the proposal is required.
(2) A program should-cost review
should be considered, particularly in
the case of a major system acquisition
(see part 34), when—
(i) Some initial production has already taken place;
(ii) The contract will be awarded on a
sole source basis;
(iii) There are future year production
requirements for substantial quantities
of like items;
(iv) The items being acquired have a
history of increasing costs;
(v) The work is sufficiently defined to
permit an effective analysis and major
changes are unlikely;
(vi) Sufficient time is available to
plan and adequately conduct the
should-cost review; and
(vii) Personnel with the required
skills are available or can be assigned
for the duration of the should-cost review.
(3) The contracting officer should decide which elements of the contractor’s
operation have the greatest potential
for cost savings and assign the available personnel resources accordingly.
The expertise of on-site Government
personnel should be used, when appropriate. While the particular elements
to be analyzed are a function of the
contract work task, elements such as
manufacturing, pricing and accounting, management and organization, and
subcontract and vendor management
are normally reviewed in a should-cost
review.
(4) In acquisitions for which a program should-cost review is conducted,
a separate program should-cost review
team report, prepared in accordance
with agency procedures, is required.
The contracting officer shall consider
the findings and recommendations contained in the program should-cost review team report when negotiating the
contract price. After completing the
negotiation, the contracting officer
shall provide the ACO a report of any
identified uneconomical or inefficient
practices, together with a report of
correction or disposition agreements
reached with the contractor. The contracting officer shall establish a follow-up plan to monitor the correction
of the uneconomical or inefficient
practices.
(5) When a program should-cost review is planned, the contracting officer
should state this fact in the acquisition
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48 CFR Ch. 1 (10–1–03 Edition)
plan or acquisition plan updates (see
subpart 7.1) and in the solicitation.
(c) Overhead should-cost review. (1) An
overhead should-cost review is used to
evaluate indirect costs, such as fringe
benefits, shipping and receiving, facilities and equipment, depreciation, plant
maintenance and security, taxes, and
general and administrative activities.
It is normally used to evaluate and
negotiate an FPRA with the contractor. When an overhead should-cost
review is conducted, a separate audit
report is required.
(2) The following factors should be
considered when selecting contractor
sites for overhead should-cost reviews:
(i) Dollar amount of Government
business.
(ii) Level of Government participation.
(iii) Level of noncompetitive Government contracts.
(iv) Volume of proposal activity.
(v) Major system or program.
(vi) Corporate reorganizations, mergers, acquisitions, or takeovers.
(vii) Other conditions (e.g., changes
in accounting systems, management,
or business activity).
(3) The objective of the overhead
should-cost review is to evaluate significant indirect cost elements indepth, and identify and recommend
corrective actions regarding inefficient
and uneconomical practices. If it is
conducted in conjunction with a program should-cost review, a separate
overhead should-cost review report is
not required. However, the findings and
recommendations of the overhead
should-cost team, or any separate overhead should-cost review report, shall be
provided to the ACO. The ACO should
use this information to form the basis
for the Government position in negotiating an FPRA with the contractor.
The ACO shall establish a follow-up
plan to monitor the correction of the
uneconomical or inefficient practices.
15.407–5 Estimating systems.
(a) Using an acceptable estimating
system for proposal preparation benefits both the Government and the contractor by increasing the accuracy and
reliability of individual proposals. Cognizant audit activities, when it is appropriate to do so, shall establish and
manage regular programs for reviewing
selected contractors’ estimating systems or methods, in order to reduce the
scope of reviews to be performed on individual proposals, expedite the negotiation process, and increase the reliability of proposals. The results of estimating system reviews shall be documented in survey reports.
(b) The auditor shall send a copy of
the estimating system survey report
and a copy of the official notice of corrective action required to each contracting office and contract administration office having substantial business with that contractor. Significant
deficiencies not corrected by the contractor shall be a consideration in subsequent proposal analyses and negotiations.
15.408 Solicitation provisions and contract clauses.
(a) Changes or Additions to Make-orBuy Program. The contracting officer
shall insert the clause at 52.215–9,
Changes or Additions to Make-or-Buy
Program, in solicitations and contracts
when it is contemplated that a makeor- buy program will be incorporated in
the contract. If a less economical
‘‘make’’ or ‘‘buy’’ categorization is selected for one or more items of significant value, the contracting officer
shall use the clause with—
(1) Its Alternate I, if a fixed-price incentive contract is contemplated; or
(2) Its Alternate II, if a cost-plus-incentive-fee contract is contemplated.
(b) Price Reduction for Defective Cost or
Pricing Data. The contracting officer
shall, when contracting by negotiation,
insert the clause at 52.215–10, Price Reduction for Defective Cost or Pricing
Data, in solicitations and contracts
when it is contemplated that cost or
pricing data will be required from the
contractor or any subcontractor (see
15.403–4).
(c) Price Reduction for Defective Cost or
Pricing Data—Modifications. The contracting officer shall, when contracting
by negotiation, insert the clause at
52.215–11, Price Reduction for Defective
Cost or Pricing Data— Modifications,
in solicitations and contracts when it
is contemplated that cost or pricing
data will be required from the contractor or any subcontractor (see
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15.408
15.403–4) for the pricing of contract
modifications, and the clause prescribed in paragraph (b) of this section
has not been included.
(d) Subcontractor Cost or Pricing Data.
The contracting officer shall insert the
clause at 52.215–12, Subcontractor Cost
or Pricing Data, in solicitations and
contracts when the clause prescribed in
paragraph (b) of this section is included.
(e) Subcontractor Cost or Pricing
Data— Modifications. The contracting
officer shall insert the clause at 52.215–
13, Subcontractor Cost or Pricing
Data—Modifications, in solicitations
and contracts when the clause prescribed in paragraph (c) of this section
is included.
(f) Integrity of Unit Prices. (1) The contracting officer shall insert the clause
at 52.215–14, Integrity of Unit Prices, in
solicitations and contracts except for—
(i) Acquisitions at or below the simplified acquisition threshold;
(ii) Construction or architect-engineer services under part 36;
(iii) Utility services under part 41;
(iv) Service contracts where supplies
are not required;
(v) Acquisitions of commercial items;
and
(vi) Contracts for petroleum products.
(2) The contracting officer shall insert the clause with its Alternate I
when contracting without adequate
price competition or when prescribed
by agency regulations.
(g) Pension Adjustments and Asset Reversions. The contracting officer shall
insert the clause at 52.215–15, Pension
Adjustments and Asset Reversions, in
solicitations and contracts for which it
is anticipated that cost or pricing data
will be required or for which any
preaward or postaward cost determinations will be subject to Part 31 of the
FAR.
(h) Facilities Capital Cost of Money.
The contracting officer shall insert the
provision at 52.215–16, Facilities Capital
Cost of Money, in solicitations expected to result in contracts that are
subject to the cost principles for contracts with commercial organizations
(see subpart 31.2).
(i) Waiver of Facilities Capital Cost of
Money. If the prospective contractor
does not propose facilities capital cost
of money in its offer, the contracting
officer shall insert the clause at 52.215–
17, Waiver of Facilities Capital Cost of
Money, in the resulting contract.
(j) Reversion or Adjustment of Plans for
Postretirement Benefits (PRB) Other
Than Pensions. The contracting officer
shall insert the clause at 52.215–18, Reversion or Adjustment of Plans for
Postretirement Benefits (PRB) Other
Than Pensions, in solicitations and
contracts for which it is anticipated
that cost or pricing data will be required or for which any preaward or
postaward cost determinations will be
subject to part 31.
(k) Notification of Ownership Changes.
The contracting officer shall insert the
clause at 52.215–19, Notification of Ownership Changes, in solicitations and
contracts for which it is contemplated
that cost or pricing data will be required or for which any preaward or
postaward cost determination will be
subject to subpart 31.2.
(l) Requirements for Cost or Pricing
Data or Information Other Than Cost or
Pricing Data. Considering the hierarchy
at 15.402, the contracting officer may
insert the provision at 52.215–20, Requirements for Cost or Pricing Data or
Information Other Than Cost or Pricing Data, in solicitations if it is reasonably certain that cost or pricing
data or information other than cost or
pricing data will be required. This provision also provides instructions to
offerors on how to request an exception. The contracting officer shall—
(1) Use the provision with its Alternate I to specify a format for cost or
pricing data other than the format required by Table 15–2 of this section;
(2) Use the provision with its Alternate II if copies of the proposal are to
be sent to the ACO and contract auditor;
(3) Use the provision with its Alternate III if submission via electronic
media is required; and
(4) Replace the basic provision with
its Alternate IV if cost or pricing data
are not expected to be required because
an exception may apply, but information other than cost or pricing data is
required as described in 15.403–3.
(m) Requirements for Cost or Pricing
Data or Information Other Than Cost or
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Pricing Data—Modifications. Considering the hierarchy at 15.402, the contracting officer may insert the clause
at 52.215–21, Requirements for Cost or
Pricing Data or Information Other
Than Cost or Pricing Data—Modifications, in solicitations and contracts if
it is reasonably certain that cost or
pricing data or information other than
cost or pricing data will be required for
modifications. This clause also provides instructions to contractors on
how to request an exception. The contracting officer shall—
(1) Use the clause with its Alternate
I to specify a format for cost or pricing
data other than the format required by
Table 15–2 of this section;
(2) Use the clause with its Alternate
II if copies of the proposal are to be
sent to the ACO and contract auditor;
(3) Use the clause with its Alternate
III if submission via electronic media
is required; and
(4) Replace the basic clause with its
Alternate IV if cost or pricing data are
not expected to be required because an
exception may apply, but information
other than cost or pricing data is required as described in 15.403–3.
TABLE 15–2 TO PART 15—INSTRUCTIONS
FOR SUBMITTING COST/PRICE PROPOSALS WHEN COST OR PRICING
DATA ARE REQUIRED
This document provides instructions for
preparing a contract pricing proposal when
cost or pricing data are required.
NOTE 1: There is a clear distinction between submitting cost or pricing data and
merely making available books, records, and
other documents without identification. The
requirement for submission of cost or pricing
data is met when all accurate cost or pricing
data reasonably available to the offeror have
been submitted, either actually or by specific identification, to the Contracting Officer or an authorized representative. As later
information comes into your possession, it
should be submitted promptly to the Contracting Officer in a manner that clearly
shows how the information relates to the
offeror’s price proposal. The requirement for
submission of cost or pricing data continues
up to the time of agreement on price, or an
earlier date agreed upon between the parties
if applicable.
NOTE 2: By submitting your proposal, you
grant the Contracting Officer or an authorized representative the right to examine
records that formed the basis for the pricing
proposal. That examination can take place
at any time before award. It may include
those books, records, documents, and other
types of factual information (regardless of
form or whether the information is specifically referenced or included in the proposal
as the basis for pricing) that will permit an
adequate evaluation of the proposed price.
I. General Instructions
A. You must provide the following information on the first page of your pricing proposal:
(1) Solicitation, contract, and/or modification number;
(2) Name and address of offeror;
(3) Name and telephone number of point of
contact;
(4) Name of contract administration office
(if available);
(5) Type of contract action (that is, new
contract, change order, price revision/redetermination, letter contract, unpriced order,
or other);
(6) Proposed cost; profit or fee; and total;
(7) Whether you will require the use of
Government property in the performance of
the contract, and, if so, what property;
(8) Whether your organization is subject to
cost accounting standards; whether your organization has submitted a CASB Disclosure
Statement, and if it has been determined
adequate; whether you have been notified
that you are or may be in noncompliance
with your Disclosure Statement or CAS
(other than a noncompliance that the cognizant Federal agency official has determined to have an immaterial cost impact),
and, if yes, an explanation; whether any aspect of this proposal is inconsistent with
your disclosed practices or applicable CAS,
and, if so, an explanation; and whether the
proposal is consistent with your established
estimating and accounting principles and
procedures and FAR Part 31, Cost Principles,
and, if not, an explanation;
(9) The following statement: This proposal
reflects our estimates and/or actual costs as
of this date and conforms with the instructions in FAR 15.403–5(b)(1) and Table 15–2. By
submitting this proposal, we grant the Contracting Officer and authorized representative(s) the right to examine, at any time before award, those records, which include
books, documents, accounting procedures
and practices, and other data, regardless of
type and form or whether such supporting
information is specifically referenced or included in the proposal as the basis for pricing, that will permit an adequate evaluation
of the proposed price.
(10) Date of submission; and
(11) Name, title, and signature of authorized representative.
B. In submitting your proposal, you must
include an index, appropriately referenced,
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of all the cost or pricing data and information accompanying or identified in the proposal. In addition, you must annotate any
future additions and/or revisions, up to the
date of agreement on price, or an earlier date
agreed upon by the parties, on a supplemental index.
C. As part of the specific information required, you must submit, with your proposal,
cost or pricing data (that is, data that are
verifiable and factual and otherwise as defined at FAR 2.101). You must clearly identify on your cover sheet that cost or pricing
data are included as part of the proposal. In
addition, you must submit with your proposal any information reasonably required to
explain your estimating process, including—
(1) The judgmental factors applied and the
mathematical or other methods used in the
estimate, including those used in projecting
from known data; and
(2) The nature and amount of any contingencies included in the proposed price.
D. You must show the relationship between
contract line item prices and the total contract price. You must attach cost-element
breakdowns for each proposed line item,
using the appropriate format prescribed in
the ‘‘Formats for Submission of Line Item
Summaries’’ section of this table. You must
furnish supporting breakdowns for each cost
element, consistent with your cost accounting system.
E. When more than one contract line item
is proposed, you must also provide summary
total amounts covering all line items for
each element of cost.
F. Whenever you have incurred costs for
work performed before submission of a proposal, you must identify those costs in your
cost/price proposal.
G. If you have reached an agreement with
Government representatives on use of forward pricing rates/factors, identify the
agreement, include a copy, and describe its
nature.
H. As soon as practicable after final agreement on price or an earlier date agreed to by
the parties, but before the award resulting
from the proposal, you must, under the conditions stated in FAR 15.406–2, submit a Certificate of Current Cost or Pricing Data.
II. Cost Elements
Depending on your system, you must provide breakdowns for the following basic cost
elements, as applicable:
A. Materials and services. Provide a consolidated priced summary of individual material
quantities included in the various tasks, orders, or contract line items being proposed
and the basis for pricing (vendor quotes, invoice prices, etc.). Include raw materials,
parts, components, assemblies, and services
to be produced or performed by others. For
all items proposed, identify the item and
show the source, quantity, and price. Con-
duct price analyses of all subcontractor proposals. Conduct cost analyses for all subcontracts when cost or pricing data are submitted by the subcontractor. Include these
analyses as part of your own cost or pricing
data submissions for subcontracts expected
to exceed the appropriate threshold in FAR
15.403–4. Submit the subcontractor cost or
pricing data as part of your own cost or pricing data as required in paragraph IIA(2) of
this table. These requirements also apply to
all subcontractors if required to submit cost
or pricing data.
(1) Adequate Price Competition. Provide data
showing the degree of competition and the
basis for establishing the source and reasonableness of price for those acquisitions (such
as subcontracts, purchase orders, material
order, etc.) exceeding, or expected to exceed,
the appropriate threshold set forth at FAR
15.403–4 priced on the basis of adequate price
competition. For interorganizational transfers priced at other than the cost of comparable competitive commercial work of the
division, subsidiary, or affiliate of the contractor, explain the pricing method (see FAR
31.205–26(e)).
(2) All Other. Obtain cost or pricing data
from prospective sources for those acquisitions (such as subcontracts, purchase orders,
material order, etc.) exceeding the threshold
set forth in FAR 15.403–4 and not otherwise
exempt, in accordance with FAR 15.403–1(b)
(i.e., adequate price competition, commercial
items, prices set by law or regulation or
waiver). Also provide data showing the basis
for establishing source and reasonableness of
price. In addition, provide a summary of
your cost analysis and a copy of cost or pricing data submitted by the prospective source
in support of each subcontract, or purchase
order that is the lower of either $10,000,000 or
more, or both more than the pertinent cost
or pricing data threshold and more than 10
percent of the prime contractor’s proposed
price. The Contracting Officer may require
you to submit cost or pricing data in support
of proposals in lower amounts. Subcontractor cost or pricing data must be accurate, complete and current as of the date of
final price agreement, or an earlier date
agreed upon by the parties, given on the
prime contractor’s Certificate of Current
Cost or Pricing Data. The prime contractor
is responsible for updating a prospective subcontractor’s data. For standard commercial
items fabricated by the offeror that are generally stocked in inventory, provide a separate cost breakdown, if priced based on cost.
For interorganizational transfers priced at
cost, provide a separate breakdown of cost
elements. Analyze the cost or pricing data
and submit the results of your analysis of
the prospective source’s proposal. When submission of a prospective source’s cost or
pricing data is required as described in this
paragraph, it must be included along with
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your own cost or pricing data submission, as
part of your own cost or pricing data. You
must also submit any other cost or pricing
data obtained from a subcontractor, either
actually or by specific identification, along
with the results of any analysis performed
on that data.
B. Direct Labor. Provide a time-phased
(e.g., monthly, quarterly, etc.) breakdown of
labor hours, rates, and cost by appropriate
category, and furnish bases for estimates.
C. Indirect Costs. Indicate how you have
computed and applied your indirect costs, including cost breakdowns. Show trends and
budgetary data to provide a basis for evaluating the reasonableness of proposed rates.
Indicate the rates used and provide an appropriate explanation.
D. Other Costs. List all other costs not otherwise included in the categories described
above (e.g., special tooling, travel, computer
and consultant services, preservation, packaging and packing, spoilage and rework, and
Federal excise tax on finished articles) and
provide bases for pricing.
E. Royalties. If royalties exceed $1,500, you
must provide the following information on a
separate page for each separate royalty or license fee:
(1) Name and address of licensor.
(2) Date of license agreement.
(3) Patent numbers.
(4) Patent application serial numbers, or
other basis on which the royalty is payable.
(5) Brief description (including any part or
model numbers of each contract item or
component on which the royalty is payable).
(6) Percentage or dollar rate of royalty per
unit.
(7) Unit price of contract item.
(8) Number of units.
(9) Total dollar amount of royalties.
(10) If specifically requested by the Contracting Officer, a copy of the current license
agreement and identification of applicable
claims of specific patents (see FAR 27.204 and
31.205–37).
F. Facilities Capital Cost of Money. When
you elect to claim facilities capital cost of
money as an allowable cost, you must submit Form CASB-CMF and show the calculation of the proposed amount (see FAR 31.205–
10).
III. Formats for Submission of Line Item
Summaries
A. New Contracts (Including Letter
Contracts)
Cost
elements
Proposed contract
estimate—total cost
Proposed contract
estimate—unit cost
Reference
(1)
(2)
(3)
(4)
cally requested to do so by the Contracting
Officer, provide a full identification and explanation of them.
(3) Optional, unless required by the Contracting Officer.
(4) Identify the attachment in which the
information supporting the specific cost element may be found. (Attach separate pages
as necessary.)
Column and Instruction
(1) Enter appropriate cost elements.
(2) Enter those necessary and reasonable
costs that, in your judgment, will properly
be incurred in efficient contract performance. When any of the costs in this column
have already been incurred (e.g., under a letter contract), describe them on an attached
supporting page. When preproduction or
startup costs are significant, or when specifi-
B. Change Orders, Modifications, and Claims
Cost
elements
Estimated cost
of all work deleted
Cost of deleted
work already
performed
Net cost to be
deleted
Cost of work
added
Net cost of
change
Reference
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Column and Instruction
(1) Enter appropriate cost elements.
(2) Include the current estimates of what
the cost would have been to complete the deleted work not yet performed (not the original proposal estimates), and the cost of deleted work already performed.
(3) Include the incurred cost of deleted
work already performed, using actuals incurred if possible, or, if actuals are not available, estimates from your accounting
records. Attach a detailed inventory of work,
materials, parts, components, and hardware
already purchased, manufactured, or performed and deleted by the change, indicating
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the cost and proposed disposition of each line
item. Also, if you desire to retain these
items or any portion of them, indicate the
amount offered for them.
(4) Enter the net cost to be deleted, which
is the estimated cost of all deleted work less
the cost of deleted work already performed.
Column (2) minus Column (3) equals Column
(4).
(5) Enter your estimate for cost of work
added by the change. When nonrecurring
costs are significant, or when specifically requested to do so by the Contracting Officer,
provide a full identification and explanation
Numof
Cutoff ber
units
date completed
(1)
(2)
of them. When any of the costs in this column have already been incurred, describe
them on an attached supporting schedule.
(6) Enter the net cost of change, which is
the cost of work added, less the net cost to
be deleted. Column (5) minus Column (4)
equals Column (6). When this result is negative, place the amount in parentheses.
(7) Identify the attachment in which the
information supporting the specific cost element may be found. (Attach separate pages
as necessary.)
C. Price Revision/Redetermination
RedeInNumIn- curred
terber of Con- minacurred
Total
Dif- Cost
Incurred
units tract
cost— cost—
intion
ferelecost—
work curred
to be amount
comproence ments preproduction pleted
in
comcost
posal
pleted
units procamount
ess
(3)
(4)
(5)
(6)
(7)
(8)
(Use as applicable).
Column and Instruction
(1) Enter the cutoff date required by the
contract, if applicable.
(2) Enter the number of units completed
during the period for which experienced costs
of production are being submitted.
(3) Enter the number of units remaining to
be completed under the contract.
(4) Enter the cumulative contract amount.
(5) Enter your redetermination proposal
amount.
(6) Enter the difference between the contract amount and the redetermination proposal amount. When this result is negative,
place the amount in parentheses. Column (4)
minus Column (5) equals Column (6).
(7) Enter appropriate cost elements. When
residual inventory exists, the final costs established under fixed-price-incentive and
fixed-price-redeterminable
arrangements
should be net of the fair market value of
such inventory. In support of subcontract
costs, submit a listing of all subcontracts
subject to repricing action, annotated as to
their status.
(8) Enter all costs incurred under the contract before starting production and other
nonrecurring costs (usually referred to as
startup costs) from your books and records
as of the cutoff date. These include such
costs as preproduction engineering, special
plant rearrangement, training program, and
any identifiable nonrecurring costs such as
initial rework, spoilage, pilot runs, etc. In
the event the amounts are not segregated in
or otherwise available from your records,
enter in this column your best estimates.
(9)
(10)
(11)
Estimated
cost
to
complete
(12)
Estimated Refertotal ence
cost
(13)
Explain the basis for each estimate and how
the costs are charged on your accounting
records (e.g., included in production costs as
direct engineering labor, charged to manufacturing overhead). Also show how the costs
would be allocated to the units at their various stages of contract completion.
(9) Enter in Column (9) the production
costs from your books and records (exclusive
of preproduction costs reported in Column
(8)) of the units completed as of the cutoff
date.
(10) Enter in Column (10) the costs of work
in process as determined from your records
or inventories at the cutoff date. When the
amounts for work in process are not available in your records but reliable estimates
for them can be made, enter the estimated
amounts in Column (10) and enter in Column
(9) the differences between the total incurred
costs (exclusive of preproduction costs) as of
the cutoff date and these estimates. Explain
the basis for the estimates, including identification of any provision for experienced or
anticipated allowances, such as shrinkage,
rework, design changes, etc. Furnish experienced unit or lot costs (or labor hours) from
inception of contract to the cutoff date, improvement curves, and any other available
production cost history pertaining to the
item(s) to which your proposal relates.
(11) Enter total incurred costs (Total of
Columns (8), (9), and (10)).
(12) Enter those necessary and reasonable
costs that in your judgment will properly be
incurred in completing the remaining work
to be performed under the contract with respect to the item(s) to which your proposal
relates.
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15.501
48 CFR Ch. 1 (10–1–03 Edition)
(13) Enter total estimated cost (Total of
Columns (11) and (12)).
(14) Identify the attachment in which the
information supporting the specific cost element may be found. (Attach separate pages
as necessary.)
[62 FR 51230, Sept. 30, 1997, as amended at 63
FR 58596, Oct. 30, 1998; 66 FR 2129, Jan. 10,
2001; 67 FR 6115, Feb. 8, 2002]
Subpart 15.5—Preaward, Award,
and Postaward Notifications,
Protests, and Mistakes
15.501 Definition.
Day, as used in this subpart, has the
meaning set forth at 33.101.
15.502 Applicability.
This subpart applies to competitive
proposals, as described in 6.102(b), and a
combination of competitive procedures, as described in 6.102(c). The procedures in 15.504, 15.506, 15.507, 15.508,
and 15.509, with reasonable modification, should be followed for sole source
acquisitions and acquisitions described
in 6.102(d)(1) and (2).
15.503 Notifications to unsuccessful
offerors.
(a) Preaward notices—(1) Preaward notices of exclusion from competitive range.
The contracting officer shall notify
offerors promptly in writing when their
proposals are excluded from the competitive range or otherwise eliminated
from the competition. The notice shall
state the basis for the determination
and that a proposal revision will not be
considered.
(2) Preaward notices for small business
programs. (i) In addition to the notice
in paragraph (a)(1) of this section, the
contracting officer shall notify each offeror in writing prior to award, upon
completion of negotiations, determinations of responsibility, and, if necessary, the process in 19.304(d)—
(A) When using a small business setaside (see subpart 19.5);
(B) When a small disadvantaged business concern receives a benefit based
on its disadvantaged status (see subpart 19.11 and 19.1202) and is the apparently successful offeror; or
(C) When using the HUBZone procedures in 19.1305 or 19.1307.
(ii) The notice shall state—
(A) The name and address of the apparently successful offeror;
(B) That the Government will not
consider subsequent revisions of the
offeror’s proposal; and
(C) That no response is required unless a basis exists to challenge the
small business size status, disadvantaged status, or HUBZone status of the
apparently successful offeror.
(iii) The notice is not required when
the contracting officer determines in
writing that the urgency of the requirement necessitates award without
delay or when the contract is entered
into under the 8(a) program (see 19.805–
2).
(b) Postaward notices. (1) Within 3
days after the date of contract award,
the contracting officer shall provide
written notification to each offeror
whose proposal was in the competitive
range but was not selected for award
(10 U.S.C. 2305(b)(5) and 41 U.S.C.
253b(c)) or had not been previously notified under paragraph (a) of this section. The notice shall include—
(i) The number of offerors solicited;
(ii) The number of proposals received;
(iii) The name and address of each offeror receiving an award;
(iv) The items, quantities, and any
stated unit prices of each award. If the
number of items or other factors
makes listing any stated unit prices
impracticable at that time, only the
total contract price need be furnished
in the notice. However, the items,
quantities, and any stated unit prices
of each award shall be made publicly
available, upon request; and
(v) In general terms, the reason(s)
the offeror’s proposal was not accepted,
unless the price information in paragraph (b)(1)(iv) of this section readily
reveals the reason. In no event shall an
offeror’s cost breakdown, profit, overhead rates, trade secrets, manufacturing processes and techniques, or
other confidential business information be disclosed to any other offeror.
(2) Upon request, the contracting officer shall furnish the information described in paragraph (b)(1) of this section to unsuccessful offerors in solicitations using simplified acquisition
procedures in part 13.
(3) Upon request, the contracting officer shall provide the information in
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paragraph (b)(1) of this section to unsuccessful offerors that received a
preaward notice of exclusion from the
competitive range.
[62 FR 51230, Sept. 30, 1997, as amended at 63
FR 35721, June 30, 1998; 63 FR 36121, July 1,
1998; 63 FR 70267, Dec. 18, 1998; 65 FR 80265,
Dec. 20, 2000; 66 FR 17756, Apr. 3, 2001; 66 FR
66986, 66990, Dec. 27, 2001]
15.504
Award to successful offeror.
The contracting officer shall award a
contract to the successful offeror by
furnishing the executed contract or
other notice of the award to that offeror.
(a) If the award document includes
information that is different than the
latest signed proposal, as amended by
the offeror’s written correspondence,
both the offeror and the contracting officer shall sign the contract award.
(b) When an award is made to an offeror for less than all of the items that
may be awarded and additional items
are being withheld for subsequent
award, each notice shall state that the
Government may make subsequent
awards on those additional items within the proposal acceptance period.
(c) If the Optional Form (OF) 307,
Contract Award, Standard Form (SF)
26, Award/Contract, or SF 33, Solicitation, Offer and Award, is not used to
award the contract, the first page of
the award document shall contain the
Government’s acceptance statement
from Block 15 of that form, exclusive of
the Item 3 reference language, and
shall contain the contracting officer’s
name, signature, and date. In addition,
if the award document includes information that is different than the
signed proposal, as amended by the
offeror’s written correspondence, the
first page shall include the contractor’s
agreement statement from Block 14 of
the OF 307 and the signature of the
contractor’s authorized representative.
15.505 Preaward
offerors.
debriefing
of
Offerors excluded from the competitive range or otherwise excluded from
the competition before award may request a debriefing before award (10
U.S.C. 2305(b)(6)(A) and 41 U.S.C.
253b(f)–(h)).
(a)(1) The offeror may request a
preaward debriefing by submitting a
written request for debriefing to the
contracting officer within 3 days after
receipt of the notice of exclusion from
the competition.
(2) At the offeror’s request, this debriefing may be delayed until after
award. If the debriefing is delayed until
after award, it shall include all information
normally
provided
in
a
postaward debriefing (see 15.506(d)).
Debriefings delayed pursuant to this
paragraph could affect the timeliness
of any protest filed subsequent to the
debriefing.
(3) If the offeror does not submit a
timely request, the offeror need not be
given either a preaward or a postaward
debriefing. Offerors are entitled to no
more than one debriefing for each proposal.
(b) The contracting officer shall
make every effort to debrief the unsuccessful offeror as soon as practicable,
but may refuse the request for a debriefing if, for compelling reasons, it is
not in the best interests of the Government to conduct a debriefing at that
time. The rationale for delaying the debriefing shall be documented in the
contract file. If the contracting officer
delays the debriefing, it shall be provided no later than the time postaward
debriefings are provided under 15.506. In
that event, the contracting officer
shall include the information at
15.506(d) in the debriefing.
(c) Debriefings may be done orally, in
writing, or by any other method acceptable to the contracting officer.
(d) The contracting officer should
normally chair any debriefing session
held. Individuals who conducted the
evaluations shall provide support.
(e)
At
a
minimum,
preaward
debriefings shall include—
(1) The agency’s evaluation of significant elements in the offeror’s proposal;
(2) A summary of the rationale for
eliminating the offeror from the competition; and
(3) Reasonable responses to relevant
questions about whether source selection procedures contained in the solicitation, applicable regulations, and
other applicable authorities were followed in the process of eliminating the
offeror from the competition.
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15.506
48 CFR Ch. 1 (10–1–03 Edition)
(f) Preaward debriefings shall not disclose—
(1) The number of offerors;
(2) The identity of other offerors;
(3) The content of other offerors proposals;
(4) The ranking of other offerors;
(5) The evaluation of other offerors;
or
(6) Any of the information prohibited
in 15.506(e).
(g) An official summary of the debriefing shall be included in the contract file.
15.506 Postaward
debriefing
of
offerors.
(a)(1) An offeror, upon its written request received by the agency within 3
days after the date on which that offeror has received notification of contract
award in accordance with 15.503(b),
shall be debriefed and furnished the
basis for the selection decision and
contract award.
(2) To the maximum extent practicable, the debriefing should occur
within 5 days after receipt of the written request. Offerors that requested a
postaward debriefing in lieu of a
preaward debriefing, or whose debriefing was delayed for compelling reasons
beyond contract award, also should be
debriefed within this time period.
(3) An offeror that was notified of exclusion from the competition (see
15.505(a)), but failed to submit a timely
request, is not entitled to a debriefing.
(4)(i) Untimely debriefing requests
may be accommodated.
(ii) Government accommodation of a
request for delayed debriefing pursuant
to 15.505(a)(2), or any untimely debriefing request, does not automatically extend the deadlines for filing protests.
Debriefings
delayed
pursuant
to
15.505(a)(2) could affect the timeliness
of any protest filed subsequent to the
debriefing.
(b) Debriefings of successful and unsuccessful offerors may be done orally,
in writing, or by any other method acceptable to the contracting officer.
(c) The contracting officer should
normally chair any debriefing session
held. Individuals who conducted the
evaluations shall provide support.
(d) At a minimum, the debriefing information shall include—
(1) The Government’s evaluation of
the significant weaknesses or deficiencies in the offeror’s proposal, if applicable;
(2) The overall evaluated cost or
price (including unit prices), and technical rating, if applicable, of the successful offeror and the debriefed offeror, and past performance information
on the debriefed offeror;
(3) The overall ranking of all offerors,
when any ranking was developed by the
agency during the source selection;
(4) A summary of the rationale for
award;
(5) For acquisitions of commercial
items, the make and model of the item
to be delivered by the successful offeror; and
(6) Reasonable responses to relevant
questions about whether source selection procedures contained in the solicitation, applicable regulations, and
other applicable authorities were followed.
(e) The debriefing shall not include
point-by-point comparisons of the debriefed offeror’s proposal with those of
other offerors. Moreover, the debriefing
shall not reveal any information prohibited from disclosure by 24.202 or exempt from release under the Freedom
of Information Act (5 U.S.C. 552) including—
(1) Trade secrets;
(2) Privileged or confidential manufacturing processes and techniques;
(3) Commercial and financial information that is privileged or confidential, including cost breakdowns, profit,
indirect cost rates, and similar information; and
(4) The names of individuals providing reference information about an
offeror’s past performance.
(f) An official summary of the debriefing shall be included in the contract file.
15.507
Protests against award.
(a) Protests against award in negotiated acquisitions shall be handled in
accordance with part 33. Use of agency
protest procedures that incorporate the
alternative dispute resolution provisions of Executive Order 12979 is encouraged for both preaward and
postaward protests.
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Federal Acquisition Regulation
15.603
(b) If a protest causes the agency,
within 1 year of contract award, to—
(1) Issue a new solicitation on the
protested contract award, the contracting officer shall provide the information in paragraph (c) of this section
to all prospective offerors for the new
solicitation; or
(2) Issue a new request for revised
proposals on the protested contract
award, the contracting officer shall
provide the information in paragraph
(c) of this section to offerors that were
in the competitive range and are requested to submit revised proposals.
(c) The following information will be
provided to appropriate parties:
(1) Information provided to unsuccessful offerors in any debriefings conducted on the original award regarding
the successful offeror’s proposal; and
(2) Other nonproprietary information
that would have been provided to the
original offerors.
15.508
Forms.
Optional Form 307, Contract Award,
Standard Form (SF) 26, Award/Contract, or SF 33, Solicitation, Offer and
Award, may be used to award negotiated contracts in which the signature
of both parties on a single document is
appropriate. If these forms are not
used, the award document shall incorporate the agreement and award language from the OF 307.
Subpart 15.6—Unsolicited
Proposals
15.600
Scope of subpart.
This subpart sets forth policies and
procedures concerning the submission,
receipt, evaluation, and acceptance or
rejection of unsolicited proposals.
15.601
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001]
15.602
Discovery of mistakes.
Mistakes in a contractor’s proposal
that are disclosed after award shall be
processed substantially in accordance
with the procedures for mistakes in
bids at 14.407–4.
15.509
products, services, or potential capabilities, or designed to stimulate the
Government’s interest in buying such
products or services.
Commercial item offer means an offer
of a commercial item that the vendor
wishes to see introduced in the Government’s supply system as an alternate
or a replacement for an existing supply
item. This term does not include innovative or unique configurations or uses
of commercial items that are being offered for further development and that
may be submitted as an unsolicited
proposal.
Contribution means a concept, suggestion, or idea presented to the Government for its use with no indication
that the source intends to devote any
further effort to it on the Government’s behalf.
Definitions.
As used in this subpart—
Advertising material means material
designed to acquaint the Government
with a prospective contractor’s present
Policy.
It is the policy of the Government to
encourage the submission of new and
innovative ideas in response to Broad
Agency Announcements, Small Business Innovation Research topics, Small
Business Technology Transfer Research topics, Program Research and
Development Announcements, or any
other Government-initiated solicitation or program. When the new and innovative ideas do not fall under topic
areas publicized under those programs
or techniques, the ideas may be submitted as unsolicited proposals.
15.603
General.
(a)
Unsolicited
proposals
allow
unique and innovative ideas or approaches that have been developed outside the Government to be made available to Government agencies for use in
accomplishment of their missions. Unsolicited proposals are offered with the
intent that the Government will enter
into a contract with the offeror for research and development or other efforts supporting the Government mission, and often represent a substantial
investment of time and effort by the
offeror.
(b) Advertising material, commercial
item offers, or contributions, as defined
in 15.601, or routine correspondence on
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15.604
48 CFR Ch. 1 (10–1–03 Edition)
technical issues, are not unsolicited
proposals.
(c) A valid unsolicited proposal
must—
(1) Be innovative and unique;
(2) Be independently originated and
developed by the offeror;
(3) Be prepared without Government
supervision, endorsement, direction, or
direct Government involvement;
(4) Include sufficient detail to permit
a determination that Government support could be worthwhile and the proposed work could benefit the agency’s
research and development or other mission responsibilities; and
(5) Not be an advance proposal for a
known agency requirement that can be
acquired by competitive methods.
(d) Unsolicited proposals in response
to a publicized general statement of
agency needs are considered to be independently originated.
(e) Agencies must evaluate unsolicited proposals for energy-savings performance contracts in accordance with
the procedures in 10 CFR 436.33(b).
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 65352, Dec. 18, 2002]
15.604
Agency points of contact.
(a) Preliminary contact with agency
technical or other appropriate personnel before preparing a detailed unsolicited proposal or submitting proprietary information to the Government
may save considerable time and effort
for both parties (see 15.201). Agencies
must make available to potential
offerors of unsolicited proposals at
least the following information:
(1) Definition (see 2.101) and content
(see 15.605) of an unsolicited proposal
acceptable for formal evaluation.
(2) Requirements concerning responsible prospective contractors (see subpart 9.1), and organizational conflicts
of interest (see subpart 9.5).
(3) Guidance on preferred methods for
submitting ideas/concepts to the Government, such as any agency: upcoming solicitations; Broad Agency Announcements; Small Business Innovation Research programs; Small Business Technology Transfer Research
programs; Program Research and Development Announcements; or grant
programs.
(4) Agency points of contact for information regarding advertising, contributions, and other types of transactions similar to unsolicited proposals.
(5) Information sources on agency objectives and areas of potential interest.
(6) Procedures for submission and
evaluation of unsolicited proposals.
(7) Instructions for identifying and
marking proprietary information so
that it is protected and restrictive legends conform to 15.609.
(b) Only the cognizant contracting
officer has the authority to bind the
Government regarding unsolicited proposals.
[62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001]
15.605 Content
posals.
of
unsolicited
Unsolicited proposals should contain
the following information to permit
consideration in an objective and timely manner:
(a) Basic information including—
(1) Offeror’s name and address and
type of organization; e.g., profit, nonprofit, educational, small business;
(2) Names and telephone numbers of
technical and business personnel to be
contacted for evaluation or negotiation
purposes;
(3) Identification of proprietary data
to be used only for evaluation purposes;
(4) Names of other Federal, State, or
local agencies or parties receiving the
proposal or funding the proposed effort;
(5) Date of submission; and
(6) Signature of a person authorized
to represent and contractually obligate
the offeror.
(b) Technical information including—
(1) Concise title and abstract (approximately 200 words) of the proposed
effort;
(2) A reasonably complete discussion
stating the objectives of the effort or
activity, the method of approach and
extent of effort to be employed, the nature and extent of the anticipated results, and the manner in which the
work will help to support accomplishment of the agency’s mission;
(3) Names and biographical information on the offeror’s key personnel who
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would be involved, including alternates; and
(4) Type of support needed from the
agency; e.g., facilities, equipment, materials, or personnel resources.
(c) Supporting information including—
(1) Proposed price or total estimated
cost for the effort in sufficient detail
for meaningful evaluation;
(2) Period of time for which the proposal is valid (a 6-month minimum is
suggested);
(3) Type of contract preferred;
(4) Proposed duration of effort;
(5) Brief description of the organization, previous experience, relevant past
performance, and facilities to be used;
(6) Other statements, if applicable,
about organizational conflicts of interest, security clearances, and environmental impacts; and
(7) The names and telephone numbers
of agency technical or other agency
points of contact already contacted regarding the proposal.
15.606 Agency procedures.
(a) Agencies shall establish procedures for controlling the receipt, evaluation, and timely disposition of unsolicited proposals consistent with the
requirements of this subpart. The procedures shall include controls on the
reproduction and disposition of proposal material, particularly data identified by the offeror as subject to duplication, use, or disclosure restrictions.
(b) Agencies shall establish agency
points of contact (see 15.604) to coordinate the receipt and handling of unsolicited proposals.
15.606–1 Receipt and initial review.
(a) Before initiating a comprehensive
evaluation, the agency contact point
shall determine if the proposal—
(1) Is a valid unsolicited proposal,
meeting the requirements of 15.603(c);
(2) Is suitable for submission in response to an existing agency requirement (see 15.602);
(3) Is related to the agency mission;
(4) Contains sufficient technical and
cost information for evaluation;
(5) Has been approved by a responsible official or other representative
authorized to obligate the offeror contractually; and
(6) Complies with the marking requirements of 15.609.
(b) If the proposal meets these requirements, the contact point shall
promptly acknowledge receipt and
process the proposal.
(c) If a proposal is rejected because
the proposal does not meet the requirements of paragraph (a) of this subsection, the agency contact point shall
promptly inform the offeror of the reasons for rejection in writing and of the
proposed disposition of the unsolicited
proposal.
15.606–2
Evaluation.
(a) Comprehensive evaluations shall
be coordinated by the agency contact
point, who shall attach or imprint on
each unsolicited proposal, circulated
for evaluation, the legend required by
15.609(d). When performing a comprehensive evaluation of an unsolicited
proposal, evaluators shall consider the
following factors, in addition to any
others appropriate for the particular
proposal:
(1) Unique, innovative and meritorious methods, approaches, or concepts demonstrated by the proposal;
(2) Overall scientific, technical, or socioeconomic merits of the proposal;
(3) Potential contribution of the effort to the agency’s specific mission;
(4) The offeror’s capabilities, related
experience, facilities, techniques, or
unique combinations of these that are
integral factors for achieving the proposal objectives;
(5) The qualifications, capabilities,
and experience of the proposed principal investigator, team leader, or key
personnel critical to achieving the proposal objectives; and
(6) The realism of the proposed cost.
(b) The evaluators shall notify the
agency point of contact of their recommendations when the evaluation is
completed.
15.607 Criteria for acceptance and negotiation of an unsolicited proposal.
(a) A favorable comprehensive evaluation of an unsolicited proposal does
not, in itself, justify awarding a contract without providing for full and
open competition. The agency point of
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15.608
48 CFR Ch. 1 (10–1–03 Edition)
contact shall return an unsolicited proposal to the offeror, citing reasons,
when its substance—
(1) Is available to the Government
without restriction from another
source;
(2) Closely resembles a pending competitive acquisition requirement;
(3) Does not relate to the activity’s
mission; or
(4) Does not demonstrate an innovative and unique method, approach, or
concept, or is otherwise not deemed a
meritorious proposal.
(b) The contracting officer may commence negotiations on a sole source
basis only when—
(1) An unsolicited proposal has received a favorable comprehensive evaluation;
(2) A justification and approval has
been obtained (see 6.302–1(a)(2)(i) for research proposals or other appropriate
provisions of subpart 6.3, and 6.303–
2(b));
(3) The agency technical office sponsoring the contract furnishes the necessary funds; and
(4) The contracting officer has complied with the synopsis requirements of
subpart 5.2.
15.608 Prohibitions.
(a) Government personnel shall not
use any data, concept, idea, or other
part of an unsolicited proposal as the
basis, or part of the basis, for a solicitation or in negotiations with any
other firm unless the offeror is notified
of and agrees to the intended use. However, this prohibition does not preclude
using any data, concept, or idea in the
proposal that also is available from another source without restriction.
(b) Government personnel shall not
disclose restrictively marked information (see 3.104 and 15.609) included in an
unsolicited proposal. The disclosure of
such information concerning trade secrets, processes, operations, style of
work, apparatus, and other matters,
except as authorized by law, may result in criminal penalties under 18
U.S.C. 1905.
15.609 Limited use of data.
(a) An unsolicited proposal may include data that the offeror does not
want disclosed to the public for any
purpose or used by the Government except for evaluation purposes. If the offeror wishes to restrict the data, the
title page must be marked with the following legend:
Use and Disclosure of Data
This proposal includes data that shall not
be disclosed outside the Government and
shall not be duplicated, used, or disclosed—in
whole or in part—for any purpose other than
to evaluate this proposal. However, if a contract is awarded to this offeror as a result
of—or in connection with—the submission of
these data, the Government shall have the
right to duplicate, use, or disclose the data
to the extent provided in the resulting contract. This restriction does not limit the
Government’s right to use information contained in these data if they are obtained
from another source without restriction. The
data subject to this restriction are contained
in Sheets [insert numbers or other identification of sheets].
(b) The offeror shall also mark each
sheet of data it wishes to restrict with
the following legend: Use or disclosure
of data contained on this sheet is subject to the restriction on the title page
of this proposal.
(c) The agency point of contact shall
return to the offeror any unsolicited
proposal marked with a legend different from that provided in paragraph
(a) of this section. The return letter
will state that the proposal cannot be
considered because it is impracticable
for the Government to comply with the
legend and that the agency will consider the proposal if it is resubmitted
with the proper legend.
(d) The agency point of contact shall
place a cover sheet on the proposal or
clearly mark it as follows, unless the
offeror clearly states in writing that no
restrictions are imposed on the disclosure or use of the data contained in the
proposal:
Unsolicited Proposal—Use of Data Limited
All Government personnel must exercise
extreme care to ensure that the information
in this proposal is not disclosed to an individual who has not been authorized access to
such data in accordance with FAR 3.104, and
is not duplicated, used, or disclosed in whole
or in part for any purpose other than evaluation of the proposal, without the written permission of the offeror. If a contract is awarded on the basis of this proposal, the terms of
the contract shall control disclosure and use.
This notice does not limit the Government’s
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Pt. 16
right to use information contained in the
proposal if it is obtainable from another
source without restriction. This is a Government notice, and shall not by itself be construed to impose any liability upon the Government or Government personnel for disclosure or use of data contained in this proposal.
(e) Use the notice in paragraph (d) of
this section solely as a manner of handling unsolicited proposals that will be
compatible with this subpart. However,
do not use this notice to justify withholding of a record, or to improperly
deny the public access to a record,
where an obligation is imposed by the
Freedom of Information Act (5 U.S.C.
552). An offeror should identify trade
secrets, commercial or financial information, and privileged or confidential
information to the Government (see
paragraph (a) of this section).
(f) When an agency receives an unsolicited proposal without any restrictive
legend from an educational or nonprofit organization or institution, and
an evaluation outside the Government
is necessary, the agency point of contact shall—
(1) Attach a cover sheet clearly
marked with the legend in paragraph
(d) of this section;
(2) Change the beginning of this legend to read ‘‘All Government and nonGovernment personnel * * * ’’; and
(3) Require any non-Government
evaluator to agree in writing that data
in the proposal will not be disclosed to
others outside the Government.
(g) If the proposal is received with
the restrictive legend (see paragraph
(a) of this section), the modified cover
sheet shall also be used and permission
shall be obtained from the offeror before release of the proposal for evaluation by non-Government personnel.
(h) When an agency receives an unsolicited proposal with or without a restrictive legend from other than an
educational or nonprofit organization
or institution, and evaluation by Government personnel outside the agency
or by experts outside of the Government is necessary, written permission
must be obtained from the offeror before release of the proposal for evaluation. The agency point of contact
shall—
(1) Clearly mark the cover sheet with
the legend in paragraph (d) or as modified in paragraph (f) of this section; and
(2) Obtain a written agreement from
any non-Government evaluator stating
that data in the proposal will not be
disclosed to persons outside the Government.
[62 FR 51230, Sept. 30, 1997, as amended at 67
FR 13056, Mar. 20, 2002]
PART 16—TYPES OF CONTRACTS
Sec.
16.000
Scope of part.
Subpart 16.1—Selecting Contract Types
16.101
16.102
16.103
16.104
16.105
General.
Policies.
Negotiating contract type.
Factors in selecting contract types.
Solicitation provision.
Subpart 16.2—Fixed-Price Contracts
16.201 General.
16.202 Firm-fixed-price contracts.
16.202–1 Description.
16.202–2 Application.
16.203 Fixed-price contracts with economic
price adjustment.
16.203–1 Description.
16.203–2 Application.
16.203–3 Limitations.
16.203–4 Contract clauses.
16.204 Fixed-price incentive contracts.
16.205 Fixed-price contracts with prospective price redetermination.
16.205–1 Description.
16.205–2 Application.
16.205–3 Limitations.
16.205–4 Contract clause.
16.206 Fixed-ceiling-price contracts with
retroactive price redetermination.
16.206–1 Description.
16.206–2 Application.
16.206–3 Limitations.
16.206–4 Contract clause.
16.207 Firm-fixed-price, level-of-effort term
contracts.
16.207–1 Description.
16.207–2 Application.
16.207–3 Limitations.
Subpart 16.3—Cost-Reimbursement
Contracts
16.301 General.
16.301–1 Description.
16.301–2 Application.
16.301–3 Limitations.
16.302 Cost contracts.
16.303 Cost-sharing contracts.
16.304 Cost-plus-incentive-fee contracts.
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48 CFR Ch. 1 (10–1–03 Edition)
16.305 Cost-plus-award-fee contracts.
16.306 Cost-plus-fixed-fee contracts.
16.307 Contract clauses.
tract type appropriate to the
cumstances of the acquisition.
[48 FR 42219, Sept. 19, 1983, as amended at 60
FR 34756, July 3, 1995; 61 FR 39197, July 26,
1996]
Subpart 16.4—Incentive Contracts
16.401 General.
16.402 Application of predetermined, formula-type incentives.
16.402–1 Cost incentives.
16.402–2 Performance incentives.
16.402–3 Delivery incentives.
16.402–4 Structuring multiple-incentive contracts.
16.403 Fixed-price incentive contracts.
16.403–1 Fixed-price incentive (firm target)
contracts.
16.403–2 Fixed-price incentive (successive
targets) contracts.
16.404 Fixed-price contracts with award
fees.
16.405 Cost-reimbursement incentive contracts.
16.405–1 Cost-plus-incentive-fee contracts.
16.405–2 Cost-plus-award-fee contracts.
16.406 Contract clauses.
Subpart 16.5—Indefinite-Delivery Contracts
16.500 Scope of subpart.
16.501–1 Definitions.
16.501–2 General.
16.502 Definite-quantity contracts.
16.503 Requirements contracts.
16.504 Indefinite-quantity contracts.
16.505 Ordering.
16.506 Solicitation provisions and contract
clauses.
Subpart 16.6—Time-and-Materials, LaborHour, and Letter Contracts
16.601 Time-and-materials contracts.
16.602 Labor-hour contracts.
16.603 Letter contracts.
16.603–1 Description.
16.603–2 Application.
16.603–3 Limitations.
16.603–4 Contract clauses.
Subpart 16.7—Agreements
16.701
16.702
16.703
Subpart 16.1—Selecting Contract
Types
16.101
SOURCE: 48 FR 42219, Sept. 19, 1983, unless
otherwise noted.
16.000 Scope of part.
This part describes types of contracts
that may be used in acquisitions. It
prescribes policies and procedures and
provides guidance for selecting a con-
General.
(a) A wide selection of contract types
is available to the Government and
contractors in order to provide needed
flexibility in acquiring the large variety and volume of supplies and services
required by agencies. Contract types
vary according to (1) the degree and
timing of the responsibility assumed
by the contractor for the costs of performance and (2) the amount and nature of the profit incentive offered to
the contractor for achieving or exceeding specified standards or goals.
(b) The contract types are grouped
into two broad categories: fixed-price
contracts (see subpart 16.2) and cost-reimbursement contracts (see subpart
16.3). The specific contract types range
from firm-fixed-price, in which the contractor has full responsibility for the
performance costs and resulting profit
(or loss), to cost-plus-fixed-fee, in
which the contractor has minimal responsibility for the performance costs
and the negotiated fee (profit) is fixed.
In between are the various incentive
contracts (see subpart 16.4), in which
the contractor’s responsibility for the
performance costs and the profit or fee
incentives offered are tailored to the
uncertainties involved in contract performance.
16.102
Scope.
Basic agreements.
Basic ordering agreements.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
Policies.
(a) Contracts resulting from sealed
bidding shall be firm-fixed-price contracts or fixed-price contracts with
economic price adjustment.
(b) Contracts negotiated under part
15 may be of any type or combination
of types that will promote the Government’s interest, except as restricted in
this part (see 10 U.S.C. 2306(a) and 41
U.S.C. 254(a)). Contract types not described in this regulation shall not be
used, except as a deviation under subpart 1.4.
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Federal Acquisition Regulation
16.104
(c) The cost-plus-a-percentage-of-cost
system of contracting shall not be used
(see 10 U.S.C. 2306(a) and 41 U.S.C.
254(b)). Prime contracts (including letter contracts) other than firm-fixedprice contracts shall, by an appropriate
clause, prohibit cost- plus-a-percentage-of-cost subcontracts (see clauses
prescribed in subpart 44.2 for cost-reimbursement contracts and subparts 16.2
and 16.4 for fixed-price contracts).
(d) No contract may be awarded before the execution of any determination and findings (D&F’s) required by
this part. Minimum requirements for
the content of D&F’s required by this
part are specified in 1.704.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1741, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
16.103 Negotiating contract type.
(a) Selecting the contract type is
generally a matter for negotiation and
requires the exercise of sound judgment. Negotiating the contract type
and negotiating prices are closely related and should be considered together. The objective is to negotiate a
contract type and price (or estimated
cost and fee) that will result in reasonable contractor risk and provide the
contractor with the greatest incentive
for efficient and economical performance.
(b) A firm-fixed-price contract, which
best utilizes the basic profit motive of
business enterprise, shall be used when
the risk involved is minimal or can be
predicted with an acceptable degree of
certainty. However, when a reasonable
basis for firm pricing does not exist,
other contract types should be considered, and negotiations should be directed toward selecting a contract type
(or combination of types) that will appropriately tie profit to contractor performance.
(c) In the course of an acquisition
program, a series of contracts, or a single long-term contract, changing circumstances may make a different contract type appropriate in later periods
than that used at the outset. In particular, contracting officers should
avoid protracted use of a cost-reimbursement or time-and-materials contract after experience provides a basis
for firmer pricing.
(d) Each contract file shall include
documentation to show why the particular contract type was selected. Exceptions to this requirement are:
(1) Fixed-price acquisitions made
under simplified acquisition procedures,
(2) Contracts on a firm fixed-price
basis other than those for major systems or research and development, and
(3) Awards on the set-aside portion of
sealed bid partial set-asides for small
business.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 54 FR 5054, Jan. 31, 1989; 60 FR 34756,
July 3, 1995; 60 FR 48260, Sept. 18, 1995; 61 FR
39198, July 26, 1996]
16.104 Factors in selecting contract
types.
There are many factors that the contracting officer should consider in selecting and negotiating the contract
type. They include the following:
(a) Price competition. Normally, effective price competition results in realistic pricing, and a fixed-price contract
is ordinarily in the Government’s interest.
(b) Price analysis. Price analysis with
or without competition, may provide a
basis for selecting the contract type.
The degree to which price analysis can
provide a realistic pricing standard
should be carefully considered. (See
15.404–1(b).)
(c) Cost analysis. In the absence of effective price competition and if price
analysis is not sufficient, the cost estimates of the offeror and the Government provide the bases for negotiating
contract pricing arrangements. It is essential that the uncertainties involved
in performance and their possible impact upon costs be identified and evaluated, so that a contract type that
places a reasonable degree of cost responsibility upon the contractor can be
negotiated.
(d) Type and complexity of the requirement. Complex requirements, particularly those unique to the Government,
usually result in greater risk assumption by the Government. This is especially true for complex research and
development contracts, when performance uncertainties or the likelihood of
changes makes it difficult to estimate
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16.105
48 CFR Ch. 1 (10–1–03 Edition)
performance costs in advance. As a requirement recurs or as quantity production begins, the cost risk should
shift to the contractor, and a fixedprice contract should be considered.
(e) Urgency of the requirement. If urgency is a primary factor, the Government may choose to assume a greater
proportion of risk or it may offer incentives to ensure timely contract performance.
(f) Period of performance or length of
production run. In times of economic
uncertainty, contracts extending over
a relatively long period may require
economic price adjustment terms.
(g) Contractor’s technical capability
and financial responsibility.
(h) Adequacy of the contractor’s accounting system. Before agreeing on a
contract type other than firm-fixedprice, the contracting officer shall ensure that the contractor’s accounting
system will permit timely development
of all necessary cost data in the form
required by the proposed contract type.
This factor may be critical when the
contract type requires price revision
while performance is in progress, or
when a cost-reimbursement contract is
being considered and all current or
past experience with the contractor
has been on a fixed-price basis.
(i) Concurrent contracts. If performance under the proposed contract involves concurrent operations under
other contracts, the impact of those
contracts, including their pricing arrangements, should be considered.
(j) Extent and nature of proposed subcontracting. If the contractor proposes
extensive subcontracting, a contract
type reflecting the actual risks to the
prime contractor should be selected.
(k) Acquisition history. Contractor
risk usually decreases as the requirement is repetitively acquired. Also,
product descriptions or descriptions of
services to be performed can be defined
more clearly.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 62 FR 44814, Aug. 22, 1997; 62 FR 51270,
Sept. 30, 1997]
16.105
Solicitation provision.
The contracting officer shall complete and insert the provision at 52.216–
1, Type of Contract, in a solicitation
unless it is for—
(a) A fixed-price acquisition made
under simplified acquisition procedures; or
(b) Information or planning purposes.
[60 FR 34756, July 3, 1995, as amended at 61
FR 39198, July 26, 1996]
Subpart 16.2—Fixed-Price
Contracts
16.201
General.
Fixed-price types of contracts provide for a firm price or, in appropriate
cases, an adjustable price. Fixed-price
contracts providing for an adjustable
price may include a ceiling price, a target price (including target cost), or
both. Unless otherwise specified in the
contract, the ceiling price or target
price is subject to adjustment only by
operation of contract clauses providing
for equitable adjustment or other revision of the contract price under stated
circumstances. The contracting officer
shall use firm-fixed-price or fixed-price
with economic price adjustment contracts when acquiring commercial
items.
[48 FR 42219, Sept. 19, 1983, as amended at 60
FR 48248, Sept. 18, 1995]
16.202
Firm-fixed-price contracts.
16.202–1
Description.
A firm-fixed-price contract provides
for a price that is not subject to any
adjustment on the basis of the contractor’s cost experience in performing the
contract. This contract type places
upon the contractor maximum risk and
full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to
control costs and perform effectively
and imposes a minimum administrative burden upon the contracting parties. The contracting officer may use a
firm-fixed-price contract in conjunction with an award-fee incentive (see
16.404) and performance or delivery incentives (see 16.402–2 and 16.402–3) when
the award fee or incentive is based
solely on factors other than cost. The
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16.203–2
contract type remains firm-fixed-price
when used with these incentives.
[48 FR 42219, Sept. 19, 1983, as amended at 68
FR 13201, Mar. 18, 2003]
16.202–2
Application.
A firm-fixed-price contract is suitable for acquiring commercial items
(see parts 2 and 12) or for acquiring
other supplies or services on the basis
of reasonably definite functional or detailed specifications (see part 11) when
the contracting officer can establish
fair and reasonable prices at the outset, such as when—
(a) There is adequate price competition;
(b) There are reasonable price comparisons with prior purchases of the
same or similar supplies or services
made on a competitive basis or supported by valid cost or pricing data;
(c) Available cost or pricing information permits realistic estimates of the
probable costs of performance; or
(d) Performance uncertainties can be
identified and reasonable estimates of
their cost impact can be made, and the
contractor is willing to accept a firm
fixed price representing assumption of
the risks involved.
[48 FR 42219, Sept. 19, 1983, as amended at 60
FR 48248, Sept. 18, 1995]
16.203 Fixed-price contracts with economic price adjustment.
16.203–1
Description.
(a) A fixed-price contract with economic price adjustment provides for
upward and downward revision of the
stated contract price upon the occurrence of specified contingencies. Economic price adjustments are of three
general types:
(1) Adjustments based on established
prices. These price adjustments are
based on increases or decreases from an
agreed-upon level in published or otherwise established prices of specific
items or the contract end items.
(2) Adjustments based on actual costs of
labor or material. These price adjustments are based on increases or decreases in specified costs of labor or
material that the contractor actually
experiences during contract performance.
(3) Adjustments based on cost indexes of
labor or material. These price adjustments are based on increases or decreases in labor or material cost standards or indexes that are specifically
identified in the contract.
(b) The contracting officer may use a
fixed-price contract with economic
price adjustment in conjunction with
an award-fee incentive (see 16.404) and
performance or delivery incentives (see
16.402–2 and 16.402–3) when the award
fee or incentive is based solely on factors other than cost. The contract type
remains fixed-price with economic
price adjustment when used with these
incentives.
[48 FR 42219, Sept. 19, 1983, as amended at 68
FR 13201, Mar. 18, 2003]
16.203–2
Application.
A fixed-price contract with economic
price adjustment may be used when (i)
there is serious doubt concerning the
stability of market or labor conditions
that will exist during an extended period of contract performance, and (ii)
contingencies that would otherwise be
included in the contract price can be
identified and covered separately in
the contract. Price adjustments based
on established prices should normally
be restricted to industry-wide contingencies. Price adjustments based on
labor and material costs should be limited to contingencies beyond the contractor’s control. For use of economic
price adjustment in sealed bid contracts, see 14.408–4.
(a) In establishing the base level
from which adjustment will be made,
the contracting officer shall ensure
that contingency allowances are not
duplicated by inclusion in both the
base price and the adjustment requested by the contractor under economic price adjustment clause.
(b) In contracts that do not require
submission of cost or pricing data, the
contracting officer shall obtain adequate information to establish the base
level from which adjustment will be
made and may require verification of
data submitted.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 34739, July 3, 1995]
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16.203–3
48 CFR Ch. 1 (10–1–03 Edition)
16.203–3 Limitations.
A fixed-price contract with economic
price adjustment shall not be used unless the contracting officer determines
that it is necessary either to protect
the contractor and the Government
against significant fluctuations in
labor or material costs or to provide
for contract price adjustment in the
event of changes in the contractor’s established prices.
16.203–4 Contract clauses.
(a) Adjustment based on established
prices—standard supplies. (1) The contracting officer shall, when contracting
by negotiation, insert the clause at
52.216–2, Economic Price Adjustment—
Standard Supplies, or an agency-prescribed clause as authorized in subparagraph (2) below, in solicitations
and contracts when all of the following
conditions apply:
(i) A fixed-price contract is contemplated.
(ii) The requirement is for standard
supplies that have an established catalog or market price.
(iii) The contracting officer has made
the determination specified in 16.203–3.
(2) If all the conditions in subparagraph (a)(1) above apply and the contracting officer determines that the
use of the clause at 52.216–2 is inappropriate, the contracting officer may use
an agency-prescribed clause instead of
the clause at 52.216–2.
(3) If the negotiated unit price reflects a net price after applying a trade
discount from a catalog or list price,
the contracting officer shall document
in the contract file both the catalog or
list price and the discount. (This does
not apply to prompt payment or cash
discounts.)
(b) Adjustment based on established
prices—semistandard supplies. (1) The
contracting officer shall, when contracting by negotiation, insert the
clause at 52.216–3, Economic Price Adjustment—Semistandard Supplies, or
an agency-prescribed clause as authorized in subparagraph (2) below, in solicitations and contracts when all of
the following conditions apply:
(i) A fixed price contract is contemplated.
(ii)
The
requirement
is
for
semistandard supplies for which the
prices can be reasonably related to the
prices of nearly equivalent standard
supplies that have an established catalog or market price.
(iii) The contracting officer has made
the determination specified in 16.203–3.
(2) If all conditions in subparagraph
(b)(1) above apply and the contracting
officer determines that the use of the
clause at 52.216–3 is inappropriate, the
contracting officer may use an agencyprescribed clause instead of the clause
at 52.216–3.
(3) If the negotiated unit price reflects a net price after applying a trade
discount from a catalog or list price,
the contracting officer shall document
in the contract file both the catalog or
list price and the discount. (This does
not apply to prompt payment or cash
discounts.)
(4) Before entering into the contract,
the contracting officer and contractor
must agree in writing on the identity
of the standard supplies and the corresponding contract line items to
which the clause applies.
(5) If the supplies are standard, except for preservation, packaging, and
packing requirements, the clause prescribed in 16.203–4(a), shall be used
rather than this clause.
(c) Adjustments based on actual cost of
labor or material. (1) The contracting officer shall, when contracting by negotiation, insert a clause that is substantially the same as the clause at 52.216–
4, Economic Price Adjustment—Labor
and Material, or an agency-prescribed
clause as authorized in subparagraph
(2) below, in solicitation and contracts
when all of the following conditions
apply:
(i) A fixed-price contract is contemplated.
(ii) There is no major element of design engineering or development work
involved.
(iii) One or more identifiable labor or
material cost factors are subject to
change.
(iv) The contracting officer has made
the determination specified in 16.203–3.
(2) If all conditions in subparagraph
(c)(1) above apply and the contracting
officer determines that the use of the
clause at 52.216–4 is inappropriate, the
contracting officer may use an agency-
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16.205–2
prescribed clause instead of the clause
at 52.216–4.
(3) The contracting officer shall describe in detail in the contract Schedule—
(i) The types of labor and materials
subject to adjustment under the clause;
(ii) The labor rates, including fringe
benefits (if any) and unit prices of materials that may be increased or decreased; and
(iii) The quantities of the specified
labor and materials allocable to each
unit to be delivered under the contract.
(4) In negotiating adjustments under
the clause, the contracting officer
shall—
(i) Consider work in process and materials on hand at the time of changes
in labor rates, including fringe benefits
(if any) or material prices;
(ii) Not include in adjustments any
indirect cost (except fringe benefits as
defined in 31.205–6(m)) or profit; and
(iii) Consider only those fringe benefits specified in the contract Schedule.
(d) Adjustments based on cost indexes of
labor or material. The contracting officer should consider using an economic
price adjustment clause based on cost
indexes of labor or material under the
circumstances and subject to approval
as described in subparagraphs (1) and
(2) below.
(1) A clause providing adjustment
based on cost indexes of labor or materials may be appropriate when—
(i) The contract involves an extended
period of performance with significant
costs to be incurred beyond 1 year after
performance begins;
(ii) The contract amount subject to
adjustment is substantial; and
(iii) The economic variables for labor
and materials are too unstable to permit a reasonable division of risk between the Government and the contractor, without this type of clause.
(2) Any clause using this method
shall be prepared and approved under
agency procedures. Because of the variations in circumstances and clause
wording that may arise, no standard
clause is prescribed.
[48 FR 42219, Sept. 19, 1983, as amended at 52
FR 19803, May 27, 1987; 60 FR 48217, Sept. 18,
1995; 62 FR 259, Jan. 2, 1997]
16.204
Fixed-price incentive contracts.
A fixed-price incentive contract is a
fixed-price contract that provides for
adjusting profit and establishing the
final contract price by a formula based
on the relationship of final negotiated
total cost to total target cost. Fixedprice incentive contracts are covered
in subpart 16.4, Incentive Contracts.
See 16.403 for more complete descriptions, application, and limitations for
these contracts. Prescribed clauses are
found at 16.406.
[48 FR 42219, Sept. 19, 1983, as amended at 59
FR 11387, Mar. 10, 1994; 62 FR 12695, Mar. 17,
1997]
16.205 Fixed-price contracts with prospective price redetermination.
16.205–1
Description.
A fixed-price contract with prospective price redetermination provides for
(a) a firm fixed price for an initial period of contract deliveries or performance and (b) prospective redetermination, at a stated time or times during
performance, of the price for subsequent periods of performance.
16.205–2
Application.
A fixed-price contract with prospective price redetermination may be used
in acquisitions of quantity production
or services for which it is possible to
negotiate a fair and reasonable firm
fixed price for an initial period, but not
for subsequent periods of contract performance.
(a) The initial period should be the
longest period for which it is possible
to negotiate a fair and reasonable firm
fixed price. Each subsequent pricing
period should be at least 12 months.
(b) The contract may provide for a
ceiling price based on evaluation of the
uncertainties involved in performance
and their possible cost impact. This
ceiling price should provide for assumption of a reasonable proportion of
the risk by the contractor and, once established, may be adjusted only by operation of contract clauses providing
for equitable adjustment or other revision of the contract price under stated
circumstances.
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16.205–3
48 CFR Ch. 1 (10–1–03 Edition)
16.205–3 Limitations.
This contract type shall not be used
unless—
(a) Negotiations have established
that (1) the conditions for use of a
firm-fixed-price
contract
are
not
present (see 16.202–2), and (2) a fixedprice incentive contract would not be
more appropriate;
(b) The contractor’s accounting system is adequate for price redetermination;
(c) The prospective pricing periods
can be made to conform with operation
of the contractor’s accounting system;
and
(d) There is reasonable assurance
that price redetermination actions will
take place promptly at the specified
times.
16.205–4 Contract clause.
The contracting officer shall, when
contracting by negotiation, insert the
clause at 52.216–5, Price Redetermination—Prospective, in solicitations and
contracts when a fixed-price contract
is contemplated and the conditions
specified in 16.205–2 and 16.205–3(a)
through (d) apply.
16.206 Fixed-ceiling-price
contracts
with retroactive price redetermination.
16.206–1 Description.
A fixed-ceiling-price contract with
retroactive price redetermination provides for (a) a fixed ceiling price and (b)
retroactive
price
redetermination
within the ceiling after completion of
the contract.
16.206–2 Application.
A fixed-ceiling-price contract with
retroactive price redetermination is
appropriate for research and development contracts estimated at $100,000 or
less when it is established at the outset
that a fair and reasonable firm fixed
price cannot be negotiated and that the
amount involved and short performance period make the use of any other
fixed-price contract type impracticable.
(a) A ceiling price shall be negotiated
for the contract at a level that reflects
a reasonable sharing of risk by the contractor. The established ceiling price
may be adjusted only if required by the
operation of contract clauses providing
for equitable adjustment or other revision of the contract price under stated
circumstances.
(b) The contract should be awarded
only after negotiation of a billing price
that is as fair and reasonable as the
circumstances permit.
(c) Since this contract type provides
the contractor no cost control incentive except the ceiling price, the contracting officer should make clear to
the contractor during discussion before
award that the contractor’s management effectiveness and ingenuity will
be considered in retroactively redetermining the price.
16.206–3
Limitations.
This contract type shall not be used
unless—
(a) The contract is for research and
development and the estimated cost is
$100,000 or less;
(b) The contractor’s accounting system is adequate for price redetermination;
(c) There is reasonable assurance
that the price redetermination will
take place promptly at the specified
time; and
(d) The head of the contracting activity (or a higher-level official, if required by agency procedures) approves
its use in writing.
16.206–4
Contract clause.
The contracting officer shall, when
contracting by negotiation, insert the
clause at 52.216–6, Price Redetermination—Retroactive, in solicitations and
contracts when a fixed-price contract
is contemplated and the conditions in
16.206–2 and 16.206–3(a) through (d)
apply.
16.207 Firm-fixed-price,
term contracts.
16.207–1
level-of-effort
Description.
A
firm-fixed-price,
level-of-effort
term contract requires (a) the contractor to provide a specified level of
effort, over a stated period of time, on
work that can be stated only in general
terms and (b) the Government to pay
the contractor a fixed dollar amount.
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16.304
16.207–2 Application.
A
firm-fixed-price,
level-of-effort
term contract is suitable for investigation or study in a specific research and
development area. The product of the
contract is usually a report showing
the results achieved through application of the required level of effort.
However, payment is based on the effort expended rather than on the results achieved.
16.207–3 Limitations.
This contract type may be used only
when—
(a) The work required cannot otherwise be clearly defined;
(b) The required level of effort is
identified and agreed upon in advance;
(c) There is reasonable assurance
that the intended result cannot be
achieved by expending less than the
stipulated effort; and
(d) The contract price is $100,000 or
less, unless approved by the chief of the
contracting office.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 59 FR 64785, Dec. 15, 1994; 60 FR 48248,
Sept. 18, 1995; 63 FR 34073, June 22, 1998]
16.302
General.
16.301–1 Description.
Cost-reimbursement types of contracts provide for payment of allowable
incurred costs, to the extent prescribed
in the contract. These contracts establish an estimate of total cost for the
purpose of obligating funds and establishing a ceiling that the contractor
may not exceed (except at its own risk)
without the approval of the contracting officer.
16.301–2 Application.
Cost-reimbursement contracts are
suitable for use only when uncertainties involved in contract performance
do not permit costs to be estimated
with sufficient accuracy to use any
type of fixed-price contract.
16.301–3 Limitations.
(a) A cost-reimbursement contract
may be used only when—
(1) The contractor’s accounting system is adequate for determining costs
applicable to the contract; and
Cost contracts.
(a) Description. A cost contract is a
cost-reimbursement contract in which
the contractor receives no fee.
(b) Application. A cost contract may
be appropriate for research and development work, particularly with nonprofit educational institutions or other
nonprofit organizations, and for facilities contracts.
(c) Limitations. See 16.301–3.
16.303
Subpart 16.3—CostReimbursement Contracts
16.301
(2) Appropriate Government surveillance during performance will provide
reasonable assurance that efficient
methods and effective cost controls are
used.
(b) The use of cost-reimbursement
contracts is prohibited for the acquisition of commercial items (see parts 2
and 12).
Cost-sharing contracts.
(a) Description. A cost-sharing contract is a cost-reimbursement contract
in which the contractor receives no fee
and is reimbursed only for an agreedupon portion of its allowable costs.
(b) Application. A cost-sharing contract may be used when the contractor
agrees to absorb a portion of the costs,
in the expectation of substantial compensating benefits.
(c) Limitations. See 16.301–3.
16.304 Cost-plus-incentive-fee
tracts.
A cost-plus-incentive-fee contract is
a cost-reimbursement contract that
provides for an initially negotiated fee
to be adjusted later by a formula based
on the relationship of total allowable
costs to total target costs. Cost-plusincentive-fee contracts are covered in
subpart 16.4, Incentive Contracts. See
16.405–1 for a more complete description and discussion of application of
these contracts. See 16.301–3 for limitations.
[48 FR 42219, Sept. 19, 1983, as amended at 62
FR 12695, Mar. 17, 1997]
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16.305
16.305
48 CFR Ch. 1 (10–1–03 Edition)
Cost-plus-award-fee contracts.
A cost-plus-award-fee contract is a
cost-reimbursement contract that provides for a fee consisting of (a) a base
amount (which may be zero) fixed at
inception of the contract and (b) an
award
amount,
based
upon
a
judgmental evaluation by the Government, sufficient to provide motivation
for excellence in contract performance.
Cost-plus-award-fee contracts are covered in subpart 16.4, Incentive Contracts. See 16.405–2 for a more complete
description and discussion of application of these contracts. See 16.301–3 and
16.405–2(c) for limitations.
[48 FR 42219, Sept. 19, 1983, as amended at 62
FR 12695, Mar. 17, 1997]
16.306
Cost-plus-fixed-fee contracts.
(a) Description. A cost-plus-fixed-fee
contract is a cost-reimbursement contract that provides for payment to the
contractor of a negotiated fee that is
fixed at the inception of the contract.
The fixed fee does not vary with actual
cost, but may be adjusted as a result of
changes in the work to be performed
under the contract. This contract type
permits contracting for efforts that
might otherwise present too great a
risk to contractors, but it provides the
contractor only a minimum incentive
to control costs.
(b) Application. (1) A cost-plus-fixedfee contract is suitable for use when
the conditions of 16.301–2 are present
and, for example—
(i) The contract is for the performance of research or preliminary exploration or study, and the level of effort
required is unknown; or
(ii) The contract is for development
and test, and using a cost-plus- incentive-fee contract is not practical.
(2) A cost-plus-fixed-fee contract normally should not be used in development of major systems (see part 34)
once preliminary exploration, studies,
and risk reduction have indicated a
high degree of probability that the development is achievable and the Government has established reasonably
firm performance objectives and schedules.
(c) Limitations. No cost-plus-fixed-fee
contract shall be awarded unless the
contracting officer complies with all
limitations in 15.404–4(c)(4)(i) and
16.301–3.
(d) Completion and term forms. A costplus-fixed-fee contract may take one of
two basic forms—completion or term.
(1) The completion form describes the
scope of work by stating a definite goal
or target and specifying an end product. This form of contract normally requires the contractor to complete and
deliver the specified end product (e.g.,
a final report of research accomplishing the goal or target) within the
estimated cost, if possible, as a condition for payment of the entire fixed fee.
However, in the event the work cannot
be completed within the estimated
cost, the Government may require
more effort without increase in fee,
provided the Government increases the
estimated cost.
(2) The term form describes the scope
of work in general terms and obligates
the contractor to devote a specified
level of effort for a stated time period.
Under this form, if the performance is
considered satisfactory by the Government, the fixed fee is payable at the expiration of the agreed-upon period,
upon contractor statement that the
level of effort specified in the contract
has been expended in performing the
contract work. Renewal for further periods of performance is a new acquisition that involves new cost and fee arrangements.
(3) Because of the differences in obligation assumed by the contractor, the
completion form is preferred over the
term form whenever the work, or specific milestones for the work, can be
defined well enough to permit development of estimates within which the
contractor can be expected to complete
the work.
(4) The term form shall not be used
unless the contractor is obligated by
the contract to provide a specific level
of effort within a definite time period.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 37777, July 21, 1995; 62 FR 236, Jan.
2, 1997; 63 FR 34073, June 22, 1998]
16.307 Contract clauses.
(a)(1) The contracting officer shall
insert the clause at 52.216–7, Allowable
Cost and Payment, in solicitations and
contracts when a cost-reimbursement
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Federal Acquisition Regulation
16.401
contract (other than a facilities contract) is contemplated. If the contract
is with an educational institution,
modify the clause by deleting from
paragraph (a) the words ‘‘subpart 31.2’’
and substituting for them ‘‘subpart
31.3.’’ If the contract is with a State or
local government, modify the clause by
deleting from paragraph (a) the words
‘‘subpart 31.2’’ and substituting for
them ‘‘subpart 31.6.’’ If the contract is
with a nonprofit organization other
than an educational institution, a
State or local government, or a nonprofit organization exempted under
OMB Circular No. A–122, modify the
clause by deleting from paragraph (a)
the words ‘‘subpart 31.2’’ and substituting for them ‘‘subpart 31.7.’’
(2) If the contract is a construction
contract and contains the clause at
52.232–27, Prompt Payment for Construction Contracts, the contracting
officer shall use the clause at 52.216–7
with its Alternate I.
(b) The contracting officer shall insert the clause at 52.216–8, Fixed Fee, in
solicitations and contracts when a
cost-plus-fixed-fee contract (other than
a facilities contract or a construction
contract) is contemplated.
(c) The contracting officer shall insert the clause at 52.216–9, Fixed-Fee—
Construction, in solicitations and contracts when a cost-plus-fixed-fee construction contract is contemplated.
(d) The contracting officer shall insert the clause at 52.216–10, Incentive
Fee, in solicitations and contracts
when a cost-plus-incentive-fee contract
(other than a facilities contract) is
contemplated.
(e)(1) The contracting officer shall insert the clause at 52.216–11, Cost Contract—No Fee, in solicitations and contracts when a cost-reimbursement contract is contemplated that provides no
fee and is not a cost-sharing contract
or a facilities contract.
(2) If a cost-reimbursement research
and development contract with an educational institution or a nonprofit organization that provides no fee or
other payment above cost and is not a
cost-sharing contract is contemplated,
and if the contracting officer determines that withholding of a portion of
allowable costs is not required, the
contracting officer shall use the clause
with its Alternate I.
(f)(1) The contracting officer shall insert the clause at 52.216–12, Cost-Sharing Contract—No Fee, in solicitations
and contracts when a cost-sharing contract (other than a facilities contract)
is contemplated.
(2) If a cost-sharing research and development contract with an educational institution or a nonprofit organization is contemplated, and if the
contracting officer determines that
withholding of a portion of allowable
costs is not required, the contracting
officer shall use the clause with its Alternate I.
(g)(1) The contracting officer shall
insert the clause at 52.216–13, Allowable
Cost and Payment—Facilities, in solicitations and contracts when a costreimbursement consolidated facilities
contract or a cost-reimbursement facilities acquisition contract (see 45.302–
6) is contemplated.
(2) If a facilities acquisition contract
is contemplated and, in the judgment
of the contracting officer, it may be
necessary to withhold payment of an
amount to protect the Government’s
interest, the contracting officer shall
use the clause with its Alternate I.
(h) The contracting officer shall insert the clause at 52.216–14, Allowable
Cost and Payment—Facilities Use, in
solicitations and contracts when a facilities use contract is contemplated.
(i) The contracting officer shall insert the clause at 52.216–15, Predetermined Indirect Cost Rates, in solicitations and contracts when a cost-reimbursement research and development
contract with an educational institution (see 42.705–3(b)) is contemplated
and predetermined indirect cost rates
are to be used. If the contract is a facilities contract, modify paragraph (c)
by deleting the words ‘‘Subpart 31.1’’
and substituting for them ‘‘section
31.106.’’
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 23606, June 4, 1985; 61 FR 31622, June 20,
1996; 61 FR 67419, Dec. 20, 1996]
Subpart 16.4—Incentive Contracts
16.401 General.
(a) Incentive contracts as described
in this subpart are appropriate when a
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16.402
48 CFR Ch. 1 (10–1–03 Edition)
firm-fixed-price contract is not appropriate and the required supplies or
services can be acquired at lower costs
and, in certain instances, with improved delivery or technical performance, by relating the amount of profit
or fee payable under the contract to
the contractor’s performance. Incentive contracts are designed to obtain
specific acquisition objectives by—
(1) Establishing reasonable and attainable targets that are clearly communicated to the contractor; and
(2) Including appropriate incentive
arrangements designed to (i) motivate
contractor efforts that might not otherwise be emphasized and (ii) discourage contractor inefficiency and waste.
(b) When predetermined, formulatype incentives on technical performance or delivery are included, increases
in profit or fee are provided only for
achievement that surpasses the targets, and decreases are provided for to
the extent that such targets are not
met. The incentive increases or decreases are applied to performance targets rather than minimum performance requirements.
(c) The two basic categories of incentive contracts are fixed-price incentive
contracts (see 16.403 and 16.404) and
cost-reimbursement
incentive
contracts (see 16.405). Since it is usually to
the Government’s advantage for the
contractor to assume substantial cost
responsibility and an appropriate share
of the cost risk, fixed-price incentive
contracts are preferred when contract
costs and performance requirements
are reasonably certain. Cost-reimbursement incentive contracts are subject to the overall limitations in 16.301
that apply to all cost-reimbursement
contracts.
(d) Award-fee contracts are a type of
incentive contract.
[48 FR 42219, Sept. 19, 1983, as amended at 62
FR 12695, Mar. 17, 1997]
16.402 Application of predetermined,
formula-type incentives.
16.402–1 Cost incentives.
(a) Most incentive contracts include
only cost incentives, which take the
form of a profit or fee adjustment formula and are intended to motivate the
contractor to effectively manage costs.
No incentive contract may provide for
other incentives without also providing
a cost incentive (or constraint).
(b) Except for award-fee contracts
(see 16.404 and 16.405–2), incentive contracts include a target cost, a target
profit or fee, and a profit or fee adjustment formula that (within the constraints of a price ceiling or minimum
and maximum fee) provides that—
(1) Actual cost that meets the target
will result in the target profit or fee;
(2) Actual cost that exceeds the target will result in downward adjustment
of target profit or fee; and
(3) Actual cost that is below the target will result in upward adjustment of
target profit or fee.
[48 FR 42219, Sept. 19, 1983, as amended at 62
FR 12696, Mar. 17, 1997; 62 FR 51379, Oct. 1,
1997]
16.402–2
Performance incentives.
(a) Performance incentives may be
considered in connection with specific
product characteristics (e.g., a missile
range, an aircraft speed, an engine
thrust, or a vehicle maneuverability)
or other specific elements of the contractor’s performance. These incentives should be designed to relate profit
or fee to results achieved by the contractor, compared with specified targets.
(b) To the maximum extent practicable, positive and negative performance incentives shall be considered in
connection with service contracts for
performance of objectively measurable
tasks when quality of performance is
critical and incentives are likely to
motivate the contractor.
(c) Technical performance incentives
may be particularly appropriate in
major systems contracts, both in development (when performance objectives
are known and the fabrication of prototypes for test and evaluation is required) and in production (if improved
performance is attainable and highly
desirable to the Government).
(d) Technical performance incentives
may involve a variety of specific characteristics that contribute to the overall performance of the end item. Accordingly, the incentives on individual
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Federal Acquisition Regulation
16.403
technical characteristics must be balanced so that no one of them is exaggerated to the detriment of the overall
performance of the end item.
(e) Performance tests and/or assessments of work performance are generally essential in order to determine
the degree of attainment of performance targets. Therefore, the contract
must be as specific as possible in establishing test criteria (such as testing
conditions, instrumentation precision,
and data interpretation) and performance standards (such as the quality levels of services to be provided).
(f) Because performance incentives
present complex problems in contract
administration, the contracting officer
should negotiate them in full coordination with Government engineering and
pricing specialists.
(g) It is essential that the Government and contractor agree explicitly
on the effect that contract changes
(e.g., pursuant to the Changes clause)
will have on performance incentives.
(h) The contracting officer must exercise care, in establishing performance criteria, to recognize that the
contractor should not be rewarded or
penalized for attainments of Government-furnished components.
[48 FR 42219, Sept. 19, 1983, as amended at 62
FR 44815, Aug. 22, 1997]
16.402–3 Delivery incentives.
(a) Delivery incentives should be considered when improvement from a required delivery schedule is a significant Government objective. It is important to determine the Government’s
primary objectives in a given contract
(e.g., earliest possible delivery or earliest quantity production).
(b) Incentive arrangements on delivery should specify the application of
the reward-penalty structure in the
event of Government-caused delays or
other delays beyond the control, and
without the fault or negligence, of the
contractor or subcontractor.
16.402–4 Structuring
multiple-incentive contracts.
A properly structured multiple-incentive arrangement should—
(a) Motivate the contractor to strive
for outstanding results in all incentive
areas; and
(b) Compel trade-off decisions among
the incentive areas, consistent with
the Government’s overall objectives for
the acquisition. Because of the interdependency of the Government’s cost,
the technical performance, and the delivery goals, a contract that emphasizes only one of the goals may jeopardize control over the others. Because
outstanding results may not be attainable for each of the incentive areas, all
multiple-incentive contracts must include a cost incentive (or constraint)
that operates to preclude rewarding a
contractor for superior technical performance or delivery results when the
cost of those results outweighs their
value to the Government.
16.403 Fixed-price incentive contracts.
(a) Description. A fixed-price incentive contract is a fixed-price contract
that provides for adjusting profit and
establishing the final contract price by
application of a formula based on the
relationship of total final negotiated
cost to total target cost. The final
price is subject to a price ceiling, negotiated at the outset. The two forms of
fixed-price incentive contracts, firm
target and successive targets, are further described in 16.403–1 and 16.403–2
below.
(b) Application. A fixed-price incentive contract is appropriate when—
(1) A firm-fixed-price contract is not
suitable;
(2) The nature of the supplies or services being acquired and other circumstances of the acquisition are such
that the contractor’s assumption of a
degree of cost responsibility will provide a positive profit incentive for effective cost control and performance;
and
(3) If the contract also includes incentives on technical performance and/
or delivery, the performance requirements provide a reasonable opportunity for the incentives to have a
meaningful impact on the contractor’s
management of the work.
(c) Billing prices. In fixed-price incentive contracts, billing prices are established as an interim basis for payment.
These billing prices may be adjusted,
within the ceiling limits, upon request
of either party to the contract, when it
becomes apparent that final negotiated
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16.403–1
48 CFR Ch. 1 (10–1–03 Edition)
cost will be substantially different
from the target cost.
[48 FR 42219, Sept. 19, 1983, as amended at 59
FR 64785, Dec. 15, 1994]
16.403–1 Fixed-price incentive (firm
target) contracts.
(a) Description. A fixed-price incentive (firm target) contract specifies a
target cost, a target profit, a price ceiling (but not a profit ceiling or floor),
and a profit adjustment formula. These
elements are all negotiated at the outset. The price ceiling is the maximum
that may be paid to the contractor, except for any adjustment under other
contract clauses. When the contractor
completes performance, the parties negotiate the final cost, and the final
price is established by applying the formula. When the final cost is less than
the target cost, application of the formula results in a final profit greater
than the target profit; conversely,
when final cost is more than target
cost, application of the formula results
in a final profit less than the target
profit, or even a net loss. If the final
negotiated cost exceeds the price ceiling, the contractor absorbs the difference as a loss. Because the profit
varies inversely with the cost, this contract type provides a positive, calculable profit incentive for the contractor to control costs.
(b) Application. A fixed-price incentive (firm target) contract is appropriate when the parties can negotiate
at the outset a firm target cost, target
profit, and profit adjustment formula
that will provide a fair and reasonable
incentive and a ceiling that provides
for the contractor to assume an appropriate share of the risk. When the contractor assumes a considerable or
major share of the cost responsibility
under the adjustment formula, the target profit should reflect this responsibility.
(c) Limitations. This contract type
may be used only when—
(1) The contractor’s accounting system is adequate for providing data to
support negotiation of final cost and
incentive price revision; and
(2) Adequate cost or pricing information for establishing reasonable firm
targets is available at the time of initial contract negotiation.
(d) Contract Schedule. The contracting
officer shall specify in the contract
Schedule the target cost, target profit,
and target price for each item subject
to incentive price revision.
[48 FR 42219, Sept. 19, 1983, as amended at 59
FR 64785, Dec. 15, 1994]
16.403–2 Fixed-price incentive (successive targets) contracts.
(a) Description. (1) A fixed-price incentive (successive targets) contract
specifies the following elements, all of
which are negotiated at the outset:
(i) An initial target cost.
(ii) An initial target profit.
(iii) An initial profit adjustment formula to be used for establishing the
firm target profit, including a ceiling
and floor for the firm target profit.
(This formula normally provides for a
lesser degree of contractor cost responsibility than would a formula for establishing final profit and price.)
(iv) The production point at which
the firm target cost and firm target
profit will be negotiated (usually before delivery or shop completion of the
first item).
(v) A ceiling price that is the maximum that may be paid to the contractor, except for any adjustment
under other contract clauses providing
for equitable adjustment or other revision of the contract price under stated
circumstances.
(2) When the production point specified in the contract is reached, the parties negotiate the firm target cost, giving consideration to cost experience
under the contract and other pertinent
factors. The firm target profit is established by the formula. At this point,
the parties have two alternatives, as
follows:
(i) They may negotiate a firm fixed
price, using the firm target cost plus
the firm target profit as a guide.
(ii) If negotiation of a firm fixed
price is inappropriate, they may negotiate a formula for establishing the
final price using the firm target cost
and firm target profit. The final cost is
then negotiated at completion, and the
final profit is established by formula,
as under the fixed-price incentive (firm
target) contract (see 16.403–1 above).
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Federal Acquisition Regulation
16.405–1
(b) Application. A fixed-price incentive (successive targets) contract is appropriate when—
(1) Available cost or pricing information is not sufficient to permit the negotiation of a realistic firm target cost
and profit before award;
(2) Sufficient information is available
to permit negotiation of initial targets;
and
(3) There is reasonable assurance
that additional reliable information
will be available at an early point in
the contract performance so as to permit negotiation of either (i) a firm
fixed price or (ii) firm targets and a
formula for establishing final profit
and price that will provide a fair and
reasonable incentive. This additional
information is not limited to experience under the contract, itself, but
may be drawn from other contracts for
the same or similar items.
(c) Limitations. This contract type
may be used only when—
(1) The contractor’s accounting system is adequate for providing data for
negotiating firm targets and a realistic
profit adjustment formula, as well as
later negotiation of final costs; and
(2) Cost or pricing information adequate for establishing a reasonable
firm target cost is reasonably expected
to be available at an early point in contract performance.
(d) Contract Schedule. The contracting
officer shall specify in the contract
Schedule the initial target cost, initial
target profit, and initial target price
for each item subject to incentive price
revision.
[48 FR 42219, Sept. 19, 1983, as amended at 59
FR 64785, Dec. 15, 1994]
16.404 Fixed-price
contracts
with
award fees.
(a) Award-fee provisions may be used
in fixed-price contracts when the Government wishes to motivate a contractor and other incentives cannot be
used because contractor performance
cannot be measured objectively. Such
contracts shall—
(1) Establish a fixed price (including
normal profit) for the effort. This price
will be paid for satisfactory contract
performance. Award fee earned (if any)
will be paid in addition to that fixed
price; and
(2) Provide for periodic evaluation of
the contractor’s performance against
an award-fee plan.
(b) A solicitation contemplating
award of a fixed-price contract with
award fee shall not be issued unless the
following conditions exist:
(1) The administrative costs of conducting award-fee evaluations are not
expected to exceed the expected benefits;
(2) Procedures have been established
for conducting the award-fee evaluation;
(3) The award-fee board has been established; and
(4) An individual above the level of
the contracting officer approved the
fixed-price-award-fee incentive.
[62 FR 12696, Mar. 17, 1997]
16.405 Cost-reimbursement
contracts.
incentive
See 16.301 for requirements applicable
to all cost-reimbursement contracts,
for use in conjunction with the following subsections.
[48 FR 42219, Sept. 19, 1983. Redesignated at
62 FR 12696, Mar. 17, 1997]
16.405–1 Cost-plus-incentive-fee
tracts.
(a) Description. The cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for the
initially negotiated fee to be adjusted
later by a formula based on the relationship of total allowable costs to
total target costs. This contract type
specifies a target cost, a target fee,
minimum and maximum fees, and a fee
adjustment formula. After contract
performance, the fee payable to the
contractor is determined in accordance
with the formula. The formula provides, within limits, for increases in fee
above target fee when total allowable
costs are less than target costs, and decreases in fee below target fee when
total allowable costs exceed target
costs. This increase or decrease is intended to provide an incentive for the
contractor to manage the contract effectively. When total allowable cost is
greater than or less than the range of
costs within which the fee-adjustment
formula operates, the contractor is
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16.405–2
48 CFR Ch. 1 (10–1–03 Edition)
paid total allowable costs, plus the
minimum or maximum fee.
(b) Application. (1) A cost-plus-incentive-fee contract is appropriate for
services or development and test programs when—
(i) A cost-reimbursement contract is
necessary (see 16.301–2) and
(ii) A target cost and a fee adjustment formula can be negotiated that
are likely to motivate the contractor
to manage effectively.
(2) The contract may include technical performance incentives when it is
highly probable that the required development of a major system is feasible
and the Government has established its
performance objectives, at least in general terms. This approach may also
apply to other acquisitions, if the use
of both cost and technical performance
incentives is desirable and administratively practical.
(3) The fee adjustment formula
should provide an incentive that will
be effective over the full range of reasonably foreseeable variations from
target cost. If a high maximum fee is
negotiated, the contract shall also provide for a low minimum fee that may
be a zero fee or, in rare cases, a negative fee.
(c) Limitations. No cost-plus-incentive-fee contract shall be awarded unless all limitations in 16.301–3 are complied with.
[48 FR 42219, Sept. 19, 1983. Redesignated at
62 FR 12696, Mar. 17, 1997, as amended at 62
FR 44815, Aug. 22, 1997]
16.405–2 Cost-plus-award-fee
contracts.
(a) Description. A cost-plus-award-fee
contract is a cost-reimbursement contract that provides for a fee consisting
of (1) a base amount fixed at inception
of the contract and (2) an award
amount that the contractor may earn
in whole or in part during performance
and that is sufficient to provide motivation for excellence in such areas as
quality, timeliness, technical ingenuity, and cost-effective management.
The amount of the award fee to be paid
is determined by the Government’s
judgmental evaluation of the contractor’s performance in terms of the criteria stated in the contract. This determination and the methodology for de-
termining the award fee are unilateral
decisions made solely at the discretion
of the Government.
(b) Application. (1) The cost-plusaward-fee contract is suitable for use
when—
(i) The work to be performed is such
that it is neither feasible nor effective
to devise predetermined objective incentive targets applicable to cost,
technical performance, or schedule;
(ii) The likelihood of meeting acquisition objectives will be enhanced by
using a contract that effectively motivates the contractor toward exceptional performance and provides the
Government with the flexibility to
evaluate both actual performance and
the conditions under which it was
achieved; and
(iii) Any additional administrative
effort and cost required to monitor and
evaluate performance are justified by
the expected benefits.
(2) The number of evaluation criteria
and the requirements they represent
will differ widely among contracts. The
criteria and rating plan should motivate the contractor to improve performance in the areas rated, but not at
the expense of at least minimum acceptable performance in all other
areas.
(3)
Cost-plus-award-fee
contracts
shall provide for evaluation at stated
intervals during performance, so that
the contractor will periodically be informed of the quality of its performance and the areas in which improvement is expected. Partial payment of
fee shall generally correspond to the
evaluation periods. This makes effective the incentive which the award fee
can create by inducing the contractor
to improve poor performance or to continue good performance.
(c) Limitations. No cost-plus-awardfee contract shall be awarded unless—
(1) All of the limitations in 16.301–3
are complied with; and
(2) The contract amount, performance period, and expected benefits are
sufficient to warrant the additional administrative effort and cost involved.
[48 FR 42219, Sept. 19, 1983. Redesignated at
62 FR 12696, Mar. 17, 1997; 63 FR 34073, June
22, 1998; 64 FR 72449, Dec. 27, 1999]
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Federal Acquisition Regulation
16.406
16.501–1
Subpart 16.5—Indefinite-Delivery
Contracts
Contract clauses.
(a) Insert the clause at 52.216–16, Incentive Price Revision—Firm Target,
in solicitations and contracts when a
fixed-price incentive (firm target) contract is contemplated. If the contract
calls for supplies or services to be ordered under a provisioning document
or Government option and the prices
are to be subject to the incentive price
revision under the clause, the contracting officer shall use the clause
with its Alternate I.
(b) Insert the clause at 52.216–17, Incentive
Price
Revision—Successive
Targets, in solicitations and contracts
when a fixed-price incentive (successive targets) contract is contemplated.
If the contract calls for supplies or
services to be ordered under a provisioning document or Government option and the prices are to be subject to
incentive price revision under the
clause, the contracting officer shall use
the clause with its Alternate I.
(c) The clause at 52.216–7, Allowable
Cost and Payment, is prescribed in
16.307(a) for insertion in solicitations
and contracts when a cost-plus-incentive-fee contract or a cost-plus-awardfee contract is contemplated.
(d) The clause at 52.216–10, Incentive
Fee, is prescribed in 16.307(d) for insertion in solicitations and contracts
when a cost-plus-incentive-fee contract
is contemplated.
(e) Insert an appropriate award-fee
clause in solicitations and contracts
when an award-fee contract is contemplated, provided that the clause—
(1) Is prescribed by or approved under
agency acquisition regulations;
(2) Is compatible with the clause at
52.216–7, Allowable Cost and Payment;
and
(3) Expressly provides that the award
amount and the award-fee determination methodology are unilateral decisions made solely at the discretion of
the Government.
[48 FR 42219, Sept. 19, 1983. Redesignated and
amended at 62 FR 12696, Mar. 17, 1997; 64 FR
72449, Dec. 27, 1999]
16.500
Scope of subpart.
(a) This subpart prescribes policies
and procedures for making awards of
indefinite-delivery contracts and establishes a preference for making multiple
awards of indefinite-quantity contracts.
(b) This subpart does not limit the
use of other than competitive procedures authorized by part 6.
(c) Nothing in this subpart restricts
the authority of the General Services
Administration (GSA) to enter into
schedule, multiple award, or task or
delivery order contracts under any
other provision of law. Therefore, GSA
regulations and the coverage for the
Federal Supply Schedule program in
subpart 8.4 and part 38 take precedence
over this subpart.
(d) The statutory multiple award
preference implemented by this subpart does not apply to architect-engineer contracts subject to the procedures in subpart 36.6. However, agencies are not precluded from making
multiple awards for architect-engineer
services using the procedures in this
subpart, provided the selection of contractors and placement of orders are
consistent with subpart 36.6.
[65 FR 24318, Apr. 25, 2000]
16.501–1
Definitions.
As used in this subpart—
Delivery order contract means a contract for supplies that does not procure
or specify a firm quantity of supplies
(other than a minimum or maximum
quantity) and that provides for the
issuance of orders for the delivery of
supplies during the period of the contract.
Task order contract means a contract
for services that does not procure or
specify a firm quantity of services
(other than a minimum or maximum
quantity) and that provides for the
issuance of orders for the performance
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48 CFR Ch. 1 (10–1–03 Edition)
of tasks during the period of the contract.
[60 FR 49725, Sept. 26, 1995, as amended at 65
FR 24318, Apr. 25, 2000]
16.501–2
General.
(a) There are three types of indefinite-delivery contracts: Definite-quantity contracts, requirements contracts,
and indefinite-quantity contracts. The
appropriate type of indefinite-delivery
contract may be used to acquire supplies and/or services when the exact
times and/or exact quantities of future
deliveries are not known at the time of
contract award. Pursuant to 10 U.S.C.
2304d and section 303K of the Federal
Property and Administrative Services
Act of 1949, requirements contracts and
indefinite-quantity contracts are also
known as delivery order contracts or
task order contracts.
(b) The various types of indefinite-delivery contracts offer the following advantages:
(1) All three types permit (i) Government stocks to be maintained at minimum levels and (ii) direct shipment to
users.
(2) Indefinite-quantity contracts and
requirements contracts also permit (i)
flexibility in both quantities and delivery scheduling and (ii) ordering of supplies or services after requirements
materialize.
(3)
Indefinite-quantity
contracts
limit the Government’s obligation to
the minimum quantity specified in the
contract.
(4) Requirements contracts may permit faster deliveries when production
lead time is involved, because contractors are usually willing to maintain
limited stocks when the Government
will obtain all of its actual purchase
requirements from the contractor.
(c) Indefinite-delivery contracts may
provide for any appropriate cost or
pricing arrangement under part 16.
Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g., estimated number of labor hours) must comply with
the appropriate procedures of this subpart.
[48 FR 42219, Sept. 19, 1983. Redesignated and
amended at 60 FR 49725, Sept. 26, 1995]
16.502
Definite-quantity contracts.
(a) Description. A definite-quantity
contract provides for delivery of a definite quantity of specific supplies or
services for a fixed period, with deliveries or performance to be scheduled at
designated locations upon order.
(b) Application. A definite-quantity
contract may be used when it can be
determined in advance that (1) a definite quantity of supplies or services
will be required during the contract period and (2) the supplies or services are
regularly available or will be available
after a short lead time.
[48 FR 42219, Sept. 19, 1983, as amended at 60
FR 49725, Sept. 26, 1995]
16.503
Requirements contracts.
(a) Description. A requirements contract provides for filling all actual purchase requirements of designated Government activities for supplies or services during a specified contract period,
with deliveries or performance to be
scheduled by placing orders with the
contractor.
(1) For the information of offerors
and contractors, the contracting officer shall state a realistic estimated
total quantity in the solicitation and
resulting contract. This estimate is not
a representation to an offeror or contractor that the estimated quantity
will be required or ordered, or that conditions affecting requirements will be
stable or normal. The contracting officer may obtain the estimate from
records of previous requirements and
consumption, or by other means, and
should base the estimate on the most
current information available.
(2) The contract shall state, if feasible, the maximum limit of the contractor’s obligation to deliver and the
Government’s obligation to order. The
contract may also specify maximum or
minimum quantities that the Government may order under each individual
order and the maximum that it may
order during a specified period of time.
(b) Application. A requirements contract may be appropriate for acquiring
any supplies or services when the Government anticipates recurring requirements but cannot predetermine the
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precise quantities of supplies or services that designated Government activities will need during a definite period.
(c) Government property furnished for
repair. When a requirements contract is
used to acquire work (e.g., repair,
modification, or overhaul) on existing
items of Government property, the
contracting officer shall specify in the
Schedule that failure of the Government to furnish such items in the
amounts or quantities described in the
Schedule as estimated or maximum will
not entitle the contractor to any equitable adjustment in price under the
Government Property clause of the
contract.
(d) Limitations on use of requirements
contracts for advisory and assistance
services. (1) Except as provided in paragraph (d)(2) of this section, no solicitation for a requirements contract for advisory and assistance services in excess
of three years and $10,000,000 (including
all options) may be issued unless the
contracting officer or other official
designated by the head of the agency
determines in writing that the services
required are so unique or highly specialized that it is not practicable to
make multiple awards using the procedures in 16.504.
(2) The limitation in paragraph (d)(1)
of this section is not applicable to an
acquisition of supplies or services that
includes the acquisition of advisory
and assistance services, if the contracting officer or other official designated by the head of the agency determines that the advisory and assistance services are necessarily incident
to, and not a significant component of,
the contract.
[48 FR 42219, Sept. 19, 1983, as amended at 56
FR 15150, Apr. 15, 1991; 60 FR 49725, Sept. 26,
1995]
16.504 Indefinite-quantity contracts.
(a) Description. An indefinite-quantity contract provides for an indefinite
quantity, within stated limits, of supplies or services during a fixed period.
The Government places orders for individual requirements. Quantity limits
may be stated as number of units or as
dollar values.
(1) The contract must require the
Government to order and the con-
tractor to furnish at least a stated
minimum quantity of supplies or services. In addition, if ordered, the contractor must furnish any additional
quantities, not to exceed the stated
maximum. The contracting officer
should establish a reasonable maximum quantity based on market research, trends on recent contracts for
similar supplies or services, survey of
potential users, or any other rational
basis.
(2) To ensure that the contract is
binding, the minimum quantity must
be more than a nominal quantity, but
it should not exceed the amount that
the Government is fairly certain to
order.
(3) The contract may also specify
maximum or minimum quantities that
the Government may order under each
task or delivery order and the maximum that it may order during a specific period of time.
(4) A solicitation and contract for an
indefinite quantity must—
(i) Specify the period of the contract,
including the number of options and
the period for which the Government
may extend the contract under each
option;
(ii) Specify the total minimum and
maximum quantity of supplies or services the Government will acquire under
the contract;
(iii) Include a statement of work,
specifications, or other description,
that reasonably describes the general
scope, nature, complexity, and purpose
of the supplies or services the Government will acquire under the contract in
a manner that will enable a prospective
offeror to decide whether to submit an
offer;
(iv) State the procedures that the
Government will use in issuing orders,
including the ordering media, and, if
multiple awards may be made, state
the procedures and selection criteria
that the Government will use to provide awardees a fair opportunity to be
considered
for
each
order
(see
16.505(b)(1));
(v) Include the name, address, telephone number, facsimile number, and
e-mail address of the agency task and
delivery
order
ombudsman
(see
16.505(b)(5)) if multiple awards may be
made;
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(vi) Include a description of the activities authorized to issue orders; and
(vii) Include authorization for placing oral orders, if appropriate, provided
that the Government has established
procedures for obligating funds and
that oral orders are confirmed in writing.
(b) Application. Contracting officers
may use an indefinite-quantity contract when the Government cannot
predetermine, above a specified minimum, the precise quantities of supplies or services that the Government
will require during the contract period,
and it is inadvisable for the Government to commit itself for more than a
minimum quantity. The contracting
officer should use an indefinite-quantity contract only when a recurring
need is anticipated.
(c) Multiple award preference—(1)
Planning the acquisition. (i) Except for
indefinite-quantity contracts for advisory and assistance services as provided in paragraph (c)(2) of this section, the contracting officer must, to
the maximum extent practicable, give
preference to making multiple awards
of indefinite-quantity contracts under
a single solicitation for the same or
similar supplies or services to two or
more sources.
(ii)(A) The contracting officer must
determine whether multiple awards are
appropriate as part of acquisition planning. The contracting officer must
avoid situations in which awardees specialize exclusively in one or a few areas
within the statement of work, thus creating the likelihood that orders in
those areas will be awarded on a solesource basis; however, each awardee
need not be capable of performing
every requirement as well as any other
awardee under the contracts. The contracting officer should consider the following when determining the number
of contracts to be awarded:
(1) The scope and complexity of the
contract requirement.
(2) The expected duration and frequency of task or delivery orders.
(3) The mix of resources a contractor
must have to perform expected task or
delivery order requirements.
(4) The ability to maintain competition among the awardees throughout
the contracts’ period of performance.
(B) The contracting officer must not
use the multiple award approach if—
(1) Only one contractor is capable of
providing performance at the level of
quality required because the supplies
or services are unique or highly specialized;
(2) Based on the contracting officer’s
knowledge of the market, more favorable terms and conditions, including
pricing, will be provided if a single
award is made;
(3) The expected cost of administration of multiple contracts outweighs
the expected benefits of making multiple awards;
(4) The projected orders are so integrally related that only a single contractor can reasonably perform the
work;
(5) The total estimated value of the
contract is less than the simplified acquisition threshold; or
(6) Multiple awards would not be in
the best interests of the Government.
(C) The contracting officer must document the decision whether or not to
use multiple awards in the acquisition
plan or contract file. The contracting
officer may determine that a class of
acquisitions is not appropriate for multiple awards (see subpart 1.7).
(2) Contracts for advisory and assistance services. (i) Except as provided in
paragraph (c)(2)(ii) of this section, if an
indefinite-quantity contract for advisory and assistance services exceeds 3
years and $10 million, including all options, the contracting officer must
make multiple awards unless—
(A) The contracting officer or other
official designated by the head of the
agency determines in writing, as part
of acquisition planning, that multiple
awards are not practicable. The contracting officer or other official must
determine that only one contractor can
reasonably perform the work because
either the scope of work is unique or
highly specialized or the tasks so integrally related;
(B) The contracting officer or other
official designated by the head of the
agency determines in writing, after the
evaluation of offers, that only one offeror is capable of providing the services required at the level of quality required; or
(C) Only one offer is received.
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(ii) The requirements of paragraph
(c)(2)(i) of this section do not apply if
the contracting officer or other official
designated by the head of the agency
determines that the advisory and assistance services are incidental and not
a significant component of the contract.
[65 FR 24318, Apr. 25, 2000]
16.505 Ordering.
(a) General. (1) The contracting officer does not synopsize orders under indefinite-delivery contracts.
(2) Individual orders shall clearly describe all services to be performed or
supplies to be delivered so the full cost
or price for the performance of the
work can be established when the order
is placed. Orders shall be within the
scope, issued within the period of performance, and be within the maximum
value of the contract.
(3) Performance-based work statements must be used to the maximum
extent practicable, if the contract or
order is for services (see 37.102(a)).
(4) When acquiring information technology and related services, consider
the use of modular contracting to reduce program risk (see 39.103(a)).
(5) Orders may be placed by using any
medium specified in the contract.
(6) Orders placed under indefinite-delivery contracts must contain the following information:
(i) Date of order.
(ii) Contract number and order number.
(iii) For supplies and services, contract item number and description,
quantity, and unit price or estimated
cost or fee.
(iv) Delivery or performance schedule.
(v) Place of delivery or performance
(including consignee).
(vi) Any packaging, packing, and
shipping instructions.
(vii) Accounting and appropriation
data.
(viii) Method of payment and payment office, if not specified in the contract (see 32.1110(e)).
(7) Orders placed under a task-order
contract or delivery-order contract
awarded by another agency (i.e., a Governmentwide acquisition contract, or
multi-agency contract)—
(i) Are not exempt from the development of acquisition plans (see subpart
7.1), and an information technology acquisition strategy (see part 39); and
(ii) May not be used to circumvent
conditions and limitations imposed on
the use of funds (e.g., 31 U.S.C.
1501(a)(1)).
(8) No protest under subpart 33.1 is
authorized in connection with the
issuance or proposed issuance of an
order under a task-order contract or
delivery-order contract, except for a
protest on the grounds that the order
increases the scope, period, or maximum value of the contract (10 U.S.C.
2304c(d) and 41 U.S.C. 253j(d)).
(b) Orders under multiple award contracts—(1) Fair opportunity. (i) The contracting officer must provide each
awardee a fair opportunity to be considered for each order exceeding $2,500
issued under multiple delivery-order
contracts or multiple task-order contracts, except as provided for in paragraph (b)(2) of this section.
(ii) The contracting officer may exercise broad discretion in developing appropriate order placement procedures.
The contracting officer should keep
submission requirements to a minimum. Contracting officers may use
streamlined procedures, including oral
presentations. In addition, the contracting officer need not contact each
of the multiple awardees under the
contract before selecting an order
awardee if the contracting officer has
information available to ensure that
each awardee is provided a fair opportunity to be considered for each order.
The competition requirements in part 6
and the policies in subpart 15.3 do not
apply to the ordering process. However,
the contracting officer must—
(A) Develop placement procedures
that will provide each awardee a fair
opportunity to be considered for each
order and that reflect the requirement
and other aspects of the contracting
environment;
(B) Not use any method (such as allocation or designation of any preferred
awardee) that would not result in fair
consideration being given to all awardees prior to placing each order;
(C) Tailor the procedures to each acquisition;
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48 CFR Ch. 1 (10–1–03 Edition)
(D) Include the procedures in the solicitation and the contract; and
(E) Consider price or cost under each
order as one of the factors in the selection decision.
(iii) The contracting officer should
consider the following when developing
the procedures:
(A)(1) Past performance on earlier orders under the contract, including
quality, timeliness and cost control.
(2) Potential impact on other orders
placed with the contractor.
(3) Minimum order requirements.
(4) The amount of time contractors
need to make informed business decisions on whether to respond to potential orders.
(5) Whether contractors could be encouraged to respond to potential orders
by outreach efforts to promote exchanges of information, such as—
(i) Seeking comments from two or
more contractors on draft statements
of work;
(ii) Using a multiphased approach
when effort required to respond to a potential order may be resource intensive
(e.g., requirements are complex or need
continued development), where all contractors are initially considered on
price considerations (e.g., rough estimates), and other considerations as appropriate (e.g., proposed conceptual approach, past performance). The contractors most likely to submit the
highest value solutions are then selected for one-on-one sessions with the
Government to increase their understanding of the requirements, provide
suggestions for refining requirements,
and discuss risk reduction measures.
(B) Formal evaluation plans or scoring of quotes or offers are not required.
(2) Exceptions to the fair opportunity
process. The contracting officer shall
give every awardee a fair opportunity
to be considered for a delivery-order or
task-order exceeding $2,500 unless one
of the following statutory exceptions
applies:
(i) The agency need for the supplies
or services is so urgent that providing
a fair opportunity would result in unacceptable delays.
(ii) Only one awardee is capable of
providing the supplies or services required at the level of quality required
because the supplies or services ordered
are unique or highly specialized.
(iii) The order must be issued on a
sole-source basis in the interest of
economy and efficiency because it is a
logical follow-on to an order already
issued under the contract, provided
that all awardees were given a fair opportunity to be considered for the
original order.
(iv) It is necessary to place an order
to satisfy a minimum guarantee.
(3) Pricing orders. If the contract did
not establish the price for the supply
or service, the contracting officer must
establish prices for each order using
the policies and methods in subpart
15.4.
(4) Decision documentation for orders.
The contracting officer shall document
in the contract file the rationale for
placement and price of each order, including the basis for award and the rationale for any tradeoffs among cost or
price and non-cost considerations in
making the award decision. This documentation need not quantify the tradeoffs that led to the decision. The contract file shall also identify the basis
for using an exception to the fair opportunity process. If the agency uses
the logical follow-on exception, the rationale shall describe why the relationship between the initial order and the
follow-on is logical (e.g., in terms of
scope, period of performance, or value).
(5) Task-order and delivery-order ombudsman. The head of the agency shall
designate a task-order and deliveryorder ombudsman. The ombudsman
must review complaints from contractors and ensure they are afforded a fair
opportunity to be considered, consistent with the procedures in the contract. The ombudsman must be a senior agency official who is independent
of the contracting officer and may be
the agency’s competition advocate.
(c) Limitation on ordering period for
task-order contracts for advisory and assistance services. (1) Except as provided
for in paragraphs (c)(2) and (c)(3), the
ordering period of a task-order contract for advisory and assistance services, including all options or modifications, normally may not exceed 5
years.
(2) The 5-year limitation does not
apply when—
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(i) A longer ordering period is specifically authorized by a statute; or
(ii) The contract is for an acquisition
of supplies or services that includes the
acquisition of advisory and assistance
services and the contracting officer, or
other official designated by the head of
the agency, determines that the advisory and assistance services are incidental and not a significant component
of the contract.
(3) The contracting officer may extend the contract on a sole-source basis
only once for a period not to exceed 6
months if the contracting officer, or
other official designated by the head of
the agency, determines that—
(i) The award of a follow-on contract
is delayed by circumstances that were
not reasonably foreseeable at the time
the initial contract was entered into;
and
(ii) The extension is necessary to ensure continuity of services, pending the
award of the follow-on contract.
[65 FR 24319, Apr. 25, 2000, as amended at 67
FR 56119, Aug. 30, 2002]
16.506 Solicitation provisions and contract clauses.
(a) Insert the clause at 52.216–18, Ordering, in solicitations and contracts
when a definite-quantity contract, a
requirements contract, or an indefinite-quantity
contract
is
contemplated.
(b) Insert a clause substantially the
same as the clause at 52.216–19, Order
Limitations, in solicitations and contracts when a definite-quantity contract, a requirements contract, or an
indefinite-quantity contract is contemplated.
(c) Insert the clause at 52.216–20, Definite Quantity, in solicitations and contracts when a definite-quantity contract is contemplated.
(d)(1) Insert the clause at 52.216–21,
Requirements, in solicitations and contracts when a requirements contract is
contemplated.
(2) If the contract is for nonpersonal
services and related supplies and covers
estimated requirements that exceed a
specific Government activity’s internal
capability to produce or perform, use
the clause with its Alternate I.
(3) If the contract includes subsistence for both Government use and re-
sale in the same Schedule, and similar
products may be acquired on a brandname basis, use the clause with its Alternate II (but see paragraph (d)(5) of
this section).
(4) If the contract involves a partial
small business set-aside, use the clause
with its Alternate III (but see subparagraph (5) below).
(5) If the contract—
(i) Includes subsistence for Government use and resale in the same schedule and similar products may be acquired on a brand-name basis; and
(ii) Involves a partial small business
set-aside, use the clause with its Alternate IV.
(e) Insert the clause at 52.216–22, Indefinite Quantity, in solicitations and
contracts when an indefinite-quantity
contract is contemplated.
(f) Insert the provision at 52.216–27,
Single or Multiple Awards, in solicitations for indefinite-quantity contracts
that may result in multiple contract
awards. Modify the provision to specify
the estimated number of awards. Do
not use this provision for advisory and
assistance services contracts that exceed 3 years and $10 million (including
all options).
(g) Insert the provision at 52.216–28,
Multiple Awards for Advisory and Assistance Services, in solicitations for
task-order contracts for advisory and
assistance services that exceed 3 years
and $10 million (including all options),
unless a determination has been made
under 16.504(c)(2)(i)(A). Modify the provision to specify the estimated number
of awards.
[48 FR 42219, Sept. 19, 1983; 60 FR 48260, Sept.
18, 1995. Redesignated and amended at 60 FR
49726, 49727, Sept. 26, 1995; 65 FR 24320, Apr.
25, 2000]
Subpart 16.6—Time-and-Materials,
Labor-Hour, and Letter Contracts
16.601 Time-and-materials contracts.
(a) Description. A time-and-materials
contract provides for acquiring supplies or services on the basis of (1) direct labor hours at specified fixed hourly rates that include wages, overhead,
general and administrative expenses,
and profit and (2) materials at cost, including, if appropriate, material handling costs as part of material costs.
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48 CFR Ch. 1 (10–1–03 Edition)
(b) Application. A time-and-materials
contract may be used only when it is
not possible at the time of placing the
contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence.
(1) Government surveillance. A timeand-materials contract provides no
positive profit incentive to the contractor for cost control or labor efficiency. Therefore, appropriate Government surveillance of contractor performance is required to give reasonable
assurance that efficient methods and
effective cost controls are being used.
(2) Material handling costs. When included as part of material costs, material handling costs shall include only
costs clearly excluded from the laborhour rate. Material handling costs may
include all appropriate indirect costs
allocated to direct materials in accordance with the contractor’s usual accounting procedures consistent with
part 31.
(3) Optional method of pricing material.
When the nature of the work to be performed requires the contractor to furnish material that it regularly sells to
the general public in the normal course
of its business, the contract may provide for charging material on a basis
other than at cost if—
(i) The total estimated contract price
does not exceed $25,000 or the estimated
price of material so charged does not
exceed 20 percent of the estimated contract price;
(ii) The material to be so charged is
identified in the contract;
(iii) No element of profit on material
so charged is included as profit in the
fixed hourly labor rates; and
(iv) The contract provides (A) that
the price to be paid for such material
shall be based on an established catalog or list price in effect when material
is furnished, less all applicable discounts to the Government, and (B) that
in no event shall the price exceed the
contractor’s sales price to its most-favored customer for the same item in
like quantity, or the current market
price, whichever is lower.
(c) Limitations. A time-and-materials
contract may be used (1) only after the
contracting officer executes a determination and findings that no other
contract type is suitable and (2) only if
the contract includes a ceiling price
that the contractor exceeds at its own
risk. The contracting officer shall document the contract file to justify the
reasons for and amount of any subsequent change in the ceiling price.
16.602 Labor-hour contracts.
Description. A labor-hour contract is
a variation of the time-and-materials
contract, differing only in that materials are not supplied by the contractor. See 16.601(b) and 16.601(c) for
application and limitations, respectively.
16.603
Letter contracts.
16.603–1 Description.
A letter contract is a written preliminary contractual instrument that
authorizes the contractor to begin immediately manufacturing supplies or
performing services.
16.603–2 Application.
(a) A letter contract may be used
when (1) the Government’s interests
demand that the contractor be given a
binding commitment so that work can
start immediately and (2) negotiating a
definitive contract is not possible in
sufficient time to meet the requirement. However, a letter contract
should be as complete and definite as
feasible under the circumstances.
(b) When a letter contract award is
based on price competition, the contracting officer shall include an overall
price ceiling in the letter contract.
(c) Each letter contract shall, as required by the clause at 52.216–25, Contract Definitization, contain a negotiated definitization schedule including
(1) dates for submission of the contractor’s price proposal, required cost or
pricing data, and, if required, make-orbuy and subcontracting plans, (2) a
date for the start of negotiations, and
(3) a target date for definitization,
which shall be the earliest practicable
date for definitization. The schedule
will provide for definitization of the
contract within 180 days after the date
of the letter contract or before completion of 40 percent of the work to be performed, whichever occurs first. However, the contracting officer may, in
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16.701
extreme cases and according to agency
procedures, authorize an additional period. If, after exhausting all reasonable
efforts, the contracting officer and the
contractor cannot negotiate a definitive contract because of failure to
reach agreement as to price or fee, the
clause at 52.216–25 requires the contractor to proceed with the work and
provides that the contracting officer
may, with the approval of the head of
the contracting activity, determine a
reasonable price or fee in accordance
with subpart 15.4 and part 31, subject to
appeal as provided in the Disputes
clause.
(d) The maximum liability of the
Government inserted in the clause at
52.216–24, Limitation of Government Liability, shall be the estimated amount
necessary to cover the contractor’s requirements
for
funds
before
definitization. However, it shall not exceed 50 percent of the estimated cost of
the definitive contract unless approved
in advance by the official that authorized the letter contract.
(e) The contracting officer shall assign a priority rating to the letter contract if it is appropriate under 11.604.
[48 FR 42219, Sept. 19, 1983, as amended at 60
FR 48248, Sept. 18, 1995; 62 FR 51270, Sept. 30,
1997]
16.603–3
Limitations.
A letter contract may be used only
after the head of the contracting activity or a designee determines in writing
that no other contract is suitable. Letter contracts shall not—
(a) Commit the Government to a definitive contract in excess of the funds
available at the time the letter contract is executed;
(b) Be entered into without competition when competition is required by
part 6; or
(c) Be amended to satisfy a new requirement unless that requirement is
inseparable from the existing letter
contract. Any such amendment is subject to the same requirements and limitations as a new letter contract.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 31426, Sept. 3, 1986]
16.603–4
Contract clauses.
(a) The contracting officer shall include in each letter contract the
clauses required by this regulation for
the type of definitive contract contemplated and any additional clauses
known to be appropriate for it.
(b) In addition, the contracting officer shall insert the following clauses in
solicitations and contracts when a letter contract is contemplated:
(1) The clause at 52.216–23, Execution
and Commencement of Work, except
that this clause may be omitted from
letter contracts awarded on SF 26;
(2) The clause at 52.216–24, Limitation
of Government Liability, with dollar
amounts completed in a manner consistent with 16.603–2(d); and
(3) The clause at 52.216–25, Contract
Definitization, with its paragraph (b)
completed in a manner consistent with
16.603–2(c). If, at the time of entering
into the letter contract, the contracting officer knows that the definitive contract will be based on adequate
price competition or will otherwise
meet the criteria of 15.403–1 for not requiring submission of cost or pricing
data, the words ‘‘and cost or pricing
data supporting its proposal’’ may be
deleted from paragraph (a) of the
clause. If the letter contract is being
awarded on the basis of price competition, the contracting officer shall use
the clause with its Alternate I.
(c) The contracting officer shall also
insert the clause at 52.216–26, Payments
of
Allowable
Costs
Before
Definitization, in solicitations and contracts if a cost-reimbursement definitive contract is contemplated, unless
the acquisition involves conversion, alteration, or repair of ships.
[48 FR 42219, Sept. 19, 1983, as amended at 60
FR 48217, Sept. 18, 1995; 62 FR 51270, Sept. 30,
1997]
Subpart 16.7—Agreements
16.701
Scope.
This subpart prescribes policies and
procedures for establishing and using
basic agreements and basic ordering
agreements. (See 13.303 for blanket purchase agreements (BPA’s) and see
35.015(b) for additional coverage of
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48 CFR Ch. 1 (10–1–03 Edition)
basic agreements with educational institutions and nonprofit organizations.)
[48 FR 42219, Sept. 19, 1983, as amended at 62
FR 64926, Dec. 9, 1997]
16.702 Basic agreements.
(a) Description. A basic agreement is a
written instrument of understanding,
negotiated between an agency or contracting activity and a contractor,
that (1) contains contract clauses applying to future contracts between the
parties during its term and (2) contemplates separate future contracts
that will incorporate by reference or
attachment the required and applicable
clauses agreed upon in the basic agreement. A basic agreement is not a contract.
(b) Application. A basic agreement
should be used when a substantial
number of separate contracts may be
awarded to a contractor during a particular period and significant recurring
negotiating problems have been experienced with the contractor. Basic agreements may be used with negotiated
fixed-price or cost-reimbursement contracts.
(1) Basic agreements shall contain (i)
clauses required for negotiated contracts by statute, executive order, and
this regulation and (ii) other clauses
prescribed in this regulation or agency
acquisition regulations that the parties
agree to include in each contract as applicable.
(2) Each basic agreement shall provide for discontinuing its future
applicablity upon 30 days’ written notice by either party.
(3) Each basic agreement shall be reviewed annually before the anniversary
of its effective date and revised as necessary to conform to the requirements
of this regulation. Basic agreements
may need to be revised before the annual review due to mandatory statutory requirements. A basic agreement
may be changed only by modifying the
agreement itself and not by a contract
incorporating the agreement.
(4) Discontinuing or modifying a
basic agreement shall not affect any
prior contract incorporating the basic
agreement.
(5) Contracting officers of one agency
should obtain and use existing basic
agreements of another agency to the
maximum practical extent.
(c) Limitations. A basic agreement
shall not—
(1) Cite appropriations or obligate
funds;
(2) State or imply any agreement by
the Government to place future contracts or orders with the contractor; or
(3) Be used in any manner to restrict
competition.
(d) Contracts incorporating basic agreements. (1) Each contract incorporating
a basic agreement shall include a scope
of work and price, delivery, and other
appropriate terms that apply to the
particular contract. The basic agreement shall be incorporated into the
contract by specific reference (including reference to each amendment) or
by attachment.
(2) The contracting officer shall include clauses pertaining to subjects not
covered by the basic agreement, but
applicable to the contract being negotiated, in the same manner as if there
were no basic agreement.
(3) If an existing contract is modified
to effect new acquisition, the modification shall incorporate the most recent
basic agreement, which shall apply
only to work added by the modification, except that this action is not
mandatory if the contract or modification includes all clauses required by
statute, executive order, and this regulation as of the date of the modification. However, if it is in the Government’s interest and the contractor
agrees, the modification may incorporate the most recent basic agreement for application to the entire contract as of the date of the modification.
16.703 Basic ordering agreements.
(a) Description. A basic ordering
agreement is a written instrument of
understanding, negotiated between an
agency, contracting activity, or contracting office and a contractor, that
contains (1) terms and clauses applying
to future contracts (orders) between
the parties during its term, (2) a description, as specific as practicable, of
supplies or services to be provided, and
(3) methods for pricing, issuing, and delivering future orders under the basic
ordering agreement. A basic ordering
agreement is not a contract.
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(b) Application. A basic ordering
agreement may be used to expedite
contracting for uncertain requirements
for supplies or services when specific
items, quantities, and prices are not
known at the time the agreement is executed, but a substantial number of requirements for the type of supplies or
services covered by the agreement are
anticipated to be purchased from the
contractor.
Under
proper
circumstances, the use of these procedures can result in economies in ordering parts for equipment support by reducing administrative lead-time, inventory investment, and inventory obsolescence due to design changes.
(c) Limitations. A basic ordering
agreement shall not state or imply any
agreement by the Government to place
future contracts or orders with the
contractor or be used in any manner to
restrict competition.
(1) Each basic ordering agreement
shall—
(i) Describe the method for determining prices to be paid to the contractor for the supplies or services;
(ii) Include delivery terms and conditions or specify how they will be determined;
(iii) List one or more Government activities authorized to issue orders
under the agreement;
(iv) Specify the point at which each
order becomes a binding contract (e.g.,
issuance of the order, acceptance of the
order in a specified manner, or failure
to reject the order within a specified
number of days);
(v) Provide that failure to reach
agreement on price for any order issued
before its price is established (see paragraph (d)(3) below) is a dispute under
the Disputes clause included in the
basic ordering agreement; and
(vi) If fast payment procedures will
apply to orders, include the special
data required by 13.403.
(2) Each basic ordering agreement
shall be reviewed annually before the
anniversary of its effective date and revised as necessary to conform to the
requirements of this regulation. Basic
ordering agreements may need to be revised before the annual review due to
mandatory statutory requirements. A
basic ordering agreement shall be
changed only by modifying the agree-
ment itself and not by individual orders issued under it. Modifying a basic
ordering agreement shall not retroactively affect orders previously issued
under it.
(d) Orders. A contracting officer representing any Government activity
listed in a basic ordering agreement
may issue orders for required supplies
or services covered by that agreement.
(1) Before issuing an order under a
basic ordering agreement, the contracting officer shall—
(i) Obtain competition in accordance
with part 6;
(ii) If the order is being placed after
competition, ensure that use of the
basic ordering agreement is not prejudicial to other offerors; and
(iii) Sign or obtain any applicable
justifications and approvals, and any
determination and findings, in accordance with 1.602–1(b), and comply with
other requirements, as if the order
were a contract awarded independently
of a basic ordering agreement.
(2) Contracting officers shall—
(i) Issue orders under basic ordering
agreements on Optional Form (OF) 347,
Order for Supplies or Services, or on
any other appropriate contractual instrument;
(ii) Incorporate by reference the provisions of the basic ordering agreement;
(iii) If applicable, cite the authority
under 6.302 in each order; and
(iv) Comply with 5.203 when synopsis
is required by 5.201.
(3) The contracting officer shall neither make any final commitment nor
authorize the contractor to begin work
on an order under a basic ordering
agreement until prices have been established, unless the order establishes
a ceiling price limiting the Government’s obligation and either—
(i) The basic ordering agreement provides adequate procedures for timely
pricing of the order early in its performance period; or
(ii) The need for the supplies or services is compelling and unusually urgent (i.e., when the Government would
be seriously injured, financially or otherwise, if the requirement is not met
sooner than would be possible if prices
were established before the work
began). The contracting officer shall
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proceed with pricing as soon as practical. In no event shall an entire order
be priced retroactively.
[48 FR 42219, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 61 FR 39198, July 26, 1996; 62 FR 64926,
Dec. 9, 1997]
PART 17—SPECIAL CONTRACTING
METHODS
Sec.
17.000
17.600 Scope of subpart.
17.601 Definition.
17.602 Policy.
17.603 Limitations.
17.604 Identifying management and operating contracts.
17.605 Award, renewal, and extension.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42231, Sept. 19, 1983, unless
otherwise noted.
Scope of part.
17.000 Scope of part.
This part prescribes policies and procedures for the acquisition of supplies
and services through special contracting methods, including—
(a) Multi-year contracting;
(b) Options; and
(c) Leader company contracting.
Subpart 17.1—Multiyear Contracting
17.101 Authority.
17.102 Applicability.
17.103 Definitions.
17.104 General.
17.105 Policy.
17.105–1 Uses.
17.105–2 Objectives.
17.106 Procedures.
17.106–1 General.
17.106–2 Solicitations.
17.106–3 Special procedures applicable
DoD, NASA, and the Coast Guard.
17.107 Options.
17.108 Congressional notification.
17.109 Contract clauses.
Subpart 17.1—Multiyear
Contracting
to
SOURCE: 61 FR 39204, July 26, 1996, unless
otherwise noted.
Subpart 17.2—Options
17.200 Scope of subpart.
17.201 [Reserved]
17.202 Use of options.
17.203 Solicitations.
17.204 Contracts.
17.205 Documentation.
17.206 Evaluation.
17.207 Exercise of options.
17.208 Solicitation provisions and contract
clauses.
Subpart 17.3 [Reserved]
Subpart 17.4—Leader Company
Contracting
17.401
17.402
17.403
Subpart 17.6—Management and
Operating Contracts
General.
Limitations.
Procedures.
Subpart 17.5—Interagency Acquisitions
Under the Economy Act
17.500 Scope of subpart.
17.501 Definition.
17.502 General.
17.503 Determinations and findings requirements.
17.504 Ordering procedures.
17.505 Payment.
17.101 Authority.
This subpart implements Section
304B of the Federal Property and Administrative Services Act of 1949 (41
U.S.C. 254c) and 10 U.S.C. 2306b and provides policy and procedures for the use
of multiyear contracting.
17.102 Applicability.
For DoD, NASA, and the Coast
Guard, the authorities cited in 17.101 do
not apply to contracts for the purchase
of supplies to which 40 U.S.C. 759 applies (information resource management supply contracts).
17.103 Definitions.
As used in this subpart—
Cancellation means the cancellation
(within a contractually specified time)
of the total requirements of all remaining program years. Cancellation results
when the contracting officer
(1) Notifies the contractor of nonavailability of funds for contract performance for any subsequent program
year, or
(2) Fails to notify the contractor that
funds are available for performance of
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the succeeding program year requirement.
Cancellation ceiling means the maximum cancellation charge that the
contractor can receive in the event of
cancellation.
Cancellation
charge
means
the
amount of unrecovered costs which
would have been recouped through amortization over the full term of the
contract, including the term canceled.
Multiyear contract means a contract
for the purchase of supplies or services
for more than 1, but not more than 5,
program years. A multiyear contract
may provide that performance under
the contract during the second and
subsequent years of the contract is
contingent upon the appropriation of
funds, and (if it does so provide) may
provide for a cancellation payment to
be made to the contractor if appropriations are not made. The key distinguishing difference between multiyear
contracts and multiple year contracts
is that multiyear contracts, defined in
the statutes cited at 17.101, buy more
than 1 year’s requirement (of a product
or service) without establishing and
having to exercise an option for each
program year after the first.
Nonrecurring costs means those costs
which are generally incurred on a onetime basis and include such costs as
plant or equipment relocation, plant
rearrangement, special tooling and special test equipment, preproduction engineering, initial spoilage and rework,
and specialized work force training.
Recurring costs means costs that vary
with the quantity being produced, such
as labor and materials.
[48 FR 42231, Sept. 19, 1983, as amended at 66
FR 2129, Jan. 10, 2001; 67 FR 43514, June 27,
2002]
17.104
General.
(a) Multiyear contracting is a special
contracting method to acquire known
requirements in quantities and total
cost not over planned requirements for
up to 5 years unless otherwise authorized by statute, even though the total
funds ultimately to be obligated may
not be available at the time of contract
award. This method may be used in
sealed bidding or contracting by negotiation.
(b) Multiyear contracting is a flexible contract method applicable to a
wide range of acquisitions. The extent
to which cancellation terms are used in
multiyear contracts will depend on the
unique circumstances of each contract.
Accordingly, for multiyear contracts,
the agency head may authorize modification of the requirements of this
subpart and the clause at 52.217–2, Cancellation Under Multiyear Contracts.
(c) Agency funding of multiyear contracts shall conform to the policies in
OMB Circulars A–11 (Preparation and
Submission of Budget Estimates) and
A–34 (Instructions on Budget Execution) and other applicable guidance regarding the funding of multiyear contracts. As provided by that guidance,
the funds obligated for multiyear contracts must be sufficient to cover any
potential cancellation and/or termination costs; and multiyear contracts
for the acquisition of fixed assets
should be fully funded or funded in
stages that are economically or programmatically viable.
(d) The termination for convenience
procedure may apply to any Government contract, including multiyear
contracts. As contrasted with cancellation, termination can be effected at
any time during the life of the contract
(cancellation is effected between fiscal
years) and can be for the total quantity
or partial quantity (where as cancellation must be for all subsequent fiscal
years’ quantities).
[61 FR 39204, July 26, 1996, as amended at 67
FR 13054, Mar. 20, 2002; 67 FR 43514, June 27,
2002]
17.105
Policy.
17.105–1 Uses.
(a) Except for DoD, NASA, and the
Coast Guard, the contracting officer
may enter into a multiyear contract if
the head of the contracting activity determines that—
(1) The need for the supplies or services is reasonably firm and continuing
over the period of the contract; and
(2) A multiyear contract will serve
the best interests of the United States
by encouraging full and open competition or promoting economy in administration, performance, and operation of
the agency’s programs.
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17.105–2
48 CFR Ch. 1 (10–1–03 Edition)
(b) For DoD, NASA, and the Coast
Guard, the head of the agency may
enter into a multiyear contract for
supplies if—
(1) The use of such a contract will result in substantial savings of the total
estimated costs of carrying out the
program through annual contracts;
(2) The minimum need to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of
production rate, procurement rate, and
total quantities;
(3) There is a stable design for the
supplies to be acquired, and the technical risks associated with such supplies are not excessive;
(4) There is a reasonable expectation
that, throughout the contemplated
contract period, the head of the agency
will request funding for the contract at
a level to avoid contract cancellation;
and
(5) The estimates of both the cost of
the contract and the cost avoidance
through the use of a multiyear contract are realistic.
(c) The multiyear contracting method may be used for the acquisition of
supplies or services.
(d) If funds are not appropriated to
support the succeeding years’ requirements, the agency must cancel the contract.
17.105–2 Objectives.
Use of multiyear contracting is encouraged to take advantage of one or
more of the following:
(a) Lower costs.
(b) Enhancement of standardization.
(c) Reduction of administrative burden in the placement and administration of contracts.
(d) Substantial continuity of production or performance, thus avoiding annual startup costs, preproduction testing costs, make-ready expenses, and
phaseout costs.
(e) Stabilization of contractor work
forces.
(f) Avoidance of the need for establishing quality control techniques and
procedures for a new contractor each
year.
(g) Broadening the competitive base
with opportunity for participation by
firms not otherwise willing or able to
compete for lesser quantities, particularly in cases involving high startup
costs.
(h) Providing incentives to contractors to improve productivity through
investment in capital facilities, equipment, and advanced technology.
17.106
Procedures.
17.106–1
General.
(a) Method of contracting. The nature
of the requirement should govern the
selection of the method of contracting,
since the multiyear procedure is compatible with sealed bidding, including
two-step sealed bidding, and negotiation.
(b) Type of contract. Given the longer
performance period associated with
multiyear acquisition, consideration in
pricing fixed-priced contracts should be
given to the use of economic price adjustment terms and profit objectives
commensurate with contractor risk
and financing arrangements.
(c) Cancellation procedures. (1) All program years except the first are subject
to cancellation. For each program year
subject to cancellation, the contracting officer shall establish a cancellation ceiling. Ceilings must exclude
amounts for requirements included in
prior program years. The contracting
officer shall reduce the cancellation
ceiling for each program year in direct
proportion to the remaining requirements subject to cancellation. For example, consider that the total nonrecurring costs (see 15.408, Table 15–2,
Formats for Submission of Line Items
Summaries C(8)) are estimated at 10
percent of the total multiyear price,
and the percentages for each of the program year requirements for 5 years are
(i) 30 in the first year, (ii) 30 in the second, (iii) 20 in the third, (iv) 10 in the
fourth, and (v) 10 in the fifth. The cancellation percentages, after deducting 3
percent for the first program year,
would be 7, 4, 2, and 1 percent of the
total price applicable to the second,
third, fourth, and fifth program years,
respectively.
(2) In determining cancellation ceilings, the contracting officer must estimate reasonable preproduction or
startup, labor learning, and other nonrecurring costs to be incurred by an
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‘‘average’’ prime contractor or subcontractor, which would be applicable to,
and which normally would be amortized over, the items or services to be
furnished under the multiyear requirements. Nonrecurring costs include such
costs, where applicable, as plant or
equipment relocation or rearrangement, special tooling and special test
equipment, preproduction engineering,
initial rework, initial spoilage, pilot
runs, allocable portions of the costs of
facilities to be acquired or established
for the conduct of the work, costs incurred for the assembly, training, and
transportation to and from the job site
of a specialized work force, and unrealized labor learning. They shall not include any costs of labor or materials,
or other expenses (except as indicated
above), which might be incurred for
performance of subsequent program
year requirements. The total estimate
of the above costs must then be compared with the best estimate of the
contract cost to arrive at a reasonable
percentage or dollar figure. To perform
this calculation, the contracting officer should obtain in-house engineering
cost estimates identifying the detailed
recurring and nonrecurring costs, and
the effect of labor learning.
(3) The contracting officer shall establish cancellation dates for each program year’s requirements regarding
production lead time and the date by
which funding for these requirements
can reasonably be established. The contracting officer shall include these
dates in the schedule, as appropriate.
(d) Cancellation ceilings. Cancellation
ceilings and dates may be revised after
issuing the solicitation if necessary. In
sealed bidding, the contracting officer
shall change the ceiling by amending
the solicitation before bid opening. In
two-step sealed bidding, discussions
conducted during the first step may indicate the need for revised ceilings and
dates which may be incorporated in
step two. In a negotiated acquisition,
negotiations with offerors may provide
information requiring a change in cancellation ceilings and dates before final
negotiation and contract award.
(e) Payment of cancellation charges. If
cancellation occurs, the Government’s
liability will be determined by the
terms of the applicable contract.
(f) Presolicitation or pre-bid conferences. To ensure that all interested
sources of supply are thoroughly aware
of how multiyear contracting is accomplished, use of presolicitation or prebid conferences may be advisable.
(g) Payment limit. The contracting officer shall limit the Government’s payment obligation to an amount available for contract performance. The
contracting officer shall insert the
amount for the first program year in
the contract upon award and modify it
for successive program years upon
availability of funds.
(h) Termination payment. If the contract is terminated for the convenience
of the Government in whole, including
requirements subject to cancellation,
the Government’s obligation shall not
exceed the amount specified in the
Schedule as available for contract performance, plus the cancellation ceiling.
[61 FR 39204, July 26, 1996, as amended at 62
FR 51270, Sept. 30, 1997]
17.106–2 Solicitations.
Solicitations for multiyear contracts
shall reflect all the factors to be considered for evaluation, specifically including the following:
(a) The requirements, by item of supply or service, for the—
(1) First program year; and
(2) Multiyear contract including the
requirements for each program year.
(b) Criteria for comparing the lowest
evaluated submission on the first program year requirements to the lowest
evaluated submission on the multiyear
requirements.
(c) A provision that, if the Government determines before award that
only the first program year requirements are needed, the Government’s
evaluation of the price or estimated
cost and fee shall consider only the
first year.
(d) A provision specifying a separate
cancellation ceiling (on a percentage or
dollar basis) and dates applicable to
each program year subject to a cancellation (see 17.106–1 (c) and (d)).
(e) A statement that award will not
be made on less than the first program
year requirements.
(f) The Government’s administrative
costs of annual contracting may be
used as a factor in the evaluation only
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48 CFR Ch. 1 (10–1–03 Edition)
if they can be reasonably established
and are stated in the solicitation.
(g) The cancellation ceiling shall not
be an evaluation factor.
17.106–3 Special procedures applicable
to DoD, NASA, and the Coast
Guard.
(a) Participation by subcontractors,
suppliers, and vendors. In order to
broaden the defense industrial base, to
the maximum extent practicable—
(1) Multiyear contracting shall be
used in such a manner as to seek, retain, and promote the use under such
contracts of companies that are subcontractors, suppliers, and vendors;
and
(2) Upon accrual of any payment or
other benefit under such a multiyear
contract to any subcontractor, supplier, or vendor company participating
in such contract, such payment or benefit shall be delivered to such company
in the most expeditious manner practicable.
(b) Protection of existing authority. To
the extent practicable, multiyear contracting shall not be carried out in a
manner to preclude or curtail the existing ability of the Department or
agency to provide for termination of a
prime contract, the performance of
which is deficient with respect to cost,
quality, or schedule.
(c) Cancellation or termination for insufficient funding. In the event funds
are not made available for the continuation of a multiyear contract awarded
using the procedures in this section,
the contract shall be canceled or terminated.
(d) Contracts awarded under the
multiyear procedure shall be firmfixed-price, fixed-price with economic
price adjustment, or fixed-price incentive.
(e) Recurring costs in cancellation ceiling. The inclusion of recurring costs in
cancellation ceilings is an exception to
normal contract financing arrangements and requires approval by the
agency head.
(f) Annual and multiyear proposals. Obtaining both annual and multiyear offers provides reduced lead time for
making an annual award in the event
that the multiyear award is not in the
Government’s interest. Obtaining both
also provides a basis for the computation of savings and other benefits.
However, the preparation and evaluation of dual offers may increase administrative costs and workload for both
offerors and the Government, especially for large or complex acquisitions. The head of a contracting activity may authorize the use of a solicitation requesting only multiyear prices,
provided it is found that such a solicitation is in the Government’s interest,
and that dual proposals are not necessary to meet the objectives in 17.105–
2.
(g) Level unit prices. Multiyear contract procedures provide for the amortization of certain costs over the entire
contract quantity resulting in identical (level) unit prices (except when
the economic price adjustment terms
apply) for all items or services under
the multiyear contract. If level unit
pricing is not in the Government’s interest, the head of a contracting activity may approve the use of variable
unit prices, provided that for competitive proposals there is a valid method
of evaluation.
17.107
Options.
Benefits may accrue by including options in a multiyear contract. In that
event, contracting officers must follow
the requirements of subpart 17.2. Options should not include charges for
plant and equipment already amortized, or other nonrecurring charges
which were included in the basic contract.
17.108
Congressional notification.
(a) Except for DoD, NASA, and the
Coast Guard, a multiyear contract
which includes a cancellation ceiling in
excess of $10 million may not be awarded until the head of the agency gives
written notification of the proposed
contract and of the proposed cancellation ceiling for that contract to the
committees on appropriations of the
House of Representatives and Senate
and the appropriate oversight committees of the House and Senate for the
agency in question. Information on
such committees may not be readily
available to contracting officers. Accordingly, agencies should provide such
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Federal Acquisition Regulation
17.202
information through its internal regulations. The contract may not be
awarded until the thirty-first day after
the date of notification.
(b) For DoD, NASA, and the Coast
guard, a multiyear contract which includes a cancellation ceiling in excess
of $100 million may not be awarded
until the head of the agency gives written notification of the proposed contract and of the proposed cancellation
ceiling for that contract to the committees on armed services and on appropriations of the House of Representative and Senate. The contract may
not be awarded until the thirty-first
day after the date of notification.
tation provisions and contract clauses.
Except as provided in agency regulations, this subpart does not apply to
contracts for
(a) Services involving the construction, alteration, or repair (including
dredging, excavating, and painting) of
buildings, bridges, roads, or other
kinds of real property;
(b) Architect-engineer services; and
(c) Research and development services.
However, it does not preclude the use
of options in those contracts.
17.109 Contract clauses.
(a) The contracting officer shall insert the clause at 52.217–2, Cancellation
Under Multiyear Contracts, in solicitations and contracts when a multiyear
contract is contemplated.
(b) Economic price adjustment clauses.
Economic price adjustment clauses are
adaptable to multiyear contracting
needs. When the period of production is
likely to warrant a labor and material
costs contingency in the contract
price, the contracting officer should
normally use an economic price adjustment clause (see 16.203). When contracting for services, the contracting
officer—
(1) Shall add the clause at 52.222–43,
Fair Labor Standards Act and Service
Contract Act-Price Adjustment (Multiple Year and Option Contracts), when
the contract includes the clause at
52.222–41, Service Contract Act of 1965,
as amended;
(2) May modify the clause at 52.222–43
in overseas contracts when laws, regulations, or international agreements
require contractors to pay higher wage
rates; or
(3) May use an economic price adjustment clause authorized by 16.203, when
potential fluctuations require coverage
and are not included in cost contingencies provided for by the clause at
52.222–43.
17.202 Use of options.
(a) Subject to the limitations of
paragraphs (b) and (c) of this section,
for both sealed bidding and contracting
by negotiation, the contracting officer
may include options in contracts when
it is in the Government’s interest.
When using sealed bidding, the contracting officer shall make a written
determination that there is a reasonable likelihood that the options will be
exercised before including the provision at 52.217–5, Evaluation of Options,
in the solicitation. (See 17.207(f) with
regard to the exercise of options.)
(b) Inclusion of an option is normally
not in the Government’s interest when,
in the judgment of the contracting officer—
(1) The foreseeable requirements involve—
(i) Minimum economic quantities
(i.e., quantities large enough to permit
the recovery of startup costs and production of the required supplies at a
reasonable price); and
(ii) Delivery requirements far enough
into the future to permit competitive
acquisition, production, and delivery.
(2) An indefinite quantity or requirements contract would be more appropriate than a contract with options.
However, this does not preclude the use
of an indefinite quantity contract or
requirements contract with options.
(c) The contracting officer shall not
employ options if—
(1) The contractor will incur undue
risks; e.g., the price or availability of
necessary materials or labor is not reasonably foreseeable;
Subpart 17.2—Options
17.200 Scope of subpart.
This subpart prescribes policies and
procedures for the use of option solici-
[61 FR 41469, Aug. 8, 1996]
17.201
[Reserved]
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17.203
48 CFR Ch. 1 (10–1–03 Edition)
(2) Market prices for the supplies or
services involved are likely to change
substantially; or
(3) The option represents known firm
requirements for which funds are available unless (i) the basic quantity is a
learning or testing quantity and (ii)
competition for the option is impracticable once the initial contract is
awarded.
(d) In recognition of (1) the Government’s need in certain service contracts for continuity of operations and
(2) the potential cost of disrupted support, options may be included in service contracts if there is an anticipated
need for a similar service beyond the
first contract period.
[48 FR 42231, Sept. 19, 1983, as amended at 53
FR 17858, May 18, 1988; 56 FR 15150, Apr. 15,
1991; 60 FR 42656, Aug. 16, 1995]
17.203 Solicitations.
(a) Solicitations shall include appropriate option provisions and clauses
when resulting contracts will provide
for the exercise of options (see 17.208).
(b) Solicitations containing option
provisions shall state the basis of evaluation, either exclusive or inclusive of
the option and, when appropriate, shall
inform offerors that it is anticipated
that the Government may exercise the
option at time of award.
(c) Solicitations normally should
allow option quantities to be offered
without limitation as to price, and
there shall be no limitation as to price
if the option quantity is to be considered in the evaluation for award (see
17.206).
(d) Solicitations that allow the offer
of options at unit prices which differ
from the unit prices for the basic requirement shall state that offerors
may offer varying prices for options,
depending on the quantities actually
ordered and the dates when ordered.
(e) If it is anticipated that the Government may exercise an option at the
time of award and if the condition
specified in paragraph (d) above applies, solicitations shall specify the
price at which the Government will
evaluate the option (highest option
price offered or option price for specified requirements).
(f) Solicitations may, in unusual circumstances, require that options be of-
fered at prices no higher than those for
the initial requirement; e.g., when (1)
the option cannot be evaluated under
17.206, or (2) future competition for the
option is impracticable.
(g) Solicitations that require the offering of an option at prices no higher
than those for the initial requirement
shall—
(1) Specify that the Government will
accept an offer containing an option
price higher than the base price only if
the acceptance does not prejudice any
other offeror; and
(2) Limit option quantities for additional supplies to not more than 50 percent of the initial quantity of the same
contract line item. In unusual circumstances, an authorized person at a
level above the contracting officer may
approve a greater percentage of quantity.
(h) Include the value of options in determining if the acquisition will exceed
the Trade Agreements Act and North
American
Free
Trade
Agreement
thresholds.
[48 FR 42231, Sept. 19, 1983, as amended at 53
FR 27464, July 20, 1988; 58 FR 31141, May 28,
1993; 59 FR 545, Jan. 5, 1994; 64 FR 72419, Dec.
27, 1999]
17.204 Contracts.
(a) The contract shall specify limits
on the purchase of additional supplies
or services, or the overall duration of
the term of the contract, including any
extension.
(b) The contract shall state the period within which the option may be
exercised.
(c) The period shall be set so as to
provide the contractor adequate lead
time to ensure continuous production.
(d) The period may extend beyond the
contract completion date for service
contracts. This is necessary for situations when exercise of the option would
result in the obligation of funds that
are not available in the fiscal year in
which the contract would otherwise be
completed.
(e) Unless otherwise approved in accordance with agency procedures, the
total of the basic and option periods
shall not exceed 5 years in the case of
services, and the total of the basic and
option quantities shall not exceed the
requirement for 5 years in the case of
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Federal Acquisition Regulation
17.207
supplies. These limitations do not
apply to information technology contracts. However, statutes applicable to
various classes of contracts, for example, the Service Contract Act (see
22.1002–1), may place additional restrictions on the length of contracts.
(f) Contracts may express options for
increased quantities of supplies or services in terms of (1) percentage of specific line items, (2) increase in specific
line items, or (3) additional numbered
line items identified as the option.
(g) Contracts may express extensions
of the term of the contract as an
amended completion date or as additional time for performance; e.g., days,
weeks, or months.
[48 FR 42231, Sept. 19, 1983, as amended at 54
FR 5055, Jan. 31, 1989; 61 FR 41470, Aug. 8,
1996]
17.205 Documentation.
(a) The contracting officer shall justify in writing the quantities or the
term under option, the notification period for exercising the option, and any
limitation on option price under
17.203(g); and shall include the justification document in the contract
file.
(b) Any justifications and approvals
and any determination and findings required by part 6 shall specify both the
basic requirement and the increase permitted by the option.
[48 FR 42231, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
17.206 Evaluation.
(a) In awarding the basic contract,
the contracting officer shall, except as
provided in paragraph (b) of this section, evaluate offers for any option
quantities or periods contained in a solicitation when it has been determined
prior to soliciting offers that the Government is likely to exercise the options. (See 17.208.)
(b) The contracting officer need not
evaluate offers for any option quantities when it is determined that evaluation would not be in the best interests of the Government and this determination is approved at a level above
the contracting officer. An example of
a circumstance that may support a determination not to evaluate offers for
option quantities is when there is a
reasonable certainty that funds will be
unavailable to permit exercise of the
option.
[53 FR 17858, May 18, 1988]
17.207 Exercise of options.
(a) When exercising an option, the
contracting officer shall provide written notice to the contractor within the
time period specified in the contract.
(b) When the contract provides for
economic price adjustment and the
contractor requests a revision of the
price, the contracting officer shall determine the effect of the adjustment on
prices under the option before the option is exercised.
(c) The contracting officer may exercise options only after determining
that—
(1) Funds are available;
(2) The requirement covered by the
option fulfills an existing Government
need;
(3) The exercise of the option is the
most advantageous method of fulfilling
the Government’s need, price and other
factors (see paragraphs (d) and (e)
below) considered; and
(4) The option was synopsized in accordance with part 5 unless exempted
by 5.202(a)(10) or other appropriate exemptions in 5.202.
(d) The contracting officer, after considering price and other factors, shall
make the determination on the basis of
one of the following:
(1) A new solicitation fails to produce
a better price or a more advantageous
offer than that offered by the option. If
it is anticipated that the best price
available is the option price or that
this is the more advantageous offer,
the contracting officer should not use
this method of testing the market.
(2) An informal analysis of prices or
an examination of the market indicates that the option price is better
than prices available in the market or
that the option is the more advantageous offer.
(3) The time between the award of
the contract containing the option and
the exercise of the option is so short
that it indicates the option price is the
lowest price obtainable or the more advantageous offer. The contracting officer shall take into consideration such
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17.208
48 CFR Ch. 1 (10–1–03 Edition)
factors as market stability and comparison of the time since award with
the usual duration of contracts for
such supplies or services.
(e) The determination of other factors under (c)(3) of this section should
take into account the Government’s
need for continuity of operations and
potential costs of disrupting operations.
(f) Before exercising an option, the
contracting officer shall make a written determination for the contract file
that exercise is in accordance with the
terms of the option, the requirements
of this section, and part 6. To satisfy
requirements of part 6 regarding full
and open competition, the option must
have been evaluated as part of the initial competition and be exercisable at
an amount specified in or reasonably
determinable from the terms of the
basic contract, e.g.—
(1) A specific dollar amount;
(2) An amount to be determined by
applying provisions (or a formula) provided in the basic contract, but not including renegotiation of the price for
work in a fixed-price type contract;
(3) In the case of a cost-type contract, if—
(i) The option contains a fixed or
maximum fee; or
(ii) The fixed or maximum fee
amount is determinable by applying a
formula contained in the basic contract (but see 16.102(c));
(4) A specific price that is subject to
an economic price adjustment provision; or
(5) A specific price that is subject to
change as the result of changes to prevailing labor rates provided by the Secretary of Labor.
(g) The contract modification or
other written document which notifies
the contractor of the exercise of the
option shall cite the option clause as
authority.
[48 FR 42231, Sept. 19, 1983, as amended at 50
FR 1742, Jan. 11, 1985; 50 FR 52429, 52434, Dec.
23, 1985; 53 FR 17858, May 18, 1988]
17.208 Solicitation provisions and contract clauses.
(a) Insert a provision substantially
the same as the provision at 52.217–3,
Evaluation Exclusive of Options, in solicitations when the solicitation in-
cludes an option clause and does not
include one of the provisions prescribed
in paragraph (b) or (c) below.
(b) Insert a provision substantially
the same as the provision at 52.217–4,
Evaluation of Options Exercised at
Time of Contract Award, in solicitations when the solicitation includes an
option clause, the contracting officer
has determined that there is a reasonable likelihood that the option will be
exercised, and the option may be exercised at the time of contract award.
(c) Insert a provision substantially
the same as the provision at 52.217–5,
Evaluation of Options, in solicitations
when—
(1) The solicitation contains an option clause;
(2) An option is not to be exercised at
the time of contract award;
(3) A firm-fixed-price contract, a
fixed-price contract with economic
price adjustment, or other type of contract approved under agency procedures is contemplated; and
(4) The contracting officer has determined that there is a reasonable likelihood that the option will be exercised.
For sealed bids, the determination
shall be in writing.
(d) Insert a clause substantially the
same as the clause at 52.217–6, Option
for Increased Quantity, in solicitations
and contracts, other than those for
services, when the inclusion of an option is appropriate (see 17.200 and
17.202) and the option quantity is expressed as a percentage of the basic
contract quantity or as an additional
quantity of a specific line item.
(e) Insert a clause substantially the
same as the clause at 52.217–7, Option
for Increased Quantity—Separately
Priced Line Item, in solicitations and
contracts, other than those for services, when the inclusion of an option is
appropriate (see 17.200 and 17.202) and
the option quantity is identified as a
separately priced line item having the
same nomenclature as a corresponding
basic contract line item.
(f) Insert a clause substantially the
same as the clause at 52.217–8, Options
to Extend Services, in solicitations and
contracts for services when the inclusion of an option is appropriate. (See
17.200, 17.202, and 37.111.)
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Federal Acquisition Regulation
17.403
(g) Insert a clause substantially the
same as the clause at 52.217–9, Option
to Extend the Term of the Contract, in
solicitations and contracts when the
inclusion of an option is appropriate
(see 17.200 and 17.202) and it is necessary to include in the contract any
or all of the following:
(1) A requirement that the Government must give the contractor a preliminary written notice of its intent to
extend the contract.
(2) A statement that an extension of
the contract includes an extension of
the option.
(3) A specified limitation on the total
duration of the contract.
[48 FR 42231, Sept. 19, 1983, as amended at 53
FR 17858, May 18, 1988; 54 FR 5055, Jan. 31,
1989; 54 FR 29281, July 11, 1989; 55 FR 38516,
Sept. 18, 1990; 60 FR 42656, Aug. 16, 1995; 64 FR
51843, Sept. 24, 1999]
Subpart 17.3 [Reserved]
Subpart 17.4—Leader Company
Contracting
(g) Facilitate the transition from development to production and to subsequent competitive acquisition of end
items or major components.
17.402
17.403
17.401
General.
Leader company contracting is an extraordinary acquisition technique that
is limited to special circumstances and
utilized only when its use is in accordance with agency procedures. A developer or sole producer of a product or
system is designated under this acquisition technique to be the leader company, and to furnish assistance and
know-how under an approved contract
to one or more designated follower
companies, so they can become a
source of supply. The objectives of this
technique are one or more of the following:
(a) Reduce delivery time.
(b) Achieve geographic dispersion of
suppliers.
(c) Maximize the use of scarce tooling or special equipment.
(d) Achieve economies in production.
(e) Ensure uniformity and reliability
in equipment, compatibility or standardization of components, and interchangeability of parts.
(f) Eliminate problems in the use of
proprietary data that cannot be resolved by more satisfactory solutions.
Limitations.
(a) Leader company contracting is to
be used only when—
(1) The leader company has the necessary production know-how and is
able to furnish required assistance to
the follower(s);
(2) No other source can meet the Government’s requirements without the
assistance of a leader company;
(3) The assistance required of the
leader company is limited to that
which is essential to enable the follower(s) to produce the items; and
(4) Its use is authorized in accordance
with agency procedures.
(b) When leader company contracting
is used, the Government shall reserve
the right to approve subcontracts between the leader company and the follower(s).
Procedures.
(a) The contracting officer may
award a prime contract to a—
(1) Leader company, obligating it to
subcontract a designated portion of the
required end items to a specified follower company and to assist it to
produce the required end items;
(2) Leader company, for the required
assistance to a follower company, and
a prime contract to the follower for
production of the items; or
(3) Follower company, obligating it
to subcontract with a designated leader
company for the required assistance.
(b) The contracting officer shall ensure that any contract awarded under
this arrangement contains a firm
agreement regarding disclosure, if any,
of contractor trade secrets, technical
designs or concepts, and specific data,
or software, of a proprietary nature.
Subpart 17.5—Interagency Acquisitions Under the Economy
Act
SOURCE: 60 FR 49721, Sept. 26, 1995, unless
otherwise noted.
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17.500
17.500
48 CFR Ch. 1 (10–1–03 Edition)
Scope of subpart.
(a) This subpart prescribes policies
and procedures applicable to interagency acquisitions under the Economy Act (31 U.S.C. 1535). The Economy
Act also provides authority for placement of orders between major organizational units within an agency; procedures for such intra-agency transactions are addressed in agency regulations.
(b) The Economy Act applies when
more specific statutory authority does
not exist. Examples of interagency acquisitions to which the Economy Act
does not apply include—
(1) Acquisitions from required or optional sources of supplies prescribed in
Part 8, which have separate statutory
authority (e.g., Federal Supply Schedule contracts); and
(2) Acquisitions using Governmentwide acquisition contracts.
[60 FR 49721, Sept. 26, 1995, as amended at 67
FR 56120, Aug. 30, 2002]
17.501
Definition.
Interagency acquisition, as used in this
subpart, means a procedure by which
an agency needing supplies or services
(the requesting agency) obtains them
from another agency (the servicing
agency).
[60 FR 49721, Sept. 26, 1995, as amended at 66
FR 2129, Jan. 10, 2001]
17.502
General.
(a) The Economy Act authorizes
agencies to enter into mutual agreements to obtain supplies or services by
interagency acquisition.
(b) The Economy Act may not be
used by an agency to circumvent conditions and limitations imposed on the
use of funds.
(c) Acquisitions under the Economy
Act are not exempt from the requirements of subpart 7.3, Contractor Versus
Government Performance.
(d) The Economy Act may not be
used to make acquisitions conflicting
with any other agency’s authority or
responsibility (for example, that of the
Administrator of General Services
under the Federal Property and Administrative Services Act).
17.503 Determinations and findings requirements.
(a) Each Economy Act order shall be
supported by a Determination and
Finding (D&F). The D&F shall state
that—
(1) Use of an interagency acquisition
is in the best interest of the Government; and
(2) The supplies or services cannot be
obtained as conveniently or economically by contracting directly with a
private source.
(b) If the Economy Act order requires
contract action by the servicing agency, the D&F must also include a statement that at least one of the following
circumstances applies:
(1) The acquisition will appropriately
be made under an existing contract of
the servicing agency, entered into before placement of the order, to meet
the requirements of the servicing agency for the same or similar supplies or
services;
(2) The servicing agency has capabilities or expertise to enter into a contract for such supplies or services
which is not available within the requesting agency; or
(3) The servicing agency is specifically authorized by law or regulation
to purchase such supplies or services
on behalf of other agencies.
(c) The D&F shall be approved by a
contracting officer of the requesting
agency with authority to contract for
the supplies or services to be ordered,
or by another official designated by the
agency head, except that, if the servicing agency is not covered by the Federal Acquisition Regulation, approval
of the D&F may not be delegated below
the senior procurement executive of
the requesting agency.
[60 FR 49721, Sept. 26, 1995, as amended at 67
FR 13054, Mar. 20, 2002]
17.504
Ordering procedures.
(a) Before placing an Economy Act
order for supplies or services with another Government agency, the requesting agency shall make the D&F required in 17.503. The servicing agency
may require a copy of the D&F to be
furnished with the order.
(b) The order may be placed on any
form or document that is acceptable to
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Federal Acquisition Regulation
17.600
both agencies. The order should include—
(1) A description of the supplies or
services required;
(2) Delivery requirements;
(3) A funds citation;
(4) A payment provision (see 17.505);
and
(5) Acquisition authority as may be
appropriate (see 17.504(d)).
(c) The requesting and servicing
agencies should agree to procedures for
the resolution of disagreements that
may arise under interagency acquisitions, including, in appropriate circumstances, the use of a third-party
forum. If a third party is proposed, consent of the third party should be obtained in writing.
(d) When an interagency acquisition
requires the servicing agency to award
a contract, the following procedures
also apply:
(1) If a justification and approval or a
D&F (other than the requesting agency’s D&F required in 17.503) is required
by law or regulation, the servicing
agency shall execute and issue the justification and approval or D&F. The requesting agency shall furnish the servicing agency any information needed to
make the justification and approval or
D&F.
(2) The requesting agency shall also
be responsible for furnishing other assistance that may be necessary, such
as providing information or special
contract terms needed to comply with
any condition or limitation applicable
to the funds of the requesting agency.
(3) The servicing agency is responsible for compliance with all other
legal or regulatory requirements applicable to the contract, including
(i) Having adequate statutory authority for the contractual action, and
(ii) Complying fully with the competition requirements of part 6 (see
6.002). However, if the servicing agency
is not subject to the Federal Acquisition Regulation, the requesting agency
shall verify that contracts utilized to
meet its requirements contain provisions protecting the Government from
inappropriate charges (for example,
provisions mandated for FAR agencies
by part 31), and that adequate contract
administration will be provided.
(e) Nonsponsoring Federal agencies
may use a Federally Funded Research
and Development Center (FFRDC) only
if the terms of the FFRDC’s sponsoring
agreement permit work from other
than a sponsoring agency. Work placed
with the FFRDC is subject to the acceptance by the sponsor and must fall
within the purpose, mission, general
scope of effort, or special competency
of the FFRDC. (See 35.017; see also 6.302
for procedures to follow where using
other than full and open competition.)
The nonsponsoring agency shall provide to the sponsoring agency necessary documentation that the requested work would not place the
FFRDC in direct competition with domestic private industry.
17.505
Payment.
(a) The servicing agency may ask the
requesting agency, in writing, for advance payment for all or part of the estimated cost of furnishing the supplies
or services. Adjustment on the basis of
actual costs shall be made as agreed to
by the agencies.
(b) If approved by the servicing agency, payment for actual costs may be
made by the requesting agency after
the supplies or services have been furnished.
(c) Bills rendered or requests for advance payment shall not be subject to
audit or certification in advance of
payment.
(d) If the Economy Act order requires
use of a contract by the servicing agency, then in no event shall the servicing
agency require, or the requiring agency
pay, any fee or charge in excess of the
actual cost (or estimated cost if the actual cost is not known) of entering into
and administering the contract or
other agreement under which the order
is filled.
Subpart 17.6—Management and
Operating Contracts
17.600
Scope of subpart.
This subpart prescribes policies and
procedures for management and operating contracts for the Department of
Energy and any other agency having
requisite statutory authority.
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17.601
17.601
48 CFR Ch. 1 (10–1–03 Edition)
Definition.
Management and operating contract
means an agreement under which the
Government contracts for the operation, maintenance, or support, on its
behalf, of a Government-owned or -controlled research, development, special
production, or testing establishment
wholly or principally devoted to one or
more major programs of the contracting Federal agency.
17.602
Policy.
(a) Heads of agencies, with requisite
statutory authority, may determine in
writing to authorize contracting officers to enter into or renew any management and operating contract in accordance with the agency’s statutory
authority, or the Competition in Contracting Act of 1984, and the agency’s
regulations governing such contracts.
This authority shall not be delegated.
Every contract so authorized shall
show its authorization upon its face.
(b) Agencies may authorize management and operating contracts only in a
manner consistent with the guidance of
this subpart and only if they are consistent with the situations described in
17.604.
(c) Within 2 years of the effective
date of this regulation, agencies shall
review their current contractual arrangements in the light of the guidance
of this subpart, in order to (1) identify,
modify as necessary, and authorize
management and operating contracts
and (2) modify as necessary or terminate contracts not so identified and authorized, except that any contract with
less than 4 years remaining as of the
effective date of this regulation need
not be terminated, nor need it be identified, modified, or authorized unless it
is renewed or its terms are substantially renegotiated.
[48 FR 42163, Sept. 19, 1983, as amended at 50
FR 52434, Dec. 23, 1985]
17.603
Limitations.
(a) Management and operating contracts shall not be authorized for—
(1) Functions involving the direction,
supervision, or control of Government
personnel, except for supervision incidental to training;
(2) Functions involving the exercise
of police or regulatory powers in the
name of the Government, other than
guard or plant protection services;
(3) Functions of determining basic
Government policies;
(4) Day-to-day staff or management
functions of the agency or of any of its
elements; or
(5) Functions that can more properly
be accomplished in accordance with
subpart 45.3, Providing Government
Property to Contractors.
(b) Since issuance of an authorization
under 17.602(a) is deemed sufficient
proof of compliance with paragraph (a)
immediately above, nothing in paragraph (a) immediately above shall affect the validity or legality of such an
authorization.
(c) For use of project labor agreements, see 36.202(d).
[61 FR 39204, July 26, 1996, as amended at 66
FR 27415, May 16, 2001]
17.604 Identifying management
operating contracts.
A management and operating contract is characterized both by its purpose (see 17.601) and by the special relationship it creates between Government and contractor. The following
criteria can generally be applied in
identifying management and operating
contracts:
(a) Government-owned or -controlled
facilities must be utilized; for instance,
(1) in the interest of national defense
or mobilization readiness, (2) to perform the agency’s mission adequately,
or (3) because private enterprise is unable or unwilling to use its own facilities for the work.
(b) Because of the nature of the work,
or because it is to be performed in Government facilities, the Government
must maintain a special, close relationship with the contractor and the
contractor’s personnel in various important areas (e.g., safety, security,
cost control, site conditions).
(c) The conduct of the work is wholly
or at least substantially separate from
the contractor’s other business, if any.
(d) The work is closely related to the
agency’s mission and is of a long-term
or continuing nature, and there is a
need (1) to ensure its continuity and (2)
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Federal Acquisition Regulation
17.605
for special protection covering the orderly transition of personnel and work
in the event of a change in contractors.
17.605 Award, renewal, and extension.
(a) Effective work performance under
management and operating contracts
usually involves high levels of expertise and continuity of operations and
personnel. Because of program requirements and the unusual (sometimes
unique) nature of the work performed
under management and operating contracts, the Government is often limited
in its ability to effect competition or
to replace a contractor. Therefore contracting officers should take extraordinary steps before award to assure
themselves that the prospective contractor’s technical and managerial capacity are sufficient, that organizational conflicts of interest are adequately covered, and that the contract
will grant the Government broad and
continuing rights to involve itself, if
necessary, in technical and managerial
decisionmaking concerning performance.
(b) The contracting officer shall review each management and operating
contract, following agency procedures,
at appropriate intervals and at least
once every 5 years. The review should
determine whether meaningful improvement in performance or cost
might reasonably be achieved. Any extension or renewal of an operating and
management contract must be authorized at a level within the agency no
lower than the level at which the original contract was authorized in accordance with 17.602(a).
(c) Replacement of an incumbent
contractor is usually based largely
upon expectation of meaningful improvement in performance or cost.
Therefore, when reviewing contractor
performance,
contracting
officers
should consider—
(1) The incumbent contractor’s overall performance, including, specifically, technical, administrative, and
cost performance;
(2) The potential impact of a change
in contractors on program needs, including safety, national defense, and
mobilization considerations; and
(3) Whether it is likely that qualified
offerors will compete for the contract.
PART 18 [RESERVED]
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SUBCHAPTER D—SOCIOECONOMIC PROGRAMS
19.503 Setting aside a class of acquisitions
for small business.
19.504 [Reserved]
19.505 Rejecting Small Business Administration recommendations.
19.506 Withdrawing or modifying small business set-asides.
19.507 Automatic dissolution of a small
business set-aside.
19.508 Solicitation provisions and contract
clauses.
PART 19—SMALL BUSINESS
PROGRAMS
Sec.
19.000
19.001
Scope of part.
Definitions.
19.101
19.102
Explanation of terms.
Size standards.
Subpart 19.1—Size Standards
Subpart 19.2—Policies
Subpart 19.6—Certificates of Competency
and Determinations of Responsibility
19.201 General policy.
19.202 Specific policies.
19.202–1 Encouraging small business participation in acquisitions.
19.202–2 Locating small business sources.
19.202–3 Equal low bids.
19.202–4 Solicitation.
19.202–5 Data collection and reporting requirements.
19.202–6 Determination of fair market price.
19.601 General.
19.602 Procedures.
19.602–1 Referral.
19.602–2 Issuing or denying a certificate of
competency (COC).
19.602–3 Resolving differences between the
agency and the Small Business Administration.
19.602–4 Awarding the contract.
Subpart 19.7—The Small Business
Subcontracting Program
Subpart 19.3—Determination of Small
Business Status for Small Business Programs
19.301 Representation by the offeror.
19.302 Protesting a small business representation.
19.303 Determining North American Industry Classification System (NAICS) codes
and size standards.
19.304 Disadvantaged business status.
19.305 Protesting a representation of disadvantaged business status.
19.306 Protesting a firm’s status as a
HUBZone small business concern.
19.307 Solicitation provisions.
Subpart 19.4—Cooperation With the Small
Business Administration
19.401 General.
19.402 Small Business Administration procurement center representatives.
19.403 Small
Business
Administration
breakout procurement center representatives.
19.701 Definitions.
19.702 Statutory requirements.
19.703 Eligibility requirements for participating in the program.
19.704 Subcontracting plan requirements.
19.705 Responsibilities of the contracting officer under the subcontracting assistance
program.
19.705–1 General support of the program.
19.705–2 Determining the need for a subcontracting plan.
19.705–3 Preparing the solicitation.
19.705–4 Reviewing the subcontracting plan.
19.705–5 Awards involving subcontracting
plans.
19.705–6 Postaward responsibilities of the
contracting officer.
19.705–7 Liquidated damages.
19.706 Responsibilities of the cognizant administrative contracting officer.
19.707 The Small Business Administration’s
role in carrying out the program.
19.708 Contract clauses.
Subpart 19.8—Contracting With the Small
Business Administration (the 8(a) Program)
Subpart 19.5—Set-Asides for Small Business
19.501 General.
19.502 Setting aside acquisitions.
19.502–1 Requirements for setting aside acquisitions.
19.502–2 Total small business set-asides.
19.502–3 Partial set-asides.
19.502–4 Methods of conducting set-asides.
19.502–5 Insufficient causes for not setting
aside an acquisition.
19.800 General.
19.801 [Reserved]
19.802 Selecting concerns for the 8(a) Program.
19.803 Selecting acquisitions for the 8(a)
Program.
19.804 Evaluation, offering, and acceptance.
19.804–1 Agency evaluation.
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19.000
19.804–2 Agency offering.
19.804–3 SBA acceptance.
19.804–4 Repetitive acquisitions.
19.804–5 Basic ordering agreements.
19.804–6 Multiple award and Federal Supply
Schedule contracts.
19.805 Competitive 8(a).
19.805–1 General.
19.805–2 Procedures.
19.806 Pricing the 8(a) contract.
19.807 Estimating the fair market price.
19.808 Contract negotiation.
19.808–1 Sole source.
19.808–2 Competitive.
19.809 Preaward considerations.
19.810 SBA appeals.
19.811 Preparing the contracts.
19.811–1 Sole source.
19.811–2 Competitive.
19.811–3 Contract clauses.
19.812 Contract administration.
Subpart 19.9—Very Small Business Pilot
Program
19.901 General.
19.902 Designated SBA district.
19.903 Applicability.
19.904 Procedures.
19.905 Solicitation provision and contract
clause.
Subpart 19.10—Small Business
Competitiveness Demonstration Program
19.1001 General.
19.1002 Definitions.
19.1003 Purpose.
19.1004 Participating agencies.
19.1005 Applicability.
19.1006 Exclusions.
19.1007 Procedures.
19.1008 Solicitation provisions.
Subpart 19.11—Price Evaluation Adjustment for Small Disadvantaged Business Concerns
19.1101
19.1102
19.1103
19.1104
General.
Applicability.
Procedures.
Contract clauses.
Subpart 19.12—Small Disadvantaged
Business Participation Program
19.1201 General.
19.1202 Evaluation factor or subfactor.
19.1202–1 General.
19.1202–2 Applicability.
19.1202–3 Considerations in developing an
evaluation factor or subfactor.
19.1202–4 Procedures.
19.1203 Incentive subcontracting with small
disadvantaged business concerns.
19.1204 Solicitation provisions and contract
clauses.
Subpart 19.13—Historically Underutilized
Business Zone (HUBZone) Program
19.1301 General.
19.1302 Applicability.
19.1303 Status as a qualified HUBZone small
business concern.
19.1304 Exclusions.
19.1305 HUBZone set-aside procedures.
19.1306 HUBZone sole source awards.
19.1307 Price evaluation preference for
HUBZone small business concerns.
19.1308 Contract clauses.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42240, Sept. 19, 1983, unless
otherwise noted.
19.000
Scope of part.
(a) This part implements the acquisition-related sections of the Small Business Act (15 U.S.C. 631, et seq.), applicable sections of the Armed Services Procurement Act (10 U.S.C. 2302, et seq.),
the Federal Property and Administrative Services Act (41 U.S.C. 252), section 7102 of the Federal Acquisition
Streamlining Act of 1994 (Public Law
103–355), 10 U.S.C. 2323, and Executive
Order 12138, May 18, 1979. It covers—
(1) The determination that a concern
is eligible for participation in the programs identified in this part;
(2) The respective roles of executive
agencies and the Small Business Administration (SBA) in implementing
the programs;
(3) Setting acquisitions aside for exclusive competitive participation by
small business concerns and HUBZone
small business concerns, and sole
source awards to HUBZone small business concerns;
(4) The certificate of competency program;
(5) The subcontracting assistance
program;
(6) The 8(a) program, under which
agencies contract with the SBA for
goods or services to be furnished under
a subcontract by a small disadvantaged
business concern;
(7) The use of women-owned small
business concerns;
(8) The use of a price evaluation adjustment for small disadvantaged business concerns, and the use of a price
evaluation preference for HUBZone
small business concerns;
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19.001
48 CFR Ch. 1 (10–1–03 Edition)
(9) The Small Disadvantaged Business Participation Program;
(10) The Very Small Business Pilot
Program; and
(11) The use of veteran-owned small
business concerns and service-disabled
veteran-owned small business concerns.
(b) This part, except for subpart 19.6,
applies only in the United States or its
outlying areas. Subpart 19.6 applies
worldwide.
[48 FR 42240, Sept. 19, 1983, as amended at 59
FR 64785, Dec. 15, 1994; 59 FR 67036, Dec. 28,
1994; 63 FR 35721, June 30, 1998; 63 FR 36122,
July 1, 1998; 63 FR 70268, Dec. 18, 1998; 64 FR
10536, Mar. 4, 1999; 65 FR 60544, Oct. 11, 2000;
68 FR 28081, May 22, 2003]
19.001
Definitions.
As used in this part—
Concern means any business entity
organized for profit (even if its ownership is in the hands of a nonprofit entity) with a place of business located in
the United States or its outlying areas
and that makes a significant contribution to the U.S. economy through payment of taxes and/or use of American
products, material and/or labor, etc.
‘‘Concern’’ includes but is not limited
to an individual, partnership, corporation, joint venture, association, or cooperative. For the purpose of making
affiliation findings (see 19.101), include
any business entity, whether organized
for profit or not, and any foreign business entity, i.e., any entity located outside the United States and its outlying
areas.
Fair market price means a price based
on reasonable costs under normal competitive conditions and not on lowest
possible cost (see 19.202–6).
Industry means all concerns primarily engaged in similar lines of activity, as listed and described in the
North American Industry Classification system (NAICS) manual (available
via
the
Internet
at
http://
www.census.gov/epcd/www/naics.html).
Nonmanufacturer rule means that a
contractor under a small business setaside or 8(a) contract shall be a small
business under the applicable size
standard and shall provide either its
own produce or that of another domestic small business manufacturing or
processing concern (see 13 CFR 121.406).
Small business concern means a concern, including its affiliates, that is
independently owned and operated, not
dominant in the field of operation in
which it is bidding on government contracts, and qualified as a small business under the criteria and size standards in 13 CFR part 121 (see 19.102).
Such a concern is not dominant in its
field of operation when it does not exercise a controlling or major influence on
a national basis in a kind of business
activity in which a number of business
concerns are primarily engaged. In determining whether dominance exists,
consideration shall be given to all appropriate factors, including volume of
business, number of employees, financial resources, competitive status or
position, ownership or control of materials, processes, patents, license agreements, facilities, sales territory, and
nature of business activity.
Very small business concern means a
small business concern—
(1) Whose headquarters is located
within the geographic area served by a
designated SBA district; and
(2) Which, together with its affiliates,
has no more than 15 employees and has
average annual receipts that do not exceed $1 million.
[51 FR 2650, Jan. 17, 1986, as amended at 52
FR 38189, Oct. 14, 1987; 54 FR 25062, June 12,
1989; 55 FR 3881, Feb. 5, 1990; 57 FR 60580, Dec.
21, 1992; 60 FR 48260, Sept. 18, 1995; 61 FR
67410, Dec. 20, 1996; 62 FR 236, Jan. 2, 1997; 62
FR 44820, 44822, Aug. 22, 1997; 63 FR 36122,
July 1, 1998; 63 FR 70268, Dec. 18, 1998; 63 FR
71723, Dec. 29, 1998; 64 FR 10536, Mar. 4, 1999;
64 FR 36223, July 2, 1999; 65 FR 46056, July 26,
2000; 65 FR 60544, Oct. 11, 2000; 66 FR 2129,
Jan. 10, 2001; 68 FR 28081, May 22, 2003]
Subpart 19.1—Size Standards
19.101
Explanation of terms.
As used in this subpart—
Affiliates. Business concerns are affiliates of each other if, directly or indirectly, either one controls or has the
power to control the other, or another
concern controls or has the power to
control both. In determining whether
affiliation exists, consideration is
given to all appropriate factors including common ownership, common management, and contractual relationships; provided, that restraints imposed
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by a franchise agreement are not considered in determining whether the
franchisor controls or has the power to
control the franchisee, if the franchisee
has the right to profit from its effort,
commensurate with ownership, and
bears the risk of loss or failure. Any
business entity may be found to be an
affiliate, whether or not it is organized
for profit or located in the United
States or its outlying areas.
(1) Nature of control. Every business
concern is considered as having one or
more parties who directly or indirectly
control or have the power to control it.
Control may be affirmative or negative
and it is immaterial whether it is exercised so long as the power to control
exists.
(2) Meaning of party or parties. The
term party or parties includes, but is
not limited to, two or more persons
with an identity of interest such as
members of the same family or persons
with common investments in more
than one concern. In determining who
controls or has the power to control a
concern, persons with an identity of interest may be treated as though they
were one person.
(3) Control through stock ownership. (i)
A party is considered to control or
have the power to control a concern, if
the party controls or has the power to
control 50 percent or more of the concern’s voting stock.
(ii) A party is considered to control
or have the power to control a concern,
even though the party owns, controls,
or has the power to control less than 50
percent of the concern’s voting stock,
if the block of stock the party owns,
controls, or has the power to control is
large, as compared with any other outstanding block of stock. If two or more
parties each owns, controls, or has the
power to control, less than 50 percent
of the voting stock of a concern, and
such minority block is equal or substantially equal in size, and large as
compared with any other block outstanding, there is a presumption that
each such party controls or has the
power to control such concern; however, such presumption may be rebutted by a showing that such control or
power to control, in fact, does not
exist.
(iii) If a concern’s voting stock is distributed other than as described above,
its management (officers and directors)
is deemed to be in control of such concern.
(4) Stock options and convertible debentures. Stock options and convertible debentures exercisable at the time or
within a relatively short time after a
size determination and agreements to
merge in the future, are considered as
having a present effect on the power to
control the concern. Therefore, in making a size determination, such options,
debentures, and agreements are treated
as though the rights held thereunder
had been exercised.
(5) Voting trusts. If the purpose of a
voting trust, or similar agreement, is
to separate voting power from beneficial ownership of voting stock for the
purpose of shifting control of or the
power to control a concern in order
that such concern or another concern
may qualify as a small business within
the size regulations, such voting trust
shall not be considered valid for this
purpose regardless of whether it is or is
not valid within the appropriate jurisdiction. However, if a voting trust is
entered into for a legitimate purpose
other than that described above, and it
is valid within the appropriate jurisdiction, it may be considered valid for the
purpose of a size determination, provided such consideration is determined
to be in the best interest of the small
business program.
(6) Control through common management. A concern may be found as controlling or having the power to control
another concern when one or more of
the following circumstances are found
to exist, and it is reasonable to conclude that under the circumstances,
such concern is directing or influencing, or has the power to direct or
influence, the operation of such other
concern.
(i) Interlocking management. Officers,
directors, employees, or principal
stockholders of one concern serve as a
working majority of the board of directors or officers of another concern.
(ii) Common facilities. One concern
shares common office space and/or employees and/or other facilities with another concern, particularly where such
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19.101
48 CFR Ch. 1 (10–1–03 Edition)
concerns are in the same or related industry or field of operation, or where
such concerns were formerly affiliated.
(iii) Newly organized concern. Former
officers, directors, principal stockholders, and/or key employees of one
concern organize a new concern in the
same or a related industry or field operation, and serve as its officers, directors, principal stockholders, and/or key
employees, and one concern is furnishing or will furnish the other concern with subcontracts, financial or
technical assistance, and/or facilities,
whether for a fee or otherwise.
(7) Control through contractual relationships—(i) Definition of a joint venture
for size determination purposes. A joint
venture for size determination purposes is an association of persons or
concerns with interests in any degree
or proportion by way of contract, express or implied, consorting to engage
in and carry out a single specific business venture for joint profit, for which
purpose they combine their efforts,
property, money, skill, or knowledge,
but not on a continuing or permanent
basis for conducting business generally. A joint venture is viewed as a
business entity in determining power
to control its management.
(A) For bundled requirements, apply
size standards for the requirement to
individual persons or concerns, not to
the combined assets, of the joint venture.
(B) For other than bundled requirements, apply size standards for the requirement to individual persons or concerns, not to the combined assets, of
the joint venture, if—
(1) A revenue-based size standard applies to the requirement and the estimated contract value, including options, exceeds one-half the applicable
size standard; or
(2) An employee-based size standard
applies to the requirement and the estimated contract value, including options, exceeds $10 million.
(ii) Joint venture—acquisition and
property sale assistance. Concerns bidding on a particular acquisition or
property sale as joint ventures are considered as affiliated and controlling or
having the power to control each other
with regard to performance of the contract. Moreover, an ostensible subcon-
tractor which is to perform primary or
vital requirements of a contract may
have a controlling role such to be considered a joint venturer affiliated on
the contract with the prime contractor. A joint venture affiliation
finding is limited to particular contracts unless the SBA size determination finds general affiliation between
the parties. The rules governing 8(a)
Program joint ventures are described
in 13 CFR 124.513.
(iii) Where a concern is not considered as being an affiliate of a concern
with which it is participating in a joint
venture, it is necessary, nevertheless,
in computing annual receipts, etc., for
the purpose of applying size standards,
to include such concern’s share of the
joint venture receipts (as distinguished
from its share of the profits of such
venture).
(iv) Franchise and license agreements.
If a concern operates or is to operate
under a franchise (or a license) agreement, the following policy is applicable: In determining whether the
franchisor controls or has the power to
control and, therefore, is affiliated
with the franchisee, the restraints imposed on a franchisee by its franchise
agreement shall not be considered, provided that the franchisee has the right
to profit from its effort and the risk of
loss or failure, commensurate with
ownership. Even though a franchisee
may not be controlled by the
franchisor by virtue of the contractual
relationship
between
them,
the
franchisee may be controlled by the
franchisor or others through common
ownership or common management, in
which case they would be considered as
affiliated.
(v) Size determination for teaming arrangements. For size determination purposes, apply the size standard tests in
(7)(1)(A) and (B) of this section when a
teaming arrangement of two or more
business concerns submits an offer, as
appropriate.
Annual receipts. (1) Annual receipts of
a concern which has been in business
for 3 or more complete fiscal years
means the annual average gross revenue of the concern taken for the last
3 fiscal years. For the purpose of this
definition, gross revenue of the concern
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19.102
includes revenues from sales of products and services, interest, rents, fees,
commissions and/or whatever other
sources derived, but less returns and
allowances, sales of fixed assets, interaffiliate transactions between a concern and its domestic and foreign affiliates, and taxes collected for remittance (and if due, remitted) to a third
party. Such revenues shall be measured
as entered on the regular books of account of the concern whether on a
cash, accrual, or other basis of accounting acceptable to the U.S. Treasury Department for the purpose of supporting Federal income tax returns, except when a change in accounting
method from cash to accrual or accrual
to cash has taken place during such 3year period, or when the completed
contract method has been used.
(i) In any case of a change in accounting method from cash to accrual
or accrual to cash, revenues for such 3year period shall, prior to the calculation of the annual average, be restated
to the accrual method. In any case,
where the completed contract method
has been used to account for revenues
in such 3-year period, revenues must be
restated on an accrual basis using the
percentage of completion method.
(ii) In the case of a concern which
does not keep regular books of accounts, but which is subject to U.S.
Federal income taxation, annual receipts shall be measured as reported, or
to be reported to the U.S. Treasury Department, Internal Revenue Service,
for Federal income tax purposes, except that any return based on a change
in accounting method or on the completed contract method of accounting
must be restated as provided for in the
preceding paragraphs.
(2) Annual receipts of a concern that
has been in business for less than 3
complete fiscal years means its total
receipts for the period it has been in
business, divided by the number of
weeks including fractions of a week
that it has been in business, and multiplied by 52. In calculating total receipts, the definitions and adjustments
related to a change of accounting
method and the completed contract
method of paragraph (1) of this definition, are applicable.
Number of employees is a measure of
the average employment of a business
concern and means its average employment, including the employees of its
domestic and foreign affiliates, based
on the number of persons employed on
a full-time, part-time, temporary, or
other basis during each of the pay periods of the preceding 12 months. If a
business has not been in existence for
12 months, number of employees means
the average employment of such concern and its affiliates during the period
that such concern has been in existence
based on the number of persons employed during each of the pay periods
of the period that such concern has
been in business. If a business has acquired an affiliate during the applicable 12-month period, it is necessary, in
computing the applicant’s number of
employees, to include the affiliate’s
number of employees during the entire
period, rather than only its employees
during the period in which it has been
an affiliate. The employees of a former
affiliate are not included, even if such
concern had been an affiliate during a
portion of the period.
[51 FR 2650, Jan. 17, 1986, as amended at 64
FR 32743, June 17, 1999; 64 FR 72444, Dec. 27,
1999; 65 FR 46055, July 26, 2000; 66 FR 2129,
Jan. 10, 2001; 68 FR 28081, May 22, 2003]
19.102 Size standards.
(a) The SBA establishes small business size standards on an industry-byindustry basis. (See 13 CFR part 121.)
(b) Small business size standards are
applied by—
(1) Classifying the product or service
being acquired in the industry whose
definition, as found in the North American Industry Classification System
(NAICS) Manual (available via the
Internet at http://www.census.gov/epcd/
www/naics.html), best describes the
principal nature of the product or service being acquired;
(2) Identifying the size standard SBA
established for that industry; and
(3) Specifying the size standard in the
solicitation, so that offerors can appropriately represent themselves as small
or large.
(c) For size standard purposes, a
product or service shall be classified in
only one industry, whose definition
best describes the principal nature of
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48 CFR Ch. 1 (10–1–03 Edition)
the product or service being acquired
even though for other purposes it could
be classified in more than one.
(d) When acquiring a product or service that could be classified in two or
more industries with different size
standards, contracting officers shall
apply the size standard for the industry
accounting for the greatest percentage
of the contract price.
(e) If a solicitation calls for more
than one item and allows offers to be
submitted on any or all of the items,
an offeror must meet the size standard
for each item it offers to furnish. If a
solicitation calling for more than one
item requires offers on all or none of
the items, an offeror may qualify as a
small business by meeting the size
standard for the item accounting for
the greatest percentage of the total
contract price.
(f) Any concern submitting a bid or
offer in its own name, other than on a
construction or service contract, that
proposes to furnish an end product it
did not manufacture (a ‘‘nonmanufacturer’’), is a small business if it has no
more than 500 employees, and—
(1) Except as provided in paragraphs
(f)(4) through (f)(7) of this section, in
the case of Government acquisitions
set-aside for small businesses, furnishes in the performance of the contract, the product of a small business
manufacturer or producer. The end
product furnished must be manufactured or produced in the United States
or its outlying areas. The term ‘‘nonmanufacturer’’ includes a concern that
can, but elects not to, manufacture or
produce the end product for the specific
acquisition. For size determination
purposes, there can be only one manufacturer of the end product being acquired. The manufacturer of the end
product being acquired is the concern
that, with its own forces, transforms
inorganic or organic substances including raw materials and/or miscellaneous
parts or components into the end product. However, see the limitations on
subcontracting at 52.219–14 that apply
to any small business offeror other
than a nonmanufacturer for purposes
of set-asides and 8(a) awards.
(2) A concern which purchases items
and packages them into a kit is considered to be a nonmanufacturer small
business and can qualify as such for a
given acquisition if it meets the size
qualifications of a small nonmanufacturer for the acquisition, and if more
than 50 percent of the total value of
the kit and its contents is accounted
for by items manufactured by small
business.
(3) For the purpose of receiving a Certificate of Competency on an unrestricted acquisition, a small business
nonmanufacturer may furnish any domestically produced or manufactured
product.
(4) In the case of acquisitions set
aside for small business or awarded
under section 8(a) of the Small Business Act, when the acquisition is for a
specific product (or a product in a class
of products) for which the SBA has determined that there are no small business manufacturers or processors in
the Federal market, then the SBA may
grant a class waiver so that a nonmanufacturer does not have to furnish
the product of a small business. For
the most current listing of classes for
which SBA has granted a waiver, contact an SBA Office of Government Contracting. A listing is also available on
SBA’s Internet Homepage at http://
www.sba.gov/gc. Contracting officers
may request that the SBA waive the
nonmanufacturer rule for a particular
class of products.
(5) For a specific solicitation, a contracting officer may request a waiver
of that part of the nonmanufacturer
rule which requires that the actual
manufacturer or processor be a small
business concern if the contracting officer determines that no known domestic small business manufacturers or
processors can reasonably be expected
to offer a product meeting the requirements of the solicitation.
(6) Requests for waivers shall be sent
to the Associate Administrator for
Government
Contracting,
United
States Small Business Administration,
Mail Code 6250, 409 Third Street, SW.,
Washington, DC 20416.
(7) The SBA provides for an exception
to the nonmanufacturer rule if—
(i) The procurement of a manufactured end product processed under the
procedures set forth in part 13—
(A) Is set aside for small business;
and
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Federal Acquisition Regulation
19.201
(B) Is not anticipated to exceed
$25,000; and
(ii) The offeror supplies an end product that is manufactured or produced
in the United States or its outlying
areas.
(g) In the case of acquisitions set
aside for very small business in accordance with 19.904, offerors may not have
more than 15 employees and may not
have average annual receipts that exceed $1 million.
(h) The industry size standards are
published by the Small Business Administration and are available via the
Internet at http://www.sba.gov/size.
[48 FR 42240, Sept. 19, 1983 as amended at 51
FR 2652, Jan. 17, 1986; 51 FR 27489, July 31,
1986; 51 FR 31426, Sept. 3, 1986; 52 FR 21887,
June 9, 1987; 52 FR 30076, Aug. 12, 1987; 53 FR
661, Jan. 11, 1988; 53 FR 34227, Sept. 2, 1988; 53
FR 43390, Oct. 26, 1988; 54 FR 5055, Jan. 31,
1989; 54 FR 13023, Mar. 29, 1989; 54 FR 25062,
June 12, 1989; 55 FR 3882, Feb. 5, 1990; 55 FR
25529, June 21, 1990; 57 FR 60580, 60610, Dec. 21,
1992; 59 FR 11376, 11387, Mar. 10, 1994; 59 FR
17723, Apr. 14, 1994; 60 FR 34756, July 3, 1995;
61 FR 31622, June 20, 1996; 61 FR 39208, July
26, 1996; 61 FR 67410, Dec. 20, 1996; 63 FR 58602,
Oct. 30, 1998; 63 FR 70292, Dec. 18, 1998; 64 FR
10536, Mar. 4, 1999; 64 FR 51850, Sept. 24, 1999;
65 FR 46056, July 26, 2000; 66 FR 65370, Dec. 18,
2001; 68 FR 28081, May 22, 2003]
Subpart 19.2—Policies
19.201 General policy.
(a) It is the policy of the Government
to provide maximum practicable opportunities in its acquisitions to small
business, veteran-owned small business, service-disabled veteran-owned
small business, HUBZone small business, small disadvantaged business, and
women-owned small business concerns.
Such concerns must also have the maximum practicable opportunity to participate as subcontractors in the contracts awarded by any executive agency, consistent with efficient contract
performance. The Small Business Administration (SBA) counsels and assists small business concerns and assists contracting personnel to ensure
that a fair proportion of contracts for
supplies and services is placed with
small business.
(b) The Department of Commerce
will determine on an annual basis, by
North American Industry Classifica-
tion System (NAICS) Industry Subsector, and region, if any, the authorized small disadvantaged business
(SDB) procurement mechanisms and
applicable factors (percentages). The
Department of Commerce determination shall only affect solicitations that
are issued on or after the effective date
of the determination. The effective
date of the Department of Commerce
determination shall be no less than 60
days after its publication date. The Department of Commerce determination
shall not affect ongoing acquisitions.
The SDB procurement mechanisms are
a price evaluation adjustment for SDB
concerns (see Subpart 19.11), an evaluation factor or subfactor for participation of SDB concerns (see 19.1202), and
monetary subcontracting incentive
clauses for SDB concerns (see 19.1203).
The Department of Commerce determination shall also include the applicable factors, by NAICS Industry Subsector, to be used in the price evaluation adjustment for SDB concerns (see
19.1104). The General Services Administration shall post the Department of
Commerce determination at http://
www.arnet.gov/References/
sdbadjustments.htm. The authorized
procurement mechanisms shall be applied consistently with the policies and
procedures in this subpart. The agencies shall apply the procurement mechanisms determined by the Department
of Commerce. The Department of Commerce, in making its determination, is
not limited to the SDB procurement
mechanisms identified in this section
where the Department of Commerce
has found substantial and persuasive
evidence of—
(1) A persistent and significant underutilization of minority firms in a
particular industry, attributable to
past or present discrimination; and
(2) A demonstrated incapacity to alleviate the problem by using those
mechanisms.
(c) Heads of contracting activities
are responsible for effectively implementing the small business programs
within
their
activities,
including
achieving program goals. They are to
ensure that contracting and technical
personnel maintain knowledge of small
business program requirements and
take all reasonable action to increase
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19.201
48 CFR Ch. 1 (10–1–03 Edition)
participation in their activities’ contracting processes by these businesses.
(d) The Small Business Act requires
each agency with contracting authority to establish an Office of Small and
Disadvantaged Business Utilization
(see section (k) of the Small Business
Act). Management of the office shall be
the responsibility of an officer or employee of the agency who shall, in carrying out the purposes of the Act—
(1) Be known as the Director of Small
and Disadvantaged Business Utilization;
(2) Be appointed by the agency head;
(3) Be responsible to and report directly to the agency head or the deputy
to the agency head;
(4) Be responsible for the agency carrying out the functions and duties in
sections 8, 15, and 31 of the Small Business Act.
(5) Work with the SBA procurement
center representative to—
(i) Identify proposed solicitations
that involve bundling;
(ii) Facilitate small business participation as contractors including small
business contract teams, where appropriate; and
(iii) Facilitate small business participation as subcontractors and suppliers
where participation by small business
concerns as contractors is unlikely;
(6) Assist small business concerns in
obtaining payments under their contracts, late payment, interest penalties, or information on contractual
payment provisions;
(7) Have supervisory authority over
agency personnel to the extent that
their functions and duties relate to sections 8, 15, and 31 of the Small Business
Act.
(8) Assign a small business technical
advisor to each contracting activity
within the agency to which the SBA
has assigned a representative (see
19.402)—
(i) Who shall be a full-time employee
of the contracting activity, well qualified, technically trained, and familiar
with the supplies or services contracted for by the activity; and
(ii) Whose principal duty is to assist
the SBA’s assigned representative in
performing functions and duties relating to sections 8, 15, and 31 of the
Small Business Act;
(9) Cooperate and consult on a regular basis with the SBA in carrying out
the agency’s functions and duties in
sections 8, 15, and 31 of the Small Business Act;
(10) Make recommendations in accordance with agency procedures as to
whether a particular acquisition should
be awarded under subpart 19.5 as a
small business set-aside, under subpart
19.8 as a Section 8(a) award, or under
subpart 19.13 as a HUBZone set-aside.
(e) Small Business Specialists must
be appointed and act in accordance
with agency regulations.
(f)(1) Each agency shall designate, at
levels it determines appropriate, personnel responsible for determining
whether, in order to achieve the contracting agency’s goal for SDB concerns, the use of the SDB mechanism
in Subpart 19.11 has resulted in an
undue burden on non-SDB firms in one
of the Industry subsectors and regions
identified by Department of Commerce
following paragraph (b) of this section,
or is otherwise inappropriate. Determinations under this subpart are for
the purpose of determining future acquisitions and shall not affect ongoing
acquisitions. Requests for a determination, including supporting rationale,
may be submitted to the agency designee. If the agency designee makes an
affirmative determination that the
SDB mechanism has an undue burden
or is otherwise inappropriate, the determination shall be forwarded through
agency channels to the OFPP, which
shall review the determination in consultation with the Department of Commerce and the Small Business Administration. At a minimum, the following
information should be included in any
submittal:
(i) A determination of undue burden
or other inappropriate effect, including
proposed corrective action.
(ii) The Industry subsector affected.
(iii) Supporting information to justify the determination, including, but
not limited to, dollars and percentages
of contracts awarded by the contracting activity under the affected Industry subsector for the previous two
fiscal years and current fiscal year to
date for—
(A) Total awards;
(B) Total awards to SDB concerns;
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Federal Acquisition Regulation
19.202–1
(C) Awards to SDB concerns awarded
contracts under the SDB price evaluation adjustment where the SDB concerns would not otherwise have been
the successful offeror;
(D) Number of successful and unsuccessful SDB offerors; and
(E) Number of successful and unsuccessful non-SDB offerors.
(iv) A discussion of the pertinent
findings, including any peculiarities related to the industry, regions or demographics.
(v) A discussion of other efforts the
agency has undertaken to ensure equal
opportunity for SDBs in contracting
with the agency.
(2) After consultation with OFPP, or
if the agency does not receive a response from OFPP within 90 days after
notice is provided to OFPP, the contracting agency may limit the use of
the SDB mechanism in Subpart 19.11
until the Department of Commerce determines the updated price evaluation
adjustment, as required by this section. This limitation shall not apply to
solicitations that already have been
synopsized.
[48 FR 42240, Sept. 19, 1983, as amended at 50
FR 27562, July 3, 1985; 51 FR 27116, July 29,
1986; 54 FR 13333, Mar. 31, 1989; 54 FR 25062,
June 12, 1989; 60 FR 48260, Sept. 18, 1995; 62 FR
44820, Aug. 22, 1997; 63 FR 35721, June 30, 1998;
63 FR 36122, July 1, 1998; 63 FR 52427, Sept. 30,
1998; 63 FR 56738, Oct. 22, 1998; 63 FR 70268,
Dec. 18, 1998; 64 FR 72444, Dec. 27, 1999; 65 FR
46056, July 26, 2000; 65 FR 60544, Oct. 11, 2000]
19.202
Specific policies.
In order to further the policy in
19.201(a), contracting officers shall
comply with the specific policies listed
in this section and shall consider recommendations of the agency Director
of Small and Disadvantaged Business
Utilization, or the Director’s designee,
as to whether a particular acquisition
should be awarded under subpart 19.5,
19.8 or 19.13. The contracting officer
shall document the contract file whenever the Director’s recommendations
are not accepted.
[54 FR 25062, June 12, 1989, as amended at 60
FR 48260, Sept. 18, 1995; 63 FR 70268, Dec. 18,
1998]
19.202–1 Encouraging small business
participation in acquisitions.
Small business concerns shall be afforded an equitable opportunity to
compete for all contracts that they can
perform to the extent consistent with
the Government’s interest. When applicable, the contracting officer shall
take the following actions:
(a) Divide proposed acquisitions of
supplies and services (except construction) into reasonably small lots (not
less than economic production runs) to
permit offers on quantities less than
the total requirement.
(b) Plan acquisitions such that, if
practicable, more than one small business concern may perform the work, if
the work exceeds the amount for which
a surety may be guaranteed by SBA
against loss under 15 U.S.C. 694b.
(c) Ensure that delivery schedules are
established on a realistic basis that
will encourage small business participation to the extent consistent with
the actual requirements of the Government.
(d) Encourage prime contractors to
subcontract with small business concerns (see subpart 19.7).
(e)(1) Provide a copy of the proposed
acquisition package to the SBA procurement center representative at
least 30 days prior to the issuance of
the solicitation if—
(i) The proposed acquisition is for
supplies or services currently being
provided by a small business and the
proposed acquisition is of a quantity or
estimated dollar value, the magnitude
of which makes it unlikely that small
businesses can compete for the prime
contract;
(ii) The proposed acquisition is for
construction and seeks to package or
consolidate
discrete
construction
projects and the magnitude of this consolidation makes it unlikely that small
businesses can compete for the prime
contract; or
(iii) The proposed acquisition is for a
bundled requirement. (See 10.001(c)(2)(i)
for mandatory 30-day notice requirement to incumbent small business concerns.)
(2) The contracting officer also must
provide a statement explaining why
the—
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19.202–2
48 CFR Ch. 1 (10–1–03 Edition)
(i) Proposed acquisition cannot be divided into reasonably small lots (not
less than economic production runs) to
permit offers on quantities less than
the total requirement;
(ii) Delivery schedules cannot be established on a realistic basis that will
encourage small business participation
to the extent consistent with the actual requirements of the Government;
(iii) Proposed acquisition cannot be
structured so as to make it likely that
small businesses can compete for the
prime contract;
(iv)
Consolidated
construction
project cannot be acquired as separate
discrete projects; or
(v) Bundling is necessary and justified.
(3) The 30-day notification process
shall occur concurrently with other
processing steps required prior to the
issuance of the solicitation.
(4) If the contracting officer rejects
the SBA procurement center representative’s recommendation, made in accordance with 19.402(c)(2), the contracting officer shall document the
basis for the rejection and notify the
SBA procurement center representative in accordance with 19.505.
[48 FR 42240, Sept. 19, 1983, as amended at 56
FR 67132, Dec. 27, 1991; 57 FR 60581, Dec. 21,
1992; 64 FR 72444, Dec. 27, 1999; 65 FR 46055,
July 26, 2000]
19.202–2 Locating
small
business
sources.
The contracting officer must, to the
extent practicable, encourage maximum participation by small business,
veteran-owned small business, servicedisabled veteran-owned small business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns in acquisitions by taking the following actions:
(a) Before issuing solicitations, make
every reasonable effort to find additional small business concerns, unless
lists are already excessively long and
only some of the concerns on the list
will be solicited. This effort should include contacting the agency SBA procurement center representative, or if
there is none, the SBA.
(b) Publicize solicitations and contract awards through the Government-
wide point of entry (see subparts 5.2
and 5.3).
[48 FR 42240, Sept. 19, 1983, as amended at 63
FR 70268, Dec. 18, 1998; 65 FR 60544, Oct. 11,
2000; 66 FR 27413, May 16, 2001; 68 FR 43856,
July 24, 2003]
19.202–3 Equal low bids.
In the event of equal low bids (see
14.408–6), awards shall be made first to
small business concerns which are also
labor surplus area concerns, and second
to small business concerns which are
not also labor surplus area concerns.
[60 FR 48261, Sept. 18, 1995]
19.202–4 Solicitation.
The contracting officer must encourage maximum response to solicitations
by small business, veteran-owned small
business,
service-disabled
veteranowned small business, HUBZone small
business, small disadvantaged business,
and women-owned small business concerns by taking the following actions:
(a) Allow the maximum amount of
time practicable for the submission of
offers.
(b) Furnish specifications, plans, and
drawings with solicitations, or furnish
information as to where they may be
obtained or examined.
(c) Provide to any small business
concern, upon its request, a copy of bid
sets and specifications with respect to
any contract to be let, the name and
telephone number of an agency contact
to answer questions related to such
prospective contract and adequate citations to each major Federal law or
agency rule with which such business
concern must comply in performing
such contract other than laws or agency rules with which the small business
must comply when doing business with
other than the Government.
[48 FR 42240, Sept. 19, 1983, as amended at 63
FR 70268, Dec. 18, 1998; 65 FR 60544, Oct. 11,
2000; 68 FR 43856, July 24, 2003]
19.202–5 Data collection and reporting
requirements.
Agencies must measure the extent of
small business participation in their
acquisition programs by taking the following actions:
(a) Require each prospective contractor to represent whether it is a
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small business, veteran-owned small
business,
service-disabled
veteranowned small business, HUBZone small
business, small disadvantaged business,
or women-owned small business concern (see the provision at 52.219–1,
Small Business Program Representations).
(b) Accurately measure the extent of
participation by small business, veteran-owned small business, service-disabled veteran-owned small business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns in Government acquisitions in terms of the
total value of contracts placed during
each fiscal year, and report data to the
SBA at the end of each fiscal year (see
subpart 4.6).
[48 FR 42240, Sept. 19, 1983, as amended at 60
FR 48261, Sept. 18, 1995; 63 FR 70268, Dec. 18,
1998; 65 FR 60544, Oct. 11, 2000]
19.202–6 Determination of fair market
price.
(a) The fair market price shall be the
price achieved in accordance with the
reasonable price guidelines in 15.404–
1(b) for—
(1) Total and partial small business
set-asides (see subpart 19.5);
(2) HUBZone set-asides (see subpart
19.13);
(3) Contracts utilizing the price evaluation adjustment for small disadvantaged business concerns (see subpart
19.11); and
(4) Contracts utilizing the price evaluation preference for HUBZone small
business concerns (see subpart 19.13).
(b) For 8(a) contracts, both with respect to meeting the requirement at
19.806(b) and in order to accurately estimate the current fair market price,
contracting officers shall follow the
procedures at 19.807.
[52 FR 38189, Oct. 14, 1987, as amended at 53
FR 43390, Oct. 26, 1988; 54 FR 46005, Oct. 31,
1989; 62 FR 51270, Sept. 30, 1997; 63 FR 35722,
June 30, 1998; 63 FR 70268, Dec. 18, 1998]
Subpart 19.3—Determination of
Small Business Status for Small
Business Programs
19.301 Representation by the offeror.
(a) To be eligible for award as a small
business, an offeror must represent in
good faith that it is a small business at
the time of its written representation.
An offeror may represent that it is a
small business concern in connection
with a specific solicitation if it meets
the definition of a small business concern applicable to the solicitation and
has not been determined by the Small
Business Administration (SBA) to be
other than a small business.
(b) The contracting officer shall accept an offeror’s representation in a
specific bid or proposal that it is a
small business unless (1) another offeror or interested party challenges the
concern’s small business representation or (2) the contracting officer has a
reason to question the representation.
Challenges of and questions concerning
a specific representation shall be referred to the SBA in accordance with
19.302.
(c) An offeror’s representation that it
is a small business is not binding on
the SBA. If an offeror’s small business
status is challenged, the SBA will
evaluate the status of the concern and
make a determination, which will be
binding on the contracting officer, as
to whether the offeror is a small business. A concern cannot become eligible
for a specific award by taking action to
meet the definition of a small business
concern after the SBA has determined
that it is not a small business.
(d) If the SBA determines that the
status of a concern as a small business,
veteran-owned
small
business,
HUBZone small business, small disadvantaged business, or women-owned
small business has been misrepresented
in order to obtain a set-aside contract,
an 8(a) subcontract, a subcontract that
is to be included as part or all of a goal
contained in a subcontracting plan, or
a prime or subcontract to be awarded
as a result, or in furtherance of any
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19.302
48 CFR Ch. 1 (10–1–03 Edition)
other provision of Federal law that specifically references Section 8(d) of the
Small Business Act for a definition of
program eligibility, the SBA may take
action as specified in Section 16(d) of
the Act. If the SBA declines to take action, the agency may initiate the process. The SBA’s regulations on penalties
for misrepresentations and false statements are contained in 13 CFR 124.6.
[48 FR 42240, Sept. 19, 1983, as amended at 55
FR 3882, Feb. 5, 1990; 60 FR 48261, Sept. 18,
1995; 62 FR 236, Jan. 2, 1997; 63 FR 70268, Dec.
18, 1998; 65 FR 60545, Oct. 11, 2000]
19.302 Protesting a small business representation.
(a) An offeror, the SBA, or another
interested party may protest the small
business representation of an offeror in
a specific offer. However, for competitive 8(a) contracts, the filing of a protest is limited to an offeror, the contracting officer, or the SBA.
(b) Any time after offers are opened,
the contracting officer may question
the small business representation of
any offeror in a specific offer by filing
a contracting officer’s protest (see
paragraph (c) below).
(c)(1) Any contracting officer who receives a protest, whether timely or not,
or who, as the contracting officer,
wishes to protest the small business
representation of an offeror, shall
promptly forward the protest to the
SBA Government Contracting Area Office for the geographical area where
the principal office of the concern in
question is located.
(2) The protest, or confirmation if the
protest was initiated orally, shall be in
writing and shall contain the basis for
the protest with specific, detailed evidence to support the allegation that
the offeror is not small. The SBA will
dismiss any protest that does not contain specific grounds for the protest.
(d) In order to affect a specific solicitation, a protest must be timely. SBA’s
regulations on timeliness are contained
in 13 CFR 121.1004. SBA’s regulations
on timeliness related to protests of disadvantaged status are contained in 13
CFR 124, Subpart B.
(1) To be timely, a protest by any
concern or other interested party must
be received by the contracting officer
(see (i) and (ii) of this section by the
close of business of the 5th business
day after bid opening (in sealed bid acquisitions) or receipt of the special notification from the contracting officer
that identifies the apparently successful offeror (in negotiated acquisitions)
(see 15.503(a)(2)).
(i) A protest may be made orally if it
is confirmed in writing either within
the 5-day period or by letter postmarked no later than 1 business day
after the oral protest.
(ii) A protest may be made in writing
if it is delivered to the contracting officer by hand, telegram, or letter within
the 5-day period.
(2) A contracting officer’s protest is
always considered timely whether filed
before or after award.
(3) A protest under a Multiple Award
Schedule will be timely if received by
SBA at any time prior to the expiration of the contract period, including
renewals.
(e) Upon receipt of a protest from or
forwarded by the Contracting Office,
the SBA will—
(1) Notify the contracting officer and
the protester of the date it was received, and that the size of the concern
being challenged is under consideration
by the SBA; and
(2) Furnish to the concern whose representation is being protested a copy of
the protest and a blank SBA Form 355,
Application for Small Business Determination, by certified mail, return receipt requested.
(f) Within 3 business days after receiving a copy of the protest and the
form, the challenged offeror must file
with the SBA a completed SBA Form
355 and a statement answering the allegations in the protest, and furnish evidence to support its position. If the offeror does not submit the required material within the 3 business days or another period of time granted by the
SBA, the SBA may assume that the
disclosure would be contrary to the
offeror’s interests.
(g)(1) Within 10 business days after
receiving a protest, the challenged
offeror’s response, and other pertinent
information, the SBA will determine
the size status of the challenged concern and notify the contracting officer,
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Federal Acquisition Regulation
19.303
the protester, and the challenged offeror of its decision by certified mail, return receipt requested.
(2) The SBA Government Contracting
Area Director, or designee, will determine the small business status of the
questioned bidder or offeror and notify
the contracting officer and the bidder
or offeror of the determination. Award
may be made on the basis of that determination. This determination is final
unless it is appealed in accordance with
paragraph (i) of this section, and the
contracting officer is notified of the
appeal before award. If an award was
made before the time the contracting
officer received notice of the appeal,
the contract shall be presumed to be
valid.
(h)(1) After receiving a protest involving an offeror being considered for
award, the contracting officer shall not
award the contract until (i) the SBA
has made a size determination or (ii) 10
business days have expired since SBA’s
receipt of a protest, whichever occurs
first; however, award shall not be withheld when the contracting officer determines in writing that an award
must be made to protect the public interest.
(2) After the 10-day period has expired, the contracting officer may,
when practical, continue to withhold
award until the SBA’s determination is
received, unless further delay would be
disadvantageous to the Government.
(3) Whenever an award is made before
the receipt of SBA’s size determination, the contracting officer shall notify SBA that the award has been
made.
(4) If a protest is received that challenges the small business status of an
offeror not being considered for award,
the contracting officer is not required
to suspend contract action. The contracting officer shall forward the protest to the SBA (see paragraph (c)(1) of
this section) with a notation that the
concern is not being considered for
award, and shall notify the protester of
this action.
(i) An appeal from an SBA size determination may be filed by: any concern
or other interested party whose protest
of the small business representation of
another concern has been denied by an
SBA Government Contracting Area Di-
rector; any concern or other interested
party that has been adversely affected
by a Government Contracting Area Director’s decision; or the SBA Associate
Administrator for the SBA program involved. The appeal must be filed with
the—
Office of Hearings and Appeals, Small Business Administration, Suite 5900, 409 3rd
Street, SW., Washington, DC 20416
within the time limits and in strict accordance with the procedures contained in subpart C of 13 CFR Part 134.
It is within the discretion of the SBA
Judge whether to accept an appeal
from a size determination. If the Judge
decides not to consider such an appeal,
the Judge will issue an order denying
review and specifying the reasons for
the decision. The SBA will inform the
contracting officer of its ruling on the
appeal. The SBA decision, if received
before award, will apply to the pending
acquisition. SBA rulings received after
award shall not apply to that acquisition.
(j) A protest that is not timely, even
though received before award, shall be
forwarded to the SBA Government
Contracting Area Office (see paragraph
(c)(1) of this section), with a notation
on it that the protest is not timely.
The protester shall be notified that the
protest cannot be considered on the instant acquisition but has been referred
to SBA for its consideration in any future actions. A protest received by a
contracting officer after award of a
contract shall be forwarded to the SBA
Government Contracting Area Office
with a notation that award has been
made. The protester shall be notified
that the award has been made and that
the protest has been forwarded to SBA
for its consideration in future actions.
[48 FR 42240, Sept. 19, 1983, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 2664, Jan. 17, 1986; 60 FR 42656,
Aug. 16, 1995; 61 FR 69289, Dec. 31, 1996; 62 FR
44820, Aug. 22, 1997; 62 FR 51270, Sept. 30, 1997;
63 FR 9053, 9055, Feb. 23, 1998; 63 FR 35722,
June 30, 1998; 64 FR 32743, June 17, 1999; 67 FR
13054, Mar. 20, 2002]
19.303 Determining North American
Industry
Classification
System
(NAICS) codes and size standards.
(a) The contracting officer shall determine the appropriate NAICS code
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19.304
48 CFR Ch. 1 (10–1–03 Edition)
and related small business size standard and include them in solicitations
above the micro-purchase threshold.
(b) If different products or services
are required in the same solicitation,
the solicitation shall identify the appropriate small business size standard
for each product or service.
(c) The contracting officer’s determination is final unless appealed as
follows:
(1) An appeal from a contracting officer’s NAICS code designation and the
applicable size standard must be served
and filed within 10 calendar days after
the issuance of the initial solicitation.
SBA’s Office of Hearings and Appeals
(OHA) will dismiss summarily an untimely NAICS code appeal.
(2)(i) The appeal petition must be in
writing and must be addressed to the—
gument and evidence (see 13 CFR Part
134), and must be received by OHA
within 10 calendar days from the date
of the docketing notice and order, unless otherwise specified by the Administrative Judge. Upon receipt of OHA’s
docketing notice and order, the contracting officer must immediately send
to OHA a copy of the solicitation relating to the NAICS code appeal.
(5) After close of record, OHA will
issue a decision and inform the contracting officer. If OHA’s decision is received by the contracting officer before
the date the offers are due, the decision
shall be final and the solicitation must
be amended to reflect the decision, if
appropriate. OHA’s decision received
after the due date of the initial offers
shall not apply to the pending solicitation but shall apply to future solicitations of the same products or services.
Office of Hearings and Appeals, Small Busi
ness Administration, Suite 5900, 409 3rd
Street, SW., Washington, DC 20416
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 2664, Jan. 17, 1986; 55 FR 38516, Sept. 18,
1990; 55 FR 52791, Dec. 21, 1990; 60 FR 34756,
July 3, 1995; 61 FR 39198, July 26, 1996; 62 FR
236, Jan. 2, 1997; 63 FR 9056, Feb. 23, 1998; 65
FR 46056, 46057, July 26, 2000]
(ii) There is no required format for
the appeal; however, the appeal must
include—
(A) The solicitation or contract number and the name, address, and telephone number of the contracting officer;
(B) A full and specific statement as
to why the size determination or
NAICS code designation is allegedly erroneous and argument supporting the
allegation; and
(C) The name, address, telephone
number, and signature of the appellant
or its attorney.
(3) The appellant must serve the appeal petition upon—
(i) The SBA official who issued the
size determination;
(ii) The contracting officer who assigned the NAICS code to the acquisition;
(iii) The business concern whose size
status is at issue;
(iv) All persons who filed protests;
and
(v) SBA’s Office of General Counsel.
(4) Upon receipt of a NAICS code appeal, OHA will notify the contracting
officer by a notice and order of the date
OHA received the appeal, the docket
number, and Judge assigned to the
case. The contracting officer’s response
to the appeal, if any, must include ar-
19.304 Disadvantaged business status.
(a) To be eligible to receive a benefit
as a prime contractor based on its disadvantaged status, a concern, at the
time of its offer, must either be certified as a small disadvantaged business (SDB) concern or have a completed SDB application pending at the
SBA or a Private Certifier (see 19.001).
(b) The contracting officer may accept an offeror’s representation that it
is an SDB concern for general statistical purposes. The provision at 52.219–
1, Small Business Program Representations, or 52.212–3(c)(4), Offeror Representations and Certifications-Commercial Items, is used to collect SDB
data for general statistical purposes.
(c) The provision at 52.219–22, Small
Disadvantaged Business Status, or
52.212–3(c)(9), Offeror Representations
and Certifications—Commercial Items,
is used to obtain SDB status when the
prime contractor may receive a benefit
based on its disadvantaged status. The
mechanisms that may provide benefits
on the basis of disadvantaged status as
a prime contractor are a price evaluation adjustment for SDB concerns (see
Subpart 19.11), and an evaluation factor
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Federal Acquisition Regulation
19.305
or subfactor for SDB participation (see
19.1202).
(1) If the apparently successful offeror has represented that it is currently
certified as an SDB, the contracting officer may confirm that the concern is
identified as a small disadvantaged
business concern by accessing SBA’s
database (PRO-Net) or by contacting
the SBA’s Office of Small Disadvantaged Business Certification and Eligibility.
(2) If the apparently successful offeror has represented that its SDB application is pending at the SBA or a Private Certifier, and its position as the
apparently successful offeror is due to
the application of the price evaluation
adjustment, the contracting officer
shall follow the procedure in paragraph
(d) of this section.
(d) Notifications to SBA of potential
awards to offerors with pending SDB
applications. (1) The contracting officer shall notify the Small Business Administration Assistant Administrator
for SDBCE 409 Third Street, SW Washington, DC 20416. The notification shall
contain the name of the apparently
successful offeror, and the names of
any other offerors that have represented that their applications for
SDB status are pending at the SBA or
a Private Certifier and that could receive the award due to the application
of a price evaluation adjustment if the
apparently successful offeror is determined not to be an SDB by the SBA.
(2) The SBA will, within 15 calendar
days after receipt of the notification,
determine the disadvantaged status of
the apparently successful offeror and,
as appropriate, any other offerors referred by the contracting officer and
will notify the contracting officer.
(3) If the contracting officer does not
receive an SBA determination within
15 calendar days after the SBA’s receipt of the notification, the contracting officer shall presume that the
apparently successful offeror, and any
other offerors referred by the contracting officer, are not disadvantaged,
and shall make award accordingly, unless the contracting officer grants an
extension to the 15-day response period. No written determination is required for the contracting officer to
make award at any point following the
expiration of the 15-day response period.
(4) When the contracting officer
makes a written determination that
award must be made to protect the
public interest, the contracting officer
may proceed to contract award without
notifying SBA or before receiving a determination of SDB status from SBA
during the 15-day response period. In
both cases, the contracting officer
shall presume that the apparently successful offeror, or any other offeror referred to the SBA whose SDB application is pending, is not an SDB and shall
make award accordingly.
[63 FR 35722, June 30, 1998, as amended at 63
FR 36122, July 1, 1998; 64 FR 36223, July 2,
1999; 65 FR 60545, Oct. 11, 2000]
19.305 Protesting a representation of
disadvantaged business status.
(a) This section applies to protests of
a small business concern’s disadvantaged status as a prime contractor.
Protests of a small business concern’s
disadvantaged status as a subcontractor are processed under 19.703(a)(2).
Protests of a concern’s size as a prime
contractor are processed under 19.302.
Protests of a concern’s size as a subcontractor
are
processed
under
19.703(b). An offeror, the contracting officer, or the SBA may protest the apparently successful offeror’s representation of disadvantaged status if the
concern is eligible to receive a benefit
based on its disadvantaged status (see
Subpart 19.11 and 19.1202).
(b) An offeror, excluding an offeror
determined by the contracting officer
to be non-responsive or outside the
competitive range, or an offeror that
SBA has previously found to be ineligible for the requirement at issue, may
protest the apparently successful
offeror’s representation of disadvantaged status by filing a protest in writing with the contracting officer. SBA
regulations concerning protests are
contained in 13 CFR 124, Subpart B.
The protest—
(1) Must be filed within the times
specified in 19.302(d)(1); and
(2) Must contain specific facts or allegations supporting the basis of protest.
(c) The contracting officer or the
SBA may protest in writing a concern’s
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19.306
48 CFR Ch. 1 (10–1–03 Edition)
representation of disadvantaged status
at any time following bid opening or
notification of intended award.
(1) If a contracting officer’s protest is
based on information provided by a
party ineligible to protest directly or
ineligible to protest under the timeliness standard, the contracting officer
must be persuaded by the evidence presented before adopting the grounds for
protest as his or her own.
(2) The SBA may protest a concern’s
representation of disadvantaged status
by filing directly with its Assistant Administrator for Small Disadvantaged
Business Certification and Eligibility
and notifying the contracting officer.
(d) The contracting officer shall return premature protests to the
protestor. A protest is considered to be
premature if it is submitted before bid
opening or notification of intended
award. SBA normally will not consider
a postaward protest. SBA may consider
a postaward protest in its discretion
where it determines that an SDB determination after award is meaningful
(e.g., where the contracting officer
agrees to terminate the contract if the
protest is sustained).
(e) Upon receipt of a protest that is
not premature, the contracting officer
shall withhold award and forward the
protest to Small Business Administration, Assistant Administrator for
SDBCE, 409 Third Street, SW, Washington, DC 20416. The contracting officer shall send to SBA—
(1) The written protest and any accompanying materials;
(2) The date the protest was received;
(3) A copy of the protested concern’s
representation as a small disadvantaged business, and the date of such
representation; and
(4) The date of bid opening or date on
which notification of the apparently
successful offeror was sent to unsuccessful offerors.
(f) When the contracting officer
makes a written determination that
award must be made to protect the
public interest, award may be made
notwithstanding the protest.
(g) The SBA Assistant Administrator
for Small Disadvantaged Business Certification and Eligibility will notify
the protestor and the contracting officer of the date the protest was received
and whether it will be processed or dismissed for lack of timeliness or specificity. For protests that are not dismissed, the SBA will, within 15 working days after receipt of the protest,
determine the disadvantaged status of
the challenged offeror and will notify
the contracting officer, the challenged
offeror, and the protestor. Award may
be made on the basis of that determination. The determination is final
for purposes of the instant acquisition,
unless it is appealed and—
(1) The contracting officer receives
the SBA’s decision on the appeal before
award; or
(2) The contracting officer has agreed
to terminate the contract, as appropriate, based on the outcome of the appeal (see 13 CFR 124, Subpart B).
(h) If the contracting officer does not
receive an SBA determination within
15 working days after the SBA’s receipt
of the protest, the contracting officer
shall presume that the challenged offeror is disadvantaged and may award
the contract, unless the SBA requests
and the contracting officer grants an
extension to the 15-day response period.
(i) An SBA determination may be appealed by—
(1) The party whose protest has been
denied;
(2) The concern whose status was protested; or
(3) The contracting officer.
(j) The appeal must be filed with the
SBA’s Administrator or designee within five working days after receipt of
the determination. If the contracting
officer receives the SBA’s decision on
the appeal before award, the decision
shall apply to the instant acquisition.
If the decision is received after award,
it will not apply to the instant acquisition (but see paragraph (g)(2) of this
section).
[63 FR 35722, June 30, 1998, as amended at 63
FR 36122, July 1, 1998]
19.306 Protesting a firm’s status as a
HUBZone small business concern.
(a) For sole source acquisitions, the
SBA or the contracting officer may
protest the apparently successful
offeror’s HUBZone small business status. For all other acquisitions, an offeror, the contracting officer, or the
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Federal Acquisition Regulation
19.306
SBA may protest the apparently successful offeror’s HUBZone small business concern status.
(b) Protests relating to whether a
HUBZone small business concern is a
small business for purposes of any Federal program are subject to the procedures of subpart 19.3. Protests relating
to small business size status for the acquisition and the HUBZone qualifying
requirements will be processed concurrently by SBA.
(c) All protests must be in writing
and must state all specific grounds for
the protest. Assertions that a protested
concern is not a qualified HUBZone
small business concern, without setting forth specific facts or allegations,
are insufficient. An offeror must submit its protest to the contracting officer. The contracting officer and the
SBA must submit protests to SBA’s Associate Administrator for the HUBZone
Program (AA/HUB).
(d) An offeror’s protest must be received by close of business on the fifth
business day after bid opening (in
sealed bid acquisitions) or by close of
business on the fifth business day after
notification by the contracting officer
of the apparently successful offeror (in
negotiated acquisitions). Any protest
received after these time limits is untimely. Any protest received prior to
bid opening or notification of intended
award, whichever applies, is premature
and shall be returned to the protester.
(e) Except for premature protests,
the contracting officer must forward
any protest received, notwithstanding
whether the contracting officer believes that the protest is insufficiently
specific or untimely, to: AA/HUB, U.S.
Small Business Administration, 409 3rd
Street, SW, Washington, DC 20416. The
AA/HUB will notify the protester and
the contracting officer of the date the
protest was received and whether the
protest will be processed or dismissed
for lack of timeliness or specificity.
(f) SBA will determine the HUBZone
status of the protested HUBZone small
business concern within 15 business
days after receipt of a protest. If SBA
does not contact the contracting officer within 15 business days, the contracting officer may award the contract to the apparently successful offeror, unless the contracting officer has
granted SBA an extension. The contracting officer may award the contract after receipt of a protest if the
contracting officer determines in writing that an award must be made to protect the public interest.
(g) SBA will notify the contracting
officer, the protester, and the protested
concern of its determination. The determination is effective immediately
and is final unless overturned on appeal by SBA’s Associate Deputy Administrator for Government Contracting and 8(a) Business Development
(ADA/GC&8(a)BD).
(h) The protested HUBZone small
business concern, the protester, or the
contracting officer may file appeals of
protest determinations with SBA’s
ADA/GC&8(a)BD. The ADA/GC&8(a)BD
must receive the appeal no later than 5
business days after the date of receipt
of the protest determination. SBA will
dismiss any appeal received after the 5day period.
(i) The appeal must be in writing.
The appeal must identify the protest
determination being appealed and must
set forth a full and specific statement
as to why the decision is erroneous or
what significant fact the AA/HUB
failed to consider.
(j) The party appealing the decision
must provide notice of the appeal to
the contracting officer and either the
protested HUBZone small business concern or the original protester, as appropriate. SBA will not consider additional information or changed circumstances that were not disclosed at
the time of the AA/HUB’s decision or
that are based on disagreement with
the findings and conclusions contained
in the determination.
(k) The ADA/GC&8(a)BD will make
its decision within 5 business days of
the receipt of the appeal, if practicable,
and will base its decision only on the
information and documentation in the
protest record as supplemented by the
appeal. SBA will provide a copy of the
decision to the contracting officer, the
protester, and the protested HUBZone
small business concern. The SBA decision, if received before award, will
apply to the pending acquisition. SBA
rulings received after award will not
apply to that acquisition. The ADA/
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19.307
48 CFR Ch. 1 (10–1–03 Edition)
GC&8(a)BD’s decision is the final decision.
[63 FR 70269, Dec. 18, 1998, as amended at 64
FR 51831, Sept. 24, 1999]
19.307
Solicitation provisions.
(a)(1) Insert the provision at 52.219–1,
Small Business Program Representations, in solicitations exceeding the
micro-purchase threshold when the
contract will be performed in the
United States or its outlying areas.
(2) Use the provision with its Alternate I in solicitations issued by DoD,
NASA, or the Coast Guard that the
contracting officer expects will exceed
the threshold at 4.601(a).
(b) Insert the provision at 52.219–22,
Small Disadvantaged Business Status,
in solicitations that include the clause
at 52.219–23, Notice of Price Evaluation
Adjustment for Small Disadvantaged
Business Concerns, or 52.219–25, Small
Disadvantaged Business Participation
Program—Disadvantaged Status and
Reporting. Use the provision with its
Alternate I in solicitations for acquisitions for which a price evaluation adjustment for small disadvantaged business concerns is authorized on a regional basis.
(c) When contracting by sealed bidding, insert the provision at 52.219–2,
Equal Low Bids, in solicitations when
the contract will be performed in the
United States or its outlying areas.
[64 FR 51832, Sept. 24, 1999, as amended at 67
FR 13066, Mar. 20, 2002; 68 FR 28081, May 22,
2003]
Subpart 19.4—Cooperation With
the Small Business Administration
19.401
General.
(a) The Small Business Act is the authority under which the Small Business Administration (SBA) and agencies consult and cooperate with each
other in formulating policies to ensure
that small business interests will be
recognized and protected.
(b) The Director of Small and Disadvantaged Business Utilization serves
as the agency focal point for interfacing with SBA.
[48 FR 42240, Sept. 19, 1983, as amended at 60
FR 48261, Sept. 18, 1995]
19.402 Small Business Administration
procurement center representatives.
(a) The SBA may assign one or more
procurement center representatives to
any contracting activity or contract
administration office to carry out SBA
policies and programs. Assigned SBA
procurement center representatives are
required to comply with the contracting agency’s directives governing
the conduct of contracting personnel
and the release of contract information. The SBA must obtain for its procurement center representatives security clearances required by the contracting agency.
(b) Upon their request and subject to
applicable acquisition and security regulations, contracting officers shall give
SBA procurement center representatives access to all reasonably obtainable contract information that is directly pertinent to their official duties.
(c) The duties assigned by SBA to its
procurement center representatives include the following:
(1) Reviewing proposed acquisitions
to recommend—
(i) The setting aside of selected acquisitions not unilaterally set aside by
the contracting officer.
(ii) New qualified small, veteranowned small , service-disabled veteranowned small, HUBZone small, small
disadvantaged,
and
women-owned
small business sources, and
(iii) Breakout of components for
competitive acquisitions.
(2) Reviewing proposed acquisition
packages provided in accordance with
19.202–1(e). If the SBA procurement
center representative believes that the
acquisition, as proposed, makes it unlikely that small businesses can compete for the prime contract, the representative shall recommend any alternate contracting method that the representative reasonably believes will increase small business prime contracting
opportunities.
The
recommendation shall be made to the contracting officer within 15 days after receipt of the package.
(3) Recommending concerns for inclusion on a list of concerns to be solicited
in a specific acquisition.
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Federal Acquisition Regulation
19.403
(4) Appealing to the chief of the contracting office any contracting officer’s determination not to solicit a
concern recommended by the SBA for a
particular acquisition, when not doing
so results in no small business being
solicited.
(5) Conducting periodic reviews of the
contracting activity to which assigned
to ascertain whether it is complying
with the small business policies in this
regulation.
(6) Sponsoring and participating in
conferences and training designed to
increase small business participation
in the contracting activities of the office.
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 19715, May 30, 1986; 56 FR 67132, Dec. 27,
1991; 60 FR 48261, Sept. 18, 1995; 63 FR 70269,
Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000; 68 FR
43856, July 24, 2003]
19.403 Small Business Administration
breakout procurement center representatives.
(a) The SBA is required by section 403
of Pub. L. 98–577 to assign a breakout
procurement center representative to
each major procurement center. A
major procurement center means a procurement center that, in the opinion of
the administrator, purchases substantial dollar amounts of other than commercial items, and which has the potential to incur significant savings as a
result of the placement of a breakout
procurement representative. The SBA
breakout procurement center representative is an advocate for (1) the
appropriate use of full and open competition, and (2) the breakout of items,
when appropriate and while maintaining the integrity of the system in
which such items are used. The SBA
breakout procurement center representative is in addition to the SBA
procurement center representative (see
19.402). When an SBA breakout procurement center representative is assigned,
the SBA is required to assign at least
two collocated small business technical
advisors. Assigned SBA breakout procurement center representatives and
technical advisors are required to comply with the contracting agency’s directives governing the conduct of contracting personnel and the release of
contract information. The SBA must
obtain for its breakout procurement
center representatives and technical
advisors security clearances required
by the contracting agency.
(b) Contracting officers shall comply
with 19.402(b) in their relationships
with SBA breakout procurement center
representatives and SBA small business technical advisors.
(c) The SBA breakout procurement
center representative is authorized to—
(1) Attend any provisioning conference or similar evaluation session
during which determinations are made
as to whether requirements are to be
acquired using other than full and open
competition and make recommendations with respect to such requirements to the members of such conference or session;
(2) Review, at any time, restrictions
on competition previously imposed on
items through acquisition method coding or similar procedures and recommend to personnel of the appropriate activity the prompt reevaluation of such limitations;
(3) Review restrictions on competition arising out of restrictions on the
rights of the United States in technical
data and, when appropriate, recommend that personnel of the appropriate activity initiate a review of the
validity of such an asserted restriction;
(4) Obtain from any governmental
source, and make available to personnel of the appropriate center, technical data necessary for the preparation of a competitive solicitation package for any item of supply or service
previously acquired noncompetitively
due to the unavailability of such technical data;
(5) Have access to procurement
records and other data of the procurement center commensurate with the
level of such representative’s approved
security clearance classification;
(6) Receive unsolicited engineering
proposals and, when appropriate—
(i) Conduct a value analysis of such
proposal to determine whether it, if
adopted, will result in lower costs to
the United States without substantially impeding legitimate acquisition
objectives and forward to personnel of
the appropriate center recommendations with respect to such proposal; or
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19.501
48 CFR Ch. 1 (10–1–03 Edition)
(ii) Forward such proposals without
analysis to personnel of the center responsible for reviewing them who shall
furnish the breakout procurement center representative with information regarding the proposal’s disposition;
(7) Review the systems that account
for the acquisition and management of
technical data within the procurement
center to ensure that such systems provide the maximum availability and access to data needed for the preparation
of offers to sell to the United States
those supplies to which such data pertain which potential offerors are entitled to receive;
(8) Appeal the failure by the procurement center to act favorably on any
recommendation made pursuant to
subparagraphs (c) (1) through (7) of this
section. Such appeal must be in writing
and shall be filed and processed in accordance with the appeal procedures
set out in 19.505;
(9) Conduct familiarization sessions
for contracting officers and other appropriate personnel of the procurement
center to which assigned. Such sessions
shall acquaint the participants with
the duties and objectives of the representative and shall instruct them in
the methods designed to further the
breakout of items for procurement
through full and open competition; and
(10) Prepare and personally deliver an
annual briefing and report to the head
of the procurement center to which assigned. Such briefing and report shall
detail the past and planned activities
of the representative and shall contain
recommendations for improvement in
the operation of the center as may be
appropriate. The head of such center
shall personally receive the briefing
and report and shall, within 60 calendar
days after receipt, respond, in writing,
to each recommendation made by the
representative.
(d) The duties of the SBA small business technical advisors are to assist
the SBA breakout procurement center
representative in carrying out the activities described in (c) (1) through (7)
of this section and to assist the SBA
procurement center representatives
(see FAR 19.402).
[51 FR 19715, May 30, 1986, as amended at 54
FR 25062, June 12, 1989]
Subpart 19.5—Set-Asides for Small
Business
19.501 General.
(a) The purpose of small business setasides is to award certain acquisitions
exclusively to small business concerns.
A ‘‘set-aside for small business’’ is the
reserving of an acquisition exclusively
for participation by small business concerns. A small business set-aside may
be open to all small businesses. A small
business set-aside of a single acquisition or a class of acquisitions may be
total or partial.
(b) The determination to make a
small business set-aside may be unilateral or joint. A unilateral determination is one that is made by the contracting officer. A joint determination
is one that is recommended by the
Small Business Administration (SBA)
procurement center representative and
concurred in by the contracting officer.
(c) For acquisitions exceeding the
simplified acquisition threshold, the
requirement to set aside an acquisition
for HUBZone small business concerns
(see 19.1305) takes priority over the requirement to set aside the acquisition
for small business concerns.
(d) The contracting officer shall review acquisitions to determine if they
can be set aside for small business, giving consideration to the recommendations of agency personnel having cognizance of the agency’s small business
programs. The contracting officer shall
document why a small business setaside is inappropriate when an acquisition is not set aside for small business,
unless a HUBZone small business setaside or HUBZone small business sole
source award is anticipated. If the acquisition is set aside for small business
based on this review, it is a unilateral
set-aside by the contracting officer.
Agencies may establish threshold levels for this review depending upon their
needs.
(e) At the request of an SBA procurement center representative, the contracting officer shall make available
for review at the contracting office (to
the extent of the SBA representative’s
security clearance) all proposed acquisitions in excess of the micro-purchase
threshold that have not been unilaterally set aside for small business.
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(f) To the extent practicable, unilateral determinations initiated by a contracting officer shall be used as the
basis for small business set-asides rather than joint determinations by an
SBA procurement center representative and a contracting officer.
(g) All solicitations involving setasides must specify the applicable
small business size standard and
NAICS code (see 19.303).
(h) Except as authorized by law, a
contract may not be awarded as a result of a small business set-aside if the
cost to the awarding agency exceeds
the fair market price.
[48 FR 42240, Sept. 19, 1983]
EDITORIAL NOTE: For FEDERAL REGISTER citations affecting section 19.501, see the List
of CFR Sections Affected which appears in
the Finding Aids section of the printed volume and on GPO Access.
19.502
Setting aside acquisitions.
19.502–1 Requirements
for
setting
aside acquisitions.
(a) The contracting officer shall set
aside an individual acquisition or class
of acquisitions for competition among
small businesses when—
(1) It is determined to be in the interest of maintaining or mobilizing the
Nations full productive capacity, war
or national defense programs; or
(2) Assuring that a fair proportion of
Government contracts in each industry
category is placed with small business
concerns; and the circumstances described in 19.502–2 or 19.502–3(a) exist.
(b) This requirement does not apply
to purchases of $2,500 or less ($7,500 or
less for acquisitions as described in
13.201(g)(1)(i) or $15,000 or less for acquisitions as described in 13.201(g)(1)(ii)),
or purchases from required sources of
supply under Part 8 (e.g., Federal Prison Industries, Committee for Purchase
From People Who are Blind or Severely
Disabled, and Federal Supply Schedule
contracts).
[63 FR 70270, Dec. 18, 1998, as amended at 67
FR 56121, Aug. 30, 2002; 68 FR 4050, Jan. 27,
2003]
19.502–2 Total small business setasides.
(a) Except for those acquisitions set
aside for very small business concerns
(see subpart 19.9), each acquisition of
supplies or services that has an anticipated dollar value exceeding $2,500
($7,500 for acquisitions as described in
13.201(g)(1)(i) or $15,000 for acquisitions
as described in 13.201(g)(1)(ii)), but not
over $100,000 ($200,000 for acquisitions
described in paragraph (2)(i) of the
Simplified Acquisition Threshold definition at 2.101), is automatically reserved exclusively for small business
concerns and shall be set aside for
small business unless the contracting
officer determines there is not a reasonable expectation of obtaining offers
from two or more responsible small
business concerns that are competitive
in terms of market prices, quality, and
delivery. If the contracting officer does
not proceed with the small business
set-aside and purchases on an unrestricted basis, the contracting officer
shall include in the contract file the
reason for this unrestricted purchase.
If the contracting officer receives only
one acceptable offer from a responsible
small business concern in response to a
set-aside,
the
contracting
officer
should make an award to that firm. If
the contracting officer receives no acceptable offers from responsible small
business concerns, the set-aside shall
be withdrawn and the requirement, if
still valid, shall be resolicited on an
unrestricted basis. The small business
reservation does not preclude the
award of a contract with a value not
greater than $100,000 under Subpart
19.8, Contracting with the Small Business Administration, under 19.1007(c),
Solicitations equal to or less than the
ESB reserve amount, or under 19.1305,
HUBZone set-aside procedures.
(b) The contracting officer shall set
aside any acquisition over $100,000 for
small business participation when
there is a reasonable expectation that
(1) offers will be obtained from at least
two responsible small business concerns offering the products of different
small business concerns (but see paragraph (c) of this subsection); and (2)
award will be made at fair market
prices. Total small business set-asides
shall not be made unless such a reasonable expectation exists (but see 19.502–
3 as to partial set-asides). Although
past acquisition history of an item or
similar items is always important, it is
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19.502–3
48 CFR Ch. 1 (10–1–03 Edition)
not the only factor to be considered in
determining whether a reasonable expectation exists. In making R&D small
business set-asides, there must also be
a reasonable expectation of obtaining
from small businesses the best scientific and technological sources consistent with the demands of the proposed acquisition for the best mix of
cost, performances, and schedules.
(c) For small business set-asides
other than for construction or services,
any concern proposing to furnish a
product that it did not itself manufacture must furnish the product of a
small business manufacturer unless the
SBA has granted either a waiver or exception to the nonmanufacturer rule
(see 19.102(f)). In industries where the
SBA finds that there are no small business manufacturers, it may issue a
waiver to the nonmanufacturer rule
(see 19.102(f) (4) and (5)). In addition,
SBA has excepted procurements processed under simplified acquisition procedures (see part 13), where the anticipated cost of the procurement will not
exceed $25,000, from the nonmanufacturer rule. Waivers permit small businesses to provide any firm’s product.
The exception permits small businesses
to provide any domestic firm’s product.
In both of these cases, the contracting
officer’s determination in paragraph
(b)(1) of this subsection or the decision
not to set aside a procurement reserved
for small business under paragraph (a)
of this subsection will be based on the
expectation of receiving offers from at
least two responsible small businesses,
including nonmanufacturers, offering
the products of different concerns.
(d) The requirements of this subsection do not apply to acquisitions
over $25,000 during the period when
small business set-asides cannot be
considered for the four designated industry groups (see 19.1007(b)).
[60 FR 34757, July 3, 1995, as amended at 61
FR 39209, July 26, 1996; 63 FR 70270, Dec. 18,
1998; 64 FR 10536, Mar. 4, 1999; 65 FR 16275,
Mar. 27, 2000; 67 FR 56121, Aug. 30, 2002; 67 FR
70522, Nov. 22, 2002; 68 FR 4050, Jan. 27, 2003]
19.502–3 Partial set-asides.
(a) The contracting officer shall set
aside a portion of an acquisition, except for construction, for exclusive
small business participation when—
(1) A total set-aside is not appropriate (see 19.502–2);
(2) The requirement is severable into
two or more economic production runs
or reasonable lots;
(3) One or more small business concerns are expected to have the technical competence and productive capacity to satisfy the set-aside portion
of the requirement at a fair market
price;
(4) The acquisition is not subject to
simplified acquisition procedures; and
(5) A partial set-aside shall not be
made if there is a reasonable expectation that only two concerns (one large
and one small) with capability will respond with offers unless authorized by
the head of a contracting activity on a
case-by-case basis. Similarly, a class of
acquisitions, not including construction, may be partially set aside. Under
certain specified conditions, partial
set-asides may be used in conjunction
with multiyear contracting procedures.
(b) When the contracting officer determines that a portion of an acquisition is to be set aside, the requirement
shall be divided into a set-aside portion
and a non-set-aside portion, each of
which shall (1) be an economic production run or reasonable lot and (2) have
terms and a delivery schedule comparable to the other. When practicable,
the set-aside portion should make maximum use of small business capacity.
(c)(1) The contracting officer shall
award the non-set-aside portion using
normal contracting procedures.
(2)(i) After all awards have been
made on the non-set-aside portion, the
contracting officer shall negotiate with
eligible concerns on the set-aside portion, as provided in the solicitation,
and make award. Negotiations shall be
conducted only with those offerors who
have submitted responsive offers on the
non-set-aside
portion.
Negotations
shall be conducted with small business
concerns in the order of priority as indicated in the solicitation (but see (ii)
below). The set-aside portion shall be
awarded as provided in the solicitation.
An offeror entitled to receive the
award for quantities of an item under
the non-set-aside portion and who accepts the award of additional quantities under the set-aside portion shall
not be requested to accept a lower
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19.503
price because of the increased quantities of the award, nor shall negotiation be conducted with a view to obtaining such a lower price based solely
upon receipt of award of both portions
of the acquisition. This does not prevent acceptance by the contracting officer of voluntary reductions in the
price from the low eligible offeror before award, acceptance of voluntary refunds, or the change of prices after
award by negotiation of a contract
modification.
(ii) If equal low offers are received on
the non-set-aside portion from concerns eligible for the set-aside portion,
the concern that is awarded the nonset-aside part of the acquisition shall
have first priority with respect to negotiations for the set-aside.
[48 FR 42240, Sept. 19, 1989, as amended at 53
FR 43390, Oct. 26, 1988; 60 FR 34757, July 3,
1995]
19.502–4 Methods of conducting setasides.
(a) Total small business set-asides
may be conducted by using simplified
acquisition procedures (see part 13),
sealed bids (see part 14), or competitive
proposals (see part 15). Partial small
business set-asides may be conducted
using sealed bids (see part 14), or competitive proposals (see part 15).
(b) Except for offers on the non-setaside portion of partial set-asides, offers received from concerns that do not
qualify as small business concerns
shall be considered nonresponsive and
shall be rejected. However, before rejecting an offer otherwise eligible for
award because of questions concerning
the size representation, an SBA determination must be obtained (see subpart
19.3).
[50 FR 1743, Jan. 11, 1985, and 50 FR 52429,
Dec. 23, 1985, as amended at 59 FR 67037, Dec.
28, 1994; 60 FR 34757, July 3, 1995; 63 FR 70270,
Dec. 18, 1998]
19.502–5 Insufficient causes for not
setting aside an acquisition.
None of the following is, in itself, sufficient cause for not setting aside an
acquisition:
(a) A large percentage of previous
contracts for the required item(s) has
been placed with small business concerns.
(b) The item is on an established
planning list under the Industrial
Readiness Planning Program. However,
a total small business set-aside shall
not be made when the list contains a
large business Planned Emergency Producer of the item(s) who has conveyed
a desire to supply some or all of the required items.
(c) The item is on a Qualified Products List. However, a total small business set-aside shall not be made if the
list contains the products of large business unless none of the large businesses
desires to participate in the acquisition.
(d) A period of less than 30 days is
available for receipt of offers.
(e) The acquisition is classified.
(f) Small business concerns are already receiving a fair proportion of the
agency’s contracts for supplies and
services.
(g) A class small business set-aside of
the item or service has been made by
another contracting activity.
(h) A ‘‘brand name or equal’’ product
description will be used in the solicitation.
[48 FR 42240, Sept. 19, 1989, as amended at 63
FR 70270, 70292, Dec. 18, 1998]
19.503 Setting aside a class of acquisitions for small business.
(a) A class of acquisitions of selected
products or services, or a portion of the
acquisitions, may be set aside for exclusive participation by small business
concerns if individual acquisitions in
the class will meet the criteria in
19.502–1, 19.502–2, or 19.502–3(a). The determination to make a class small
business set-aside shall not depend on
the existence of a current acquisition if
future acquisitions can be clearly foreseen.
(b) The determination to set aside a
class of acquisitions for small business
may be either unilateral or joint.
(c) Each class small business setaside determination shall be in writing
and must—
(1) Specifically identify the product(s) and service(s) it covers;
(2) Provide that the set-aside does
not apply to any acquisition automatically reserved for small business concerns under 19.502–2(a).
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19.504
48 CFR Ch. 1 (10–1–03 Edition)
(3) Provide that the set-aside applies
only to the (named) contracting office(s) making the determination; and
(4) Provide that the set-aside does
not apply to any individual acquisition
if the requirement is not severable into
two or more economic production runs
or reasonable lots, in the case of a partial class set-aside.
(d) The contracting officer shall review each individual acquisition arising under a class small business setaside to identify any changes in the
magnitude of requirements, specifications, delivery requirements, or competitive market conditions that have
occurred since the initial approval of
the class small business set-aside. If
there are any changes of such a material nature as to result in probable payment of more than a fair market price
by the Government or in a change in
the capability of small business concerns to satisfy the requirements, the
contracting officer may withdraw or
modify (see 19.506(a)) the unilateral or
joint set-aside by giving written notice
to the SBA procurement center representative (if one is assigned), stating
the reasons.
[48 FR 42240, Sept. 19, 1989, as amended at 53
FR 43390, Oct. 26, 1988; 60 FR 34757, July 3,
1995; 63 FR 70270, Dec. 18, 1998]
19.504
[Reserved]
19.505 Rejecting Small Business Administration recommendations.
(a) If the contracting officer rejects a
recommendation of the SBA procurement center representative or breakout
procurement center representative,
written notice shall be furnished to the
appropriate SBA center representative
within 5 working days of the contracting officer’s receipt of the recommendation.
(b) The SBA procurement center representative may appeal the contracting
officer’s rejection to the head of the
contracting activity (or designee) within 2 working days after receiving the
notice. The head of the contracting activity (or designee) shall render a decision in writing, and provide it to the
SBA representative within 7 working
days. Pending issuance of a decision to
the SBA procurement center represent-
ative, the contracting officer shall suspend action on the acquisition.
(c) If the head of the contracting activity agrees that the contracting officer’s rejection was appropriate—
(1) Within 1 working day, the SBA
procurement
center
representative
may request the contracting officer to
suspend action on the acquisition until
the SBA Administrator appeals to the
agency head (see paragraph (f) of this
section); and
(2) The SBA must be allowed 15 working days after making such a written
request, within which the Administrator of SBA—
(i) May appeal to the Secretary of the
Department concerned; and
(ii) Must notify the contracting officer whether the further appeal has, in
fact, been taken. If notification is not
received by the contracting officer
within the 15-day period, it is deemed
that the SBA request to suspend the
contract action has been withdrawn
and that an appeal to the Secretary
was not taken.
(d) When the contracting officer has
been notified within the 15-day period
that the SBA has appealed to the agency head, the head of the contracting
activity (or designee) shall forward justification for its decision to the agency
head. The contracting officer shall suspend contract action until notification
is received that the SBA appeal has
been settled.
(e) The agency head shall reply to the
SBA within 30 working days after receiving the appeal. The decision of the
agency head shall be final.
(f) A request to suspend action on an
acquisition need not be honored if the
contracting officer determines that
proceeding to contract award and performance is in the public interest. The
contracting officer shall include in the
contract file a statement of the facts
justifying the determination, and shall
promptly notify the SBA representative of the determination and provide a
copy of the justification.
[60 FR 48261, Sept. 18, 1995, as amended at 67
FR 13054, Mar. 20, 2002]
19.506 Withdrawing
or
modifying
small business set-asides.
(a) If, before award of a contract involving a small business set-aside, the
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contracting officer considers that
award would be detrimental to the public interest (e.g., payment of more than
a fair market price), the contracting
officer may withdraw the small business set-aside determination whether it
was unilateral or joint. The contracting officer shall initiate a withdrawal of an individual small business
set-aside by giving written notice to
the agency small business specialist
and the SBA procurement center representative, if one is assigned, stating
the reasons. In a similar manner, the
contracting officer may modify a unilateral or joint class small business
set-aside to withdraw one or more individual acquisitions.
(b) If the agency small business specialist does not agree to a withdrawal
or modification, the case shall be
promptly referred to the SBA representative (if one is assigned) for review. If an SBA representative is not
assigned, disagreements between the
agency small business specialist and
the contracting officer shall be resolved using agency procedures. However, the procedures are not applicable
to automatic dissolutions of small
business set-asides (see 19.507) or dissolution of small business set-asides
under $100,000.
(c) The contracting officer shall prepare a written statement supporting
any withdrawal or modification of a
small business set-aside and include it
in the contract file.
[60 FR 48262, Sept. 18, 1995, as amended at 63
FR 70270, Dec. 18, 1998]
19.507 Automatic dissolution of a
small business set-aside.
(a) If a small business set-aside acquisition or portion of an acquisition is
not awarded, the unilateral or joint determination to set the acquisition
aside is automatically dissolved for the
unawarded portion of the set-aside. The
required supplies and/or services for
which no award was made may be acquired by sealed bidding or negotiation, as appropriate.
(b) Before issuing a solicitation for
the items called for in a small business
set-aside that was dissolved, the contracting officer shall ensure that the
delivery schedule is realistic in the
light of all relevant factors, including
the capabilities of small business concerns.
[48 FR 42240, Sept. 19, 1983, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 63 FR 70270, Dec. 18, 1998]
19.508 Solicitation provisions and contract clauses.
(a)-(b) [Reserved]
(c) The contracting officer shall insert the clause at 52.219–6, Notice of
Total Small Business Set-Aside, in solicitations and contracts involving
total small business set-asides. The
clause at 52.219–6 with its Alternate I
will be used when the acquisition is for
a product in a class for which the
Small Business Administration has
waived the nonmanufacturer rule (see
19.102(f) (4) and (5)).
(d) The contracting officer shall insert the clause at 52.219–7, Notice of
Partial Small Business Set-Aside, in
solicitations and contracts involving
partial small business set-asides. The
clause at 52.219–7 with its Alternate I
will be used when the acquisition is for
a product in a class for which the
Small Business Administration has
waived the nonmanufacturer rule (see
19.102(f) (4) and (5)).
(e) The contracting officer shall insert the clause at 52.219–14, Limitations
on Subcontracting, in solicitations and
contracts for supplies, services, and
construction, if any portion of the requirement is to be set aside for small
business and the contract amount is
expected to exceed $100,000.
[48 FR 42240, June 9, 1987, as amended at 52
FR 21902, June 9, 1987; 52 FR 38189, Oct. 14,
1987; 53 FR 27464, July 20, 1988; 53 FR 43390,
Oct. 26, 1988; 54 FR 25063, June 12, 1989; 55 FR
25529, June 21, 1990; 55 FR 38516, Sept. 18, 1990;
60 FR 34757, July 3, 1995; 60 FR 48262, Sept. 18,
1995; 61 FR 39209, July 26, 1996; 61 FR 67430,
Dec. 20, 1996; 62 FR 236, Jan. 2, 1997; 62 FR
44820, Aug. 22, 1997]
Subpart
19.6—Certificates
of
Competency and Determinations of Responsibility
19.601
General.
(a) A Certificate of Competency
(COC) is the certificate issued by the
Small Business Administration (SBA)
stating that the holder is responsible
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48 CFR Ch. 1 (10–1–03 Edition)
(with respect to all elements of responsibility, including, but not limited to,
capability, competency, capacity, credit, integrity, perseverance, tenacity,
and limitations on subcontracting) for
the purpose of receiving and performing a specific Government contract.
(b) The COC program empowers the
Small Business Administration (SBA)
to certify to Government contracting
officers as to all elements of responsibility of any small business concern to
receive and perform a specific Government contract. The COC program does
not extend to questions concerning regulatory requirements imposed and enforced by other Federal agencies.
(c) The COC program is applicable to
all Government acquisitions. A contracting officer shall, upon determining an apparent successful small
business offeror to be nonresponsible,
refer that small business to the SBA
for a possible COC, even if the next acceptable offer is also from a small business.
(d) When a solicitation requires a
small business to adhere to the limitations on subcontracting, a contracting
officer’s finding that a small business
cannot comply with the limitation
shall be treated as an element of responsibility and shall be subject to the
COC process. When a solicitation requires a small business to adhere to the
definition of a nonmanufacturer, a contracting officer’s determination that
the small business does not comply
shall be processed in accordance with
subpart 19.3.
(e) Contracting officers, including
those located overseas, are required to
comply with this subpart for U.S. small
business concerns.
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 2664, Jan. 17, 1986; 54 FR 34754, Aug. 21,
1989; 59 FR 67036, Dec. 28, 1994; 61 FR 67410,
Dec. 20, 1996; 62 FR 44820, Aug. 22, 1997]
19.602
Procedures.
19.602–1 Referral.
(a) Upon determining and documenting that an apparent successful
small business offeror lacks certain
elements of responsibility (including,
but not limited to, capability, competency, capacity, credit, integrity,
perseverance, tenacity, and limitations
on subcontracting), the contracting officer shall—
(1) Withhold contract award (see
19.602–3); and
(2) Refer the matter to the cognizant
SBA Government Contracting Area Office (Area Office) serving the area in
which the headquarters of the offeror is
located, in accordance with agency procedures, except that referral is not necessary if the small business concern—
(i) Is determined to be unqualified
and ineligible because it does not meet
the standard in 9.104–1(g); provided,
that the determination is approved by
the chief of the contracting office; or
(ii) Is suspended or debarred under
Executive Order 11246 or subpart 9.4.
(b) If a partial set-aside is involved,
the contracting officer shall refer to
the SBA the entire quantity to which
the concern may be entitled, if responsible.
(c) The referral shall include—
(1) A notice that a small business
concern has been determined to be nonresponsible, specifying the elements of
responsibility the contracting officer
found lacking; and
(2) If applicable, a copy of the following:
(i) Solicitation.
(ii) Final offer submitted by the concern whose responsibility is at issue for
the procurement.
(iii) Abstract of bids or the contracting officer’s price negotiation
memorandum.
(iv) Preaward survey.
(v) Technical data package (including
drawings, specifications and statement
of work).
(vi) Any other justification and documentation used to arrive at the nonresponsibility determination.
(d) For any single acquisition, the
contracting officer shall make only one
referral at a time regarding a determination of nonresponsibility.
(e) Contract award shall be withheld
by the contracting officer for a period
of 15 business days (or longer if agreed
to by the SBA and the contracting officer) following receipt by the appropriate SBA Area Office of a referral
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that includes all required documentation.
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 27489, July 31, 1986; 62 FR 44820, Aug. 22,
1997]
19.602–2 Issuing or denying a Certificate of Competency (COC).
Within 15 business days (or a longer
period agreed to by the SBA and the
contracting agency) after receiving a
notice that a small business concern
lacks certain elements of responsibility, the SBA Area Office will take
the following actions:
(a) Inform the small business concern
of the contracting officer’s determination and offer it an opportunity to
apply to the SBA for a COC. (A concern
wishing to apply for a COC should notify the SBA Area Office serving the
geographical area in which the headquarters of the offeror is located.)
(b) Upon timely receipt of a complete
and acceptable application, elect to
visit the applicant’s facility to review
its responsibility.
(1) The COC review process is not
limited to the areas of nonresponsibility cited by the contracting officer.
(2) The SBA may, at its discretion,
independently evaluate the COC applicant for all elements of responsibility,
but may presume responsibility exists
as to elements other than those cited
as deficient.
(c) Consider denying a COC for reasons of nonresponsibility not originally
cited by the contracting officer.
(d) When the Area Director determines that a COC is warranted (for
contracts valued at $25,000,000 or less),
notify the contracting officer and provide the following options:
(1) Accept the Area Director’s decision to issue a COC and award the contract to the concern. The COC issuance
letter will then be sent, including as an
attachment a detailed rationale for the
decision; or
(2) Ask the Area Director to suspend
the case for one or more of the following purposes:
(i) To permit the SBA to forward a
detailed rationale for the decision to
the contracting officer for review within a specified period of time.
(ii) To afford the contracting officer
the opportunity to meet with the Area
Office to review all documentation contained in the case file and to attempt
to resolve any issues.
(iii) To submit any information to
the SBA Area Office that the contracting officer believes the SBA did
not consider (at which time the SBA
Area Office will establish a new suspense date mutually agreeable to the
contracting officer and the SBA).
(iv) To permit resolution of an appeal
by the contracting agency to SBA
Headquarters under 19.602–3. However,
there is no contracting officer’s appeal
when the Area Office proposes to issue
a COC valued at $100,000 or less.
(e) At the completion of the process,
notify the concern and the contracting
officer that the COC is denied or is
being issued.
(f)
Refer
recommendations
for
issuing a COC on contracts greater
than $25,000,000 to SBA Headquarters.
[62 FR 44820, Aug. 22, 1997]
19.602–3 Resolving
differences
between the agency and the Small
Business Administration.
(a) COCs valued between $100,000 and
$25,000,000. (1) When disagreements
arise about a concern’s ability to perform, the contracting officer and the
SBA shall make every effort to reach a
resolution before the SBA takes final
action on a COC. This shall be done
through the complete exchange of information and in accordance with
agency procedures. If agreement cannot be reached between the contracting
officer and the SBA Area Office, the
contracting officer shall request that
the Area Office suspend action and
refer the matter to SBA Headquarters
for review. The SBA Area Office shall
honor the request for a review if the
contracting officer agrees to withhold
award until the review process is concluded. Without an agreement to withhold award, the SBA Area Office will
issue the COC in accordance with applicable SBA regulations.
(2) SBA Headquarters will furnish
written notice to the procuring agency’s Director, Office of Small and Disadvantaged
Business
Utilization
(OSDBU) or other designated official
(with a copy to the contracting officer)
that the case file has been received and
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19.602–4
48 CFR Ch. 1 (10–1–03 Edition)
that an appeal decision may be requested by an authorized official.
(3) If the contracting agency decides
to file an appeal, it must notify SBA
Headquarters through its procuring
agency’s Director, OSDBU, or other
designated official, within 10 business
days (or a time period agreed upon by
both agencies) that it intends to appeal
the issuance of the COC.
(4) The appeal and any supporting
documentation shall be filed by the
procuring agency’s Director, OSDBU,
or other designated official, within 10
business days (or a period agreed upon
by both agencies) after SBA Headquarters receives the agency’s notification in accordance with paragraph
(a)(3) of this subsection.
(5) The SBA Associate Administrator
for Government Contracting will make
a final determination, in writing, to
issue or to deny the COC.
(b) SBA Headquarters’ decisions on
COCs valued over $25,000,000. (1) Prior to
taking final action, SBA Headquarters
will contact the contracting agency
and offer it the following options:
(i) To request that the SBA suspend
case processing to allow the agency to
meet with SBA Headquarters personnel
and review all documentation contained in the case file; or
(ii) To submit to SBA Headquarters
for evaluation any information that
the contracting agency believes has
not been considered.
(2) After reviewing all available information, the SBA will make a final
decision to either issue or deny the
COC.
(c) Reconsideration of a COC after
issuance. (1) The SBA reserves the right
to reconsider its issuance of a COC,
prior to contract award, if—
(i) The COC applicant submitted false
information or omitted materially adverse information; or
(ii) The COC has been issued for more
than 60 days (in which case the SBA
may investigate the firm’s current circumstances).
(2) When the SBA reconsiders and reaffirms the COC, the procedures in subsection 19.602–2 do not apply.
(3) Denial of a COC by the SBA does
not preclude a contracting officer from
awarding a contract to the referred
concern, nor does it prevent the con-
cern from making an offer on any other
procurement.
[62 FR 44821, Aug. 22, 1997]
19.602–4 Awarding the contract.
(a) If new information causes the
contracting officer to determine that
the concern referred to the SBA is actually responsible to perform the contract, and award has not already been
made under paragraph (c) below, the
contracting officer shall reverse the determination of nonresponsibility, notify the SBA of this action, withdraw
the referral, and proceed to award the
contract.
(b) The contracting officer shall
award the contract to the concern in
question if the SBA issues a COC after
receiving the referral. An SBA-certified concern shall not be required to
meet any other requirements of responsibility. SBA COC’s are conclusive with
respect to all elements of responsibility of prospective small business
contractors.
(c) The contracting officer shall proceed with the acquisition and award
the contract to another appropriately
selected and responsible offeror if the
SBA has not issued a COC within 15
business days (or a longer period of
time agreed to with the SBA) after receiving the referral.
Subpart 19.7—The Small Business
Subcontracting Program
19.701 Definitions.
As used in this subpart—
Commercial plan means a subcontracting plan (including goals) that
covers the offeror’s fiscal year and that
applies to the entire production of
commercial items sold by either the
entire company or a portion thereof
(e.g., division, plant, or product line).
Failure to make a good faith effort to
comply with the subcontracting plan
means willful or intentional failure to
perform in accordance with the requirements of the subcontracting plan,
or willful or intentional action to frustrate the plan.
Individual contract plan means a subcontracting plan that covers the entire
contract period (including option periods), applies to a specific contract, and
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Federal Acquisition Regulation
19.702
has goals that are based on the
offeror’s planned subcontracting in
support of the specific contract, except
that indirect costs incurred for common or joint purposes may be allocated
on a prorated basis to the contract.
Master plan means a subcontracting
plan that contains all the required elements of an individual contract plan,
except goals, and may be incorporated
into individual contract plans, provided the master plan has been approved.
Subcontract means any agreement
(other than one involving an employeremployee relationship) entered into by
a Government prime contractor or subcontractor calling for supplies and/or
services required for performance of
the contract, contract modification, or
subcontract.
[63 FR 34064, June 22, 1998, as amended at 66
FR 2130, Jan. 10, 2001]
19.702 Statutory requirements.
Any contractor receiving a contract
for more than the simplified acquisition threshold must agree in the contract that small business, veteranowned small business, service-disabled
veteran-owned
small
business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns will
have the maximum practicable opportunity to participate in contract performance consistent with its efficient
performance. It is further the policy of
the United States that its prime contractors establish procedures to ensure
the timely payment of amounts due
pursuant to the terms of their subcontracts with small business, veteranowned small business, service-disabled
veteran-owned
small
business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns.
(a) Except as stated in paragraph (b)
of this section, Section 8(d) of the
Small Business Act (15 U.S.C. 637(d))
imposes the following requirements regarding subcontracting with small
businesses and small business subcontracting plans:
(1) In negotiated acquisitions, each
solicitation of offers to perform a contract or contract modification, that individually is expected to exceed $500,000
($1,000,000 for construction) and that
has subcontracting possibilities, shall
require the apparently successful offeror to submit an acceptable subcontracting plan. If the apparently successful offeror fails to negotiate a subcontracting plan acceptable to the contracting officer within the time limit
prescribed by the contracting officer,
the offeror will be ineligible for award.
(2) In sealed bidding acquisitions,
each invitation for bids to perform a
contract or contract modification, that
individually is expected to exceed
$500,000 ($1,000,000 for construction) and
that has subcontracting possibilities,
shall require the bidder selected for
award to submit a subcontracting plan.
If the selected bidder fails to submit a
plan within the time limit prescribed
by the contracting officer, the bidder
will be ineligible for award.
(b) Subcontracting plans (see subparagraphs (a)(1) and (2) above) are not
required—
(1) From small business concerns;
(2) For personal services contracts;
(3) For contracts or contract modifications that will be performed entirely outside of the United States and
its outlying areas; or
(4) For modifications to contracts
within the general scope of the contract that do not contain the clause at
52.219–8, Utilization of Small Business
Concerns (or equivalent prior clauses;
e.g., contracts awarded before the enactment of Public Law 95–507).
(c) As stated in 15 U.S.C. 637(d)(8),
any contractor or subcontractor failing
to comply in good faith with the requirements of the subcontracting plan
is in material breach of its contract.
Further, 15 U.S.C. 637(d)(4)(F) directs
that a contractor’s failure to make a
good faith effort to comply with the requirements of the subcontracting plan
shall result in the imposition of liquidated damages.
(d) As authorized by 15 U.S.C.
637(d)(11), certain costs incurred by a
mentor firm in providing developmental assistance to a Prote´ge´ firm
under the Department of Defense Pilot
Mentor-Prote´ge´ Program, may be credited as subcontract awards to a small
disadvantaged business for the purpose
of determining whether the mentor
firm attains a small disadvantaged
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19.703
48 CFR Ch. 1 (10–1–03 Edition)
business goal under any subcontracting
plan entered into with any executive
agency. However, the mentor-prote´ge´
agreement must have been approved by
the—
Office of Small and Disadvantaged Business
Utilization, Office of the Under Secretary
of Defense (Acquisition, Technology and
Logistics), 1777 N. Kent Street, Suite 9100,
Arlington, VA 22209
before developmental assistance costs
may be credited against subcontracting
goals. A list of approved agreements
may
be
obtained
at
http://
www.acq.osd.mil/sadbu/
mentorlprotege/ or by calling 1–800–
553–1858.
[48 FR 42240, Sept. 19, 1983, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 50 FR 27562, July 3, 1985; 51 FR 27116,
July 29, 1986; 54 FR 30709, July 21, 1989; 56 FR
41731, Aug. 22, 1991; 60 FR 48262, Sept. 18, 1995;
61 FR 2638, Jan. 26, 1996; 61 FR 39190, July 26,
1996; 61 FR 67420, Dec. 20, 1996; 62 FR 40236,
July 25, 1997; 63 FR 36122, July 1, 1998; 63 FR
70270, Dec. 18, 1998; 64 FR 72451, Dec. 27, 1999;
65 FR 60545, Oct. 11, 2000; 68 FR 28081, May 22,
2003]
19.703 Eligibility
requirements
participating in the program.
for
(a) To be eligible as a subcontractor
under the program, a concern must
represent itself as a small business,
veteran-owned small business, servicedisabled veteran-owned small business,
HUBZone small business, small disadvantaged business, or woman-owned
small business concern.
(1) To represent itself as a small business, veteran-owned small business,
service-disabled veteran-owned small
business, HUBZone small business, or
woman-owned small business concern,
a concern must meet the appropriate
definition (see 2.101 and 19.001).
(2) In connection with a subcontract,
or a requirement for which the apparently successful offeror received an
evaluation credit for proposing one or
more SDB subcontractors, the contracting officer or the SBA may protest the disadvantaged status of a proposed subcontractor. Such protests will
be processed in accordance with 13 CFR
124.1015 through 124.1022. Other interested parties may submit information
to the contracting officer or the SBA
in an effort to persuade the contracting
officer or the SBA to initiate a protest.
Such protests, in order to be considered
timely, must be submitted to the SBA
prior to completion of performance by
the intended subcontractor.
(b) A contractor acting in good faith
may rely on the written representation
of its subcontractor regarding the subcontractor’s status as a small business,
veteran-owned small business, servicedisabled veteran-owned small business,
HUBZone small business, or a womanowned small business concern. The
clause at 52.219–25, Small Disadvantaged Business Participation Program—Disadvantaged Status and Reporting, requires the contractor to obtain representations of small disadvantaged status from subcontractors
through use of a provision substantially the same as paragraph (b)(1)(i) of
the provision at 52.219–22, Small Disadvantaged
Business
Status.
The
clause requires the contractor to confirm that a subcontractor representing
itself as a small disadvantaged business
concern is identified by SBA as a small
disadvantaged business concern by accessing SBA’s database (PRO-Net) or
by contacting the SBA’s Office of
Small Disadvantaged Business Certification and Eligibility. The contractor,
the contracting officer, or any other
interested party can challenge a subcontractor’s size status representation
by filing a protest, in accordance with
13 CFR 121.1601 through 121.1608. Protests challenging a subcontractor’s
small disadvantaged business representation must be filed in accordance with
13 CFR 124.1015 through 124.1022. Protests challenging HUBZone small business concerns status must be filed in
accordance with 13 CFR 126.800.
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 2664, Jan. 17, 1986; 55 FR 3882, Feb. 5, 1990;
55 FR 52792, Dec. 21, 1990; 60 FR 48262, Sept.
18, 1995; 62 FR 236, Jan. 2, 1997; 63 FR 34065,
July 1, 1998; 63 FR 70270, Dec. 18, 1998; 63 FR
71723, Dec. 29, 1998; 64 FR 36223, July 2, 1999;
65 FR 60545, Oct. 11, 2000; 66 FR 2130, Jan. 10,
2001]
19.704 Subcontracting plan requirements.
(a) Each subcontracting plan required under 19.702(a)(1) and (2) must
include—
(1) Separate percentage goals for
using small business, veteran-owned
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Federal Acquisition Regulation
19.704
small business, service-disabled veteran-owned small business, HUBZone
small business, small disadvantaged
business, and women-owned small business concerns as subcontractors;
(2) A statement of the total dollars
planned to be subcontracted and a
statement of the total dollars planned
to be subcontracted to small business,
veteran-owned small business, servicedisabled veteran-owned small business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns;
(3) A description of the principal
types of supplies and services to be subcontracted and an identification of
types planned for subcontracting to
small business, veteran-owned small
business,
service-disabled
veteranowned small business, HUBZone small
business, small disadvantaged business,
and women-owned small business concerns;
(4) A description of the method used
to develop the subcontracting goals;
(5) A description of the method used
to identify potential sources for solicitation purposes;
(6) A statement as to whether or not
the offeror included indirect costs in
establishing subcontracting goals, and
a description of the method used to determine the proportionate share of indirect costs to be incurred with small
business, veteran-owned small business, service-disabled veteran-owned
small business, HUBZone small business, small disadvantaged business, and
women-owned small business concerns;
(7) The name of an individual employed by the offeror who will administer the offeror’s subcontracting program, and a description of the duties of
the individual;
(8) A description of the efforts the offeror will make to ensure that small
business, veteran-owned small business, service-disabled veteran-owned
small business, HUBZone small business, small disadvantaged business, and
women-owned small business concerns
have an equitable opportunity to compete for subcontracts;
(9) Assurances that the offeror will
include the clause at 52.219–8, Utilization of Small Business Concerns (see
19.708(a)), in all subcontracts that offer
further subcontracting opportunities,
and that the offeror will require all
subcontractors (except small business
concerns) that receive subcontracts in
excess of $500,000 ($1,000,000 for construction) to adopt a plan that complies with the requirements of the
clause at 52.219–9, Small Business Subcontracting Plan (see 19.708(b));
(10) Assurances that the offeror will—
(i) Cooperate in any studies or surveys as may be required;
(ii) Submit periodic reports so that
the Government can determine the extent of compliance by the offeror with
the subcontracting plan;
(iii) Submit Standard Form (SF) 294,
Subcontracting Report for Individual
Contracts, and SF 295, Summary Subcontract Report, following the instructions on the forms or as provided in
agency regulations; and
(iv) Ensure that its subcontractors
agree to submit SF 294 and SF 295; and
(11) A description of the types of
records that will be maintained concerning procedures adopted to comply
with the requirements and goals in the
plan, including establishing source
lists; and a description of the offeror’s
efforts to locate small business, veteran-owned small business, service-disabled veteran-owned small business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns and to
award subcontracts to them.
(b) Contractors may establish, on a
plant or division-wide basis, a master
plan (see 19.701) that contains all the
elements required by the clause at
52.219–9,
Small
Business
Subcontracting Plan, except goals. Master
plans shall be effective for a 3-year period after approval by the contracting
officer; however, it is incumbent upon
contractors to maintain and update
master plans. Changes required to update master plans are not effective
until approved by the contracting officer. A master plan, when incorporated
in an individual plan, shall apply to
that contract throughout the life of
the contract.
(c) For multiyear contracts or contracts containing options, the cumulative value of the basic contract and
all options is considered in determining whether a subcontracting plan
is necessary (see 19.705–2(a)). If a plan is
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19.705
48 CFR Ch. 1 (10–1–03 Edition)
necessary and the offeror is submitting
an individual contract plan, the plan
shall contain all the elements required
by paragraph (a) of this section and
shall contain separate statements and
goals for the basic contract and for
each option.
(d) A commercial plan (as defined in
19.701) is the preferred type of subcontracting plan for contractors furnishing commercial items. The contractor shall—
(1) Submit the commercial plan to either the first contracting officer
awarding a contract subject to the plan
during the contractor’s fiscal year, or,
if the contractor has ongoing contracts
with commercial plans, to the contracting officer responsible for the contract with the latest completion date.
The contracting officer shall negotiate
the commercial plan for the Government. The approved commercial plan
shall remain in effect during the contractor’s fiscal year for all Government
contracts in effect during that period;
and
(2) Submit a new commercial plan, 30
working days before the end of the fiscal year, to the contracting officer responsible for the uncompleted Government contract with the latest completion date. The contractor must provide
to each contracting officer responsible
for an ongoing contract subject to the
plan, the identity of the contracting officer that will be negotiating the new
plan. When the new commercial plan is
approved, the contractor shall provide
a copy of the approved plan to each
contracting officer responsible for an
ongoing contract that is subject to the
plan.
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 2664, Jan. 17, 1986; 54 FR 29281, July 11,
1989; 60 FR 48262, Sept. 18, 1995; 61 FR 31643,
June 20, 1996; 63 FR 34065, June 22, 1998; 63 FR
70271, Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000;
66 FR 53493, Oct. 22, 2001; 67 FR 1858, Jan. 14,
2002]
19.705 Responsibilities of the contracting officer under the subcontracting assistance program.
19.705–1 General support of the program.
The contracting officer may encourage the development of increased subcontracting opportunities in nego-
tiated acquisition by providing monetary incentives such as payments based
on actual subcontracting achievement
or award–fee contracting (see the
clause at 52.219–10, Incentive Subcontracting Program, and 19.708(c)). This
subsection does not apply to SDB subcontracting (see 19.1203). When using
any contractual incentive provision
based upon rewarding the contractor
monetarily for exceeding goals in the
subcontracting plan, the contracting
officer must ensure that (a) the goals
are realistic and (b) any rewards for exceeding the goals are commensurate
with the efforts the contractor would
not have otherwise expended. Incentive
provisions should normally be negotiated after reaching final agreement
with the contractor on the subcontracting plan.
[48 FR 42240, Sept. 19, 1983, as amended at 60
FR 48262, Sept. 18, 1995; 63 FR 34065, June 22,
1998; 63 FR 36123, July 1, 1998]
19.705–2 Determining the need for a
subcontracting plan.
The contracting officer must take
the following actions to determine
whether a proposed contractual action
requires a subcontracting plan:
(a) Determine whether the proposed
contractual action will meet the dollar
threshold in 19.702(a)(1) or (2). If the action includes options or similar provisions, include their value in determining whether the threshold is met.
(b)
Determine
whether
subcontracting possibilities exist by considering relevant factors such as—
(1) Whether firms engaged in the
business of furnishing the types of
items to be acquired customarily contract for performance of part of the
work or maintain sufficient in-house
capability to perform the work;
(2) Whether there are likely to be
product prequalification requirements;
and
(c) If it is determined that there are
no subcontracting possibilities, the determination must be approved at a
level above the contracting officer and
placed in the contract file.
(d) In solicitations for negotiated acquisitions, the contracting officer may
require the submission of subcontracting plans with initial offers, or at
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Federal Acquisition Regulation
19.705–4
any other time prior to award. In determining when subcontracting plans
should be required, as well as when and
with whom plans should be negotiated,
the contracting officer must consider
the integrity of the competitive process, the goal of affording maximum
practicable opportunity for small business, veteran-owned small business,
service-disabled veteran-owned small
business, HUBZone small business,
small disadvantaged business, and
women-owned small business concerns
to participate, and the burden placed
on offerors.
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 2664, Jan. 17, 1986; 51 FR 19716, May 30,
1986; 60 FR 48262, Sept. 18, 1995; 61 FR 2638,
Jan. 26, 1996; 63 FR 70271, Dec. 18, 1998; 65 FR
60545, Oct. 11, 2000; 66 FR 53493, Oct. 22, 2001]
19.705–3 Preparing the solicitation.
The contracting officer shall provide
the Small Business Administration’s
(SBA’s) resident procurement center
representative, if any, a reasonable period of time to review any solicitation
requiring submission of a subcontracting plan and to submit advisory
findings before the solicitation is
issued.
19.705–4 Reviewing the subcontracting
plan.
The contracting officer must review
the subcontracting plan for adequacy,
ensuring that the required information, goals, and assurances are included
(see 19.704).
(a) No detailed standards apply to
every subcontracting plan. Instead, the
contracting officer must consider each
plan in terms of the circumstances of
the particular acquisition, including—
(1) Previous involvement of small
business concerns as prime contractors
or subcontractors in similar acquisitions;
(2) Proven methods of involving
small business concerns as subcontractors in similar acquisitions; and
(3) The relative success of methods
the contractor intends to use to meet
the goals and requirements of the plan,
as evidenced by records maintained by
contractors.
(b) If, under a sealed bid solicitation,
a bidder submits a plan that does not
cover each of the 11 required elements
(see 19.704), the contracting officer
shall advise the bidder of the deficiency and request submission of a revised plan by a specific date. If the bidder does not submit a plan that incorporates the required elements within
the time allotted, the bidder shall be
ineligible for award. If the plan, although responsive, evidences the bidder’s intention not to comply with its
obligations under the clause at 52.219–8,
Utilization of Small Business Concerns,
the contracting officer may find the
bidder nonresponsible.
(c) In negotiated acquisitions, the
contracting officer shall determine
whether the plan is acceptable based on
the negotiation of each of the 11 elements of the plan (see 19.704). Subcontracting goals should be set at a level
that the parties reasonably expect can
result from the offeror expending good
faith efforts to use small business, veteran-owned small business, service-disabled veteran-owned small business,
HUBZone small business, small disadvantaged business, and womenowned small business subcontractors to
the maximum practicable extent. The
contracting officer shall take particular care to ensure that the offeror
has not submitted unreasonably low
goals to minimize exposure to liquidated damages and to avoid the administrative burden of substantiating
good faith efforts. Additionally, particular attention should be paid to the
identification of steps that, if taken,
would be considered a good faith effort.
No goal should be negotiated upward if
it is apparent that a higher goal will
significantly increase the Government’s cost or seriously impede the attainment of acquisition objectives. An
incentive subcontracting clause (see
52.219–10,
Incentive
Subcontracting
Program), may be used when additional
and unique contract effort, such as providing technical assistance, could significantly increase subcontract awards
to small business, veteran-owned small
business,
service-disabled
veteranowned small business, HUBZone small
business, or women-owned small business concerns.
(d) In determining the acceptability
of a proposed subcontracting plan, the
contracting officer should take the following actions:
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19.705–5
48 CFR Ch. 1 (10–1–03 Edition)
(1) Obtain information available from
the cognizant contract administration
office, as provided for in 19.706(a), and
evaluate the offeror’s past performance
in awarding subcontracts for the same
or similar products or services to small
business, veteran-owned small business, service-disabled veteran-owned
small business, HUBZone small business, small disadvantaged business, and
women-owned small business concerns.
If information is not available on a specific type of product or service, evaluate the offeror’s overall past performance and consider the performance of
other contractors on similar efforts.
(2) In accordance with 15 U.S.C.
637(d)(4)(F)(iii), ensure that the goals
offered are attainable in relation to—
(i) The subcontracting opportunities
available to the contractor, commensurate with the efficient and economical
performance of the contract;
(ii) The pool of eligible subcontractors available to fulfill the subcontracting opportunities; and
(iii) The actual performance of such
contractor in fulfilling the subcontracting goals specified in prior plans.
(3) Ensure that the subcontracting
goals are consistent with the offeror’s
cost or pricing data or information
other than cost or pricing data.
(4) Evaluate the offeror’s make-orbuy policy or program to ensure that it
does not conflict with the offeror’s proposed subcontracting plan and is in the
Government’s interest. If the contract
involves products or services that are
particularly specialized or not generally available in the commercial
market, consider the offeror’s current
capacity to perform the work and the
possibility of reduced subcontracting
opportunities.
(5) Evaluate subcontracting potential, considering the offeror’s make-orbuy policies or programs, the nature of
the supplies or services to be subcontracted, the known availability of
small business, veteran-owned small
business,
service-disabled
veteranowned small business, HUBZone small
business, small disadvantaged business,
and women-owned small business concerns in the geographical area where
the work will be performed, and the potential contractor’s long-standing contractual relationship with its suppliers.
(6) Advise the offeror of available
sources of information on potential
small business, veteran-owned small
business,
service-disabled
veteranowned small business, HUBZone small
business, small disadvantaged business,
and women-owned small business subcontractors, as well as any specific
concerns known to be potential subcontractors. If the offerors proposed
goals are questionable, the contracting
officer must emphasize that the information should be used to develop realistic and acceptable goals.
(7) Obtain advice and recommendations from the SBA procurement center representative (if any) and the
agency small business specialist.
[48 FR 42240, Sept. 19, 1983, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 19716, May 30, 1986; 54 FR 30709,
July 21, 1989; 55 FR 52792, Dec. 21, 1990; 60 FR
48262, Sept. 18, 1995; 63 FR 34066, June 22, 1998;
63 FR 36123, July 1, 1998; 63 FR 70271, Dec. 18,
1998; 65 FR 60545, Oct. 11, 2000; 66 FR 53493,
Oct. 22, 2001; 67 FR 1858, Jan. 14, 2002]
19.705–5 Awards involving
tracting plans.
(a) In making an award that requires
a subcontracting plan, the contracting
officer shall be responsible for the following:
(1) Consider the contractor’s compliance with the subcontracting plans
submitted on previous contracts as a
factor in determining contractor responsibility.
(2) Assure that a subcontracting plan
was submitted when required.
(3) Notify the SBA resident procurement center representative of the opportunity to review the proposed contract (including the plan and supporting documentation). The notice
shall be issued in sufficient time to
provide the representative a reasonable
time to review the material and submit
advisory recommendations to the contracting officer. Failure of the representative to respond in a reasonable
period of time shall not delay contract
award.
(4) Determine any fee that may be
payable if an incentive is used in conjunction with the subcontracting plan.
(5) Ensure that an acceptable plan is
incorporated into and made a material
part of the contract.
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Federal Acquisition Regulation
19.705–7
(b) Letter contracts and similar
undefinitized instruments, which would
otherwise meet the requirements of
19.702(a)(1) and (2), shall contain at
least a preliminary basic plan addressing the requirements of 19.704 and in
such cases require the negotiation of
the final plan within 90 days after
award or before definitization, whichever occurs first.
(g) Taking action to enforce the
terms of the contract upon receipt of a
notice under 19.706(f).
[48 FR 42240, Sept. 19, 1983, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
(a) Maximum practicable utilization
of small business, veteran-owned small
business,
service-disabled
veteranowned small business, HUBZone small
business, small disadvantaged business
and women-owned small business concerns as subcontractors in Government
contracts is a matter of national interest with both social and economic benefits. When a contractor fails to make
a good faith effort to comply with a
subcontracting plan, these objectives
are not achieved, and 15 U.S.C.
637(d)(4)(F) directs that liquidated
damages shall be paid by the contractor.
(b) The amount of damages attributable to the contractor’s failure to
comply shall be an amount equal to the
actual dollar amount by which the contractor failed to achieve each subcontracting goal.
(c) If, at completion of the basic contract or any option, or in the case of a
commercial plan, at the close of the
fiscal year for which the plan is applicable, a contractor has failed to meet
its subcontracting goals, the contracting officer shall review all available information for an indication that
the contractor has not made a good
faith effort to comply with the plan. If
no such indication is found, the contracting officer shall document the file
accordingly. If the contracting officer
decides in accordance with paragraph
(d) of this subsection that the contractor failed to make a good faith effort to comply with its subcontracting
plan, the contracting officer shall give
the contractor written notice specifying the failure, advising the contractor of the possibility that the contractor may have to pay to the Government liquidated damages, and providing a period of 15 working days (or
longer period as necessary) within
which to respond. The notice shall give
19.705–6 Postaward responsibilities of
the contracting officer.
After a contract or contract modification containing a subcontracting
plan is awarded, the contracting officer
who approved the plan is responsible
for the following:
(a) Notifying the SBA of the award
by sending a copy of the award document to the Area Director, Office of
Government Contracting, in the SBA
area office where the contract will be
performed.
(b) Forwarding a copy of each commercial plan and any associated approvals to the Area Director, Office of
Government Contracting, in the SBA
area office where the contractor’s
headquarters is located.
(c) Giving to the assigned SBA resident procurement center representative (if any) a copy of—
(1) Any subcontracting plan submitted in response to a sealed bid solicitation; and
(2) The final negotiated subcontracting plan that was incorporated
into a negotiated contract or contract
modification.
(d) Notifying the SBA resident procurement center representative of the
opportunity to review subcontracting
plans in connection with contract
modifications.
(e) Forwarding a copy of each plan,
or a determination that there is no requirement for a subcontracting plan, to
the cognizant contract administration
office.
(f) Initiating action to assess liquidated damages in accordance with
19.705–7 upon a recommendation by the
administrative contracting officer or
receipt of other reliable evidence to indicate that such action is warranted.
[48 FR 42240, Sept. 19, 1983, as amended at 52
FR 19803, May 27, 1987; 53 FR 27464, July 20,
1988; 53 FR 34228, Sept. 2, 1988; 54 FR 30709,
July 21, 1989; 55 FR 52792, Dec. 21, 1990; 63 FR
34066, June 22, 1998; 63 FR 70271, Dec. 18, 1998]
19.705–7
Liquidated damages.
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19.705–7
48 CFR Ch. 1 (10–1–03 Edition)
the contractor an opportunity to demonstrate what good faith efforts have
been made before the contracting officer issues the final decision, and shall
further state that failure of the contractor to respond may be taken as an
admission that no valid explanation exists.
(d) In determining whether a contractor failed to make a good faith effort to comply with its subcontracting
plan, a contracting officer must look to
the totality of the contractor’s actions,
consistent with the information and
assurances provided in its plan. The
fact that the contractor failed to meet
its subcontracting goals does not, in
and of itself, constitute a failure to
make a good faith effort. For example,
notwithstanding a contractor’s diligent
effort to identify and solicit offers
from small business, veteran-owned
small business, service-disabled veteran-owned small business, HUBZone
small business, small disadvantaged
business and women-owned small business concerns, factors such as unavailability of anticipated sources or unreasonable prices may frustrate achievement of the contractor’s goals. However, when considered in the context of
the contractor’s total effort in accordance with its plan, the following,
though not all inclusive, may be considered as indicators of a failure to
make a good faith effort: a failure to
attempt to identify, contact, solicit, or
consider for contract award small business, veteran-owned small business,
service-disabled veteran-owned small
business, HUBZone small business,
small
disadvantaged
business
or
women-owned small business concerns;
a failure to designate and maintain a
company official to administer the subcontracting program and monitor and
enforce compliance with the plan; a
failure to submit Standard Form (SF)
294, Subcontracting Report for Individual Contracts, or SF 295, Summary
Subcontract Report, in accordance
with the instructions on the forms or
as provided in agency regulations; a
failure to maintain records or otherwise demonstrate procedures adopted
to comply with the plan; or the adoption of company policies or procedures
that have as their objectives the frustration of the objectives of the plan.
(e) If, after consideration of all the
pertinent data, the contracting officer
finds that the contractor failed to
make a good faith effort to comply
with its subcontracting plan, the contracting officer shall issue a final decision to the contractor to that effect
and require the payment of liquidated
damages in an amount stated. The contracting officer’s final decision shall
state that the contractor has the right
to appeal under the clause in the contract entitled Disputes.
(f) With respect to commercial plans
approved under the clause at 52.219–9,
Small Business Subcontracting Plan,
the contracting officer that approved
the plan shall—
(1) Perform the functions of the contracting officer under this subsection
on behalf of all agencies with contracts
covered by the commercial plan;
(2) Determine whether or not the
goals in the commercial plan were
achieved and, if they were not
achieved, review all available information for an indication that the contractor has not made a good faith effort to comply with the plan, and document the results of the review;
(3) If a determination is made to assess liquidated damages, in order to
calculate and assess the amount of
damages, the contracting officer shall
ask the contractor to provide—
(i) Contract numbers for the Government contracts subject to the plan;
(ii) The total Government sales during the contractor’s fiscal year; and
(iii) The amount of payments made
under the Government contracts subject to that plan that contributed to
the contractor’s total sales during the
contractor’s fiscal year; and
(4) When appropriate, assess liquidated damages on the Government’s
behalf, based on the pro rata share of
subcontracting attributable to the
Government contracts. For example:
The contractor’s total actual sales
were $50 million and its actual subcontracting was $20 million. The Government’s total payments under contracts
subject to the plan contributing to the
contractor’s total sales were $5 million,
which accounted for 10 percent of the
contractor’s total sales. Therefore, the
pro rata share of subcontracting attributable to the Government contracts
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Federal Acquisition Regulation
19.707
would be 10 percent of $20 million, or $2
million. To continue the example, if
the contractor failed to achieve its
small business goal by 1 percent, the
liquidated damages would be calculated as 1 percent of $2 million, or
$20,000. The contracting officer shall
make similar calculations for each category of small business where the contractor failed to achieve its goal and
the sum of the dollars for all of the categories equals the amount of the liquidated damages to be assessed. A copy
of the contracting officer’s final decision assessing liquidated damages shall
be provided to other contracting officers with contracts subject to the commercial plan.
(g) Liquidated damages shall be in
addition to any other remedies that
the Government may have.
(h) Every contracting officer with a
contract that is subject to a commercial plan shall include in the contract
file a copy of the approved plan and a
copy of the final decision assessing liquidating damages, if applicable.
[54 FR 30709, July 21, 1989, as amended at 60
FR 48263, Sept. 18, 1995; 63 FR 34066, June 22,
1998; 63 FR 70272, Dec. 18, 1998; 65 FR 60545,
Oct. 11, 2000; 66 FR 53493, Oct. 22, 2001]
19.706 Responsibilities of the cognizant administrative contracting
officer.
The administrative contracting officer is responsible for assisting in evaluating subcontracting plans, and for
monitoring, evaluating, and documenting contractor performance under
the clause prescribed in 19.708(b) and
any subcontracting plan included in
the contract. The contract administration office shall provide the necessary
information and advice to support the
contracting officer, as appropriate, by
furnishing—
(a) Documentation on the contractor’s performance and compliance with
subcontracting plans under previous
contracts;
(b) Information on the extent to
which the contractor is meeting the
plan’s goals for subcontracting with eligible small business, veteran-owned
small business, service-disabled veteran-owned small business, HUBZone
small business, small disadvantaged
business, and women-owned small business concerns;
(c) Information on whether the contractor’s efforts to ensure the participation of small business, veteranowned small business, service-disabled
veteran-owned
small
business,
HUBZone small business, small disadvantaged business, and womenowned small business concerns are in
accordance with its subcontracting
plan;
(d) Information on whether the contractor is requiring its subcontractors
to adopt similar subcontracting plans;
(e) Immediate notice if, during performance, the contractor is failing to
meet its commitments under the
clause prescribed in 19.708(b) or the
subcontracting plan;
(f) Immediate notice and rationale if,
during performance, the contractor is
failing to comply in good faith with the
subcontracting plan; and
(g) Immediate notice that performance under a contract is complete, that
the goals were or were not met, and, if
not met, whether there is any indication of a lack of a good faith effort to
comply with the subcontracting plan.
[48 FR 42240, Sept. 19, 1983, as amended at 54
FR 30710, July 21, 1989; 60 FR 48263, Sept. 18,
1995; 63 FR 34067, June 22, 1998; 63 FR 70272,
Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000; 66 FR
53493, Oct. 22, 2001]
19.707 The Small Business Administration’s role in carrying out the program.
(a) Under the program, the SBA
may—
(1) Assist both Government agencies
and contractors in carrying out their
responsibilities with regard to subcontracting plans;
(2) Review (within 5 working days)
any solicitation that meets the dollar
threshold in 19.702(a)(1) or (2) before the
solicitation is issued;
(3) Review (within 5 working days)
before execution any negotiated contractual document requiring a subcontracting plan, including the plan itself,
and submit recommendations to the
contracting officer, which shall be advisory in nature; and
(4) Evaluate compliance with subcontracting plans, either on a contract-by-
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19.708
48 CFR Ch. 1 (10–1–03 Edition)
contract basis, or, in the case of contractors having multiple contracts, on
an aggregate basis.
(b) The SBA is not authorized to (1)
prescribe the extent to which any contractor or subcontractor shall subcontract, (2) specify concerns to which
subcontracts will be awarded, or (3) exercise any authority regarding the administration of individual prime contracts or subcontracts.
[48 FR 42240, Sept. 19, 1983, as amended at 51
FR 2664, Jan. 17, 1986]
19.708 Contract clauses.
(a) Insert the clause at 52.219–8, Utilization of Small Business Concerns, in
solicitations and contracts when the
contract amount is expected to exceed
the simplified acquisition threshold
unless—
(1) A personal services contract is
contemplated (see 37.104); or
(2) The contract, together with all of
its subcontracts, will be performed entirely outside of the United States and
its outlying areas.
(b)(1) Insert the clause at 52.219–9,
Small Business Subcontracting Plan,
in solicitations and contracts that
offer subcontracting possibilities, are
expected to exceed $500,000 ($1,000,000
for construction of any public facility),
and are required to include the clause
at 52.219–8, Utilization of Small Business Concerns, unless the acquisition is
set aside or is to be accomplished under
the 8(a) program. When contracting by
sealed bidding rather than by negotiation, the contracting officer shall use
the clause with its Alternate I. When
contracting by negotiation, and subcontracting plans are required with initial proposals as provided for in 19.705–
2(d), the contracting officer shall use
the clause with its Alternate II.
(2) Insert the clause at 52.219–16, Liquidated
Damages—Subcontracting
Plan, in all solicitations and contracts
containing the clause at 52.219–9, Small
Business Subcontracting Plan, or the
clause with its Alternate I or II.
(c)(1) The contracting officer may,
when contracting by negotiation, insert in solicitations and contracts a
clause substantially the same as the
clause at 52.219–10, Incentive Subcontracting Program, when a subcon-
tracting plan is required (see 19.702),
and inclusion of a monetary incentive
is, in the judgment of the contracting
officer, necessary to increase subcontracting opportunities for small business, veteran-owned small business,
service-disabled veteran-owned small
business, HUBZone small business, and
women-owned small business concerns,
and is commensurate with the efficient
and economical performance of the
contract; unless the conditions in paragraph (c)(3) of this section are applicable. The contracting officer may vary
the terms of the clause as specified in
paragraph (c)(2) of this section.
(2) Various approaches may be used
in the development of small business,
veteran-owned small business, servicedisabled veteran-owned small business,
HUBZone small business, and womenowned small business concerns’ subcontracting incentives. They can take
many forms, from a fully quantified
schedule of payments based on actual
subcontract achievement to an award–
fee approach employing subjective
evaluation criteria (see paragraph
(c)(3) of this section). The incentive
should not reward the contractor for
results other than those that are attributable to the contractor’s efforts
under the incentive subcontracting
program.
(3) As specified in paragraph (c)(2) of
this section, the contracting officer
may include small business, veteranowned small business, service-disabled
veteran-owned
small
business,
HUBZone small business, and womenowned small business subcontracting
as one of the factors to be considered in
determining the award fee in a costplus-award-fee contract; in such cases,
however, the contracting officer shall
not use the clause at 52.219–10, Incentive Subcontracting Program.
[48 FR 42240, Sept. 19, 1983, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 2664, Jan. 17, 1986; 54 FR 30710,
July 21, 1989; 56 FR 41731, Aug. 22, 1991; 60 FR
48263, Sept. 18, 1995; 61 FR 2639, Jan. 26, 1996;
61 FR 39190, July 26, 1996; 63 FR 34067, June
22, 1998; 63 FR 36123, July 1, 1998; 63 FR 70272,
Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000; 66 FR
53493, Oct. 22, 2001; 68 FR 28081, May 22, 2003]
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Federal Acquisition Regulation
19.803
Subpart 19.8—Contracting With
the Small Business Administration (the 8(a) Program)
SOURCE: 54 FR 46005, Oct. 31, 1989, unless
otherwise noted.
19.800 General.
(a) Section 8(a) of the Small Busines
Act (15 U.S.C. 637(a)) established a program that authorizes the Small Business Administration (SBA) to enter
into all types of contracts with other
agencies and let subcontracts for performing those contracts to firms eligible for program participation. The
SBA’s subcontractors are referred to as
8(a) contractors.
(b) Contracts may be awarded to the
SBA for performance by eligible 8(a)
firms on either a sole source or competitive basis.
(c) When, acting under the authority
of the program, the SBA certifies to an
agency that the SBA is competent and
responsible to perform a specific contract, the contracting officer is authorized, in the contracting officer’s discretion, to award the contract to the SBA
based upon mutually agreeable terms
and conditions.
(d) The SBA refers to this program as
the 8(a) Business Development (BD)
Program.
(e) Before deciding to set aside an acquisition in accordance with Subpart
19.5 or 19.13, the contracting officer
should review the acquisition for offering under the 8(a) Program. If the acquisition is offered to the SBA, SBA
regulations (13 CFR 126.607(b)) give
first priority to HUBZone 8(a) concerns.
(f) When SBA has delegated its 8(a)
Program contract execution authority
to an agency, the contracting officer
must refer to its agency supplement or
other policy directives for appropriate
guidance.
[54 FR 46005, Oct. 31, 1989, as amended at 63
FR 70272, Dec. 18, 1998; 64 FR 32743, June 17,
1999; 64 FR 51832, Sept. 24, 1999]
19.801
[Reserved]
19.802 Selecting concerns for the 8(a)
Program.
Selecting concerns for the 8(a) Program is the responsibility of the SBA
and is based on the criteria established
in 13 CFR 124.101–112.
[48 FR 42240, Sept. 19, 1983, as amended at 64
FR 32744, June 17, 1999]
19.803 Selecting acquisitions for the
8(a) Program.
Through their cooperative efforts,
the SBA and an agency match the
agency’s requirements with the capabilities of 8(a) concerns to establish a
basis for the agency to contract with
the SBA under the program. Selection
is initiated in one of three ways—
(a) The SBA advises an agency contracting activity through a search letter of an 8(a) firm’s capabilities and
asks the agency to identify acquisitions to support the firm’s business
plans. In these instances, the SBA will
provide at least the following information in order to enable the agency to
match an acquisition to the firm’s capabilities.
(1) Identification of the concern and
its owners.
(2) Background information on the
concern, including any and all information pertaining to the concern’s technical ability and capacity to perform.
(3) The firm’s present production capacity and related facilities.
(4) The extent to which contracting
assistance is needed in the present and
the future, described in terms that will
enable the agency to relate the concern’s plans to present and future agency requirements.
(5) If construction is involved, the request shall also include the following:
(i) The concern’s capabilities in and
qualifications for accomplishing various categories of maintenance, repair,
alteration, and construction work in
specific categories such as mechanical,
electrical, heating and air conditioning, demolition, building, painting,
paving, earth work, waterfront work,
and general construction work.
(ii) The concern’s capacity in each
construction category in terms of estimated dollar value (e.g., electrical, up
to $100,000).
(b) The SBA identifies a specific requirement for a particular 8(a) firm or
firms and asks the agency contracting
activity to offer the acquisition to the
8(a) Program for the firm(s). In these
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19.804
48 CFR Ch. 1 (10–1–03 Edition)
instances, in addition to the information in paragraph (a) of this section,
the SBA will provide—
(1) A clear identification of the acquisition sought; e.g., project name or
number;
(2) A statement as to how any additional needed facilities will be provided
in order to ensure that the firm will be
fully capable of satisfying the agency’s
requirements;
(3) If construction, information as to
the bonding capability of the firm(s);
and
(4) Either—
(i) If sole source request—
(A) The reasons why the firm is considered suitable for this particular acquisition; e.g., previous contracts for
the same or similar supply or service;
and
(B) A statement that the firm is eligible in terms of NAICS code, business
support levels, and business activity
targets; or,
(ii) If competitive, a statement that
at least two 8(a) firms are considered
capable of satisfying the agency’s requirements and a statement that the
firms are also eligible in terms of the
NAICS code, business support levels,
and business activity targets. If requested by the contracting activity,
SBA will identify at least two such
firms and provide information concerning the firms’ capabilities.
(c) Agencies may also review other
proposed acquisitions for the purpose
of identifying requirements which may
be offered to the SBA. Where agencies
independently, or through the self marketing efforts of an 8(a) firm, identify a
requirement for the 8(a) Program, they
may offer on behalf of a specific 8(a)
firm, for the 8(a) Program in general,
or for 8(a) competition (but see
19.800(e)).
[54 FR 46005, Oct. 31, 1989, as amended at 55
FR 3882, Feb. 5, 1990; 61 FR 67410, Dec. 20,
1996; 63 FR 70272, Dec. 18, 1998; 64 FR 32748,
June 17, 1999; 65 FR 46057, July 26, 2000]
19.804 Evaluation, offering, and acceptance.
19.804–1
Agency evaluation.
In determining the extent to which a
requirement should be offered in sup-
port of the 8(a) Program, the agency
should evaluate—
(a) Its current and future plans to acquire the specific items or work that
8(a) contractors are seeking to provide,
identified in terms of—
(1) Quantities required or the number
of construction projects planned; and
(2) Performance or delivery requirements, including required monthly production rates, when applicable.
(b) Its current and future plans to acquire items or work similar in nature
and complexity to that specified in the
business plan;
(c) Problems encountered in previous
acquisitions of the items or work from
the 8(a) contractors and/or other contractors;
(d) The impact of any delay in delivery;
(e) Whether the items or work have
previously been acquired using small
business set-asides; and
(f) Any other pertinent information
about known 8(a) contractors, the
items, or the work. This includes any
information concerning the firms’ capabilities. When necessary, the contracting agency shall make an independent review of the factors in
19.803(a) and other aspects of the firms’
capabilities which would ensure the
satisfactory performance of the requirement being considered for commitment to the 8(a) Program.
19.804–2 Agency offering.
(a) After completing its evaluation,
the agency must notify the SBA of the
extent of its plans to place 8(a) contracts with the SBA for specific quantities of items or work. The notification must identify the timeframes
within which prime contract and subcontract actions must be completed in
order for the agency to meet its responsibilities. The notification must
also contain the following information
applicable to each prospective contract:
(1) A description of the work to be
performed or items to be delivered, and
a copy of the statement of work, if
available.
(2) The estimated period of performance.
(3) The NAICS code that applies to
the principal nature of the acquisition.
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Federal Acquisition Regulation
19.804–3
(4) The anticipated dollar value of
the requirement, including options, if
any.
(5) Any special restrictions or geographical limitations on the requirement (for construction, include the location of the work to be performed).
(6) Any special capabilities or disciplines needed for contract performance.
(7) The type of contract anticipated.
(8) The acquisition history, if any, of
the requirement, including the names
and addresses of any small business
contractors that have performed this
requirement during the previous 24
months.
(9) A statement that prior to the offering no solicitation for the specific
acquisition has been issued as a small
business or HUBZone set-aside and
that no other public communication
(such as a notice through the Governmentwide point of entry (GPE)) has
been made showing the contracting
agency’s clear intention to set-aside
the acquisition for small business or
HUBZone small business concerns.
(10) Identification of any particular
8(a) concern designated for consideration, including a brief justification,
such as—
(i) The 8(a) concern, through its own
efforts, marketed the requirement and
caused it to be reserved for the 8(a)
Program; or
(ii) The acquisition is a follow-on or
renewal contract and the nominated
concern is the incumbent.
(11) Bonding requirements, if applicable.
(12) Identification of all known 8(a)
concerns, including HUBZone 8(a) concerns, that have expressed an interest
in being considered for the specific requirement.
(13) Identification of all SBA field offices that have asked for the acquisition for the 8(a) Program.
(14) A request, if appropriate, that a
requirement with an estimated contract value under the applicable competitive threshold be awarded as an 8(a)
competitive contract (see 19.805–1(d)).
(15) A request, if appropriate, that a
requirement with a contract value over
the applicable competitive threshold be
awarded as a sole source contract (see
19.805–1(b)).
(16) Any other pertinent and reasonably available data.
(b)(1) An agency offering a construction requirement should submit it to
the SBA District Office for the geographical area where the work is to be
performed.
(2) Sole source requirements, other
than construction, should be forwarded
directly to the district office that services the nominated firm. If the contracting officer is not nominating a
specific firm, the offering letter should
be forwarded to the district office servicing the geographical area in which
the contracting office is located.
(c) All requirements for 8(a) competition, other than construction, should
be forwarded to the district office servicing the geographical area in which
the contracting office is located. All
requirements for 8(a) construction
competition should be forwarded to the
district office servicing the geographical area in which all or the
major portion of the construction is to
be performed. All requirements, including construction, must be synopsized
through the GPE. For construction,
the synopsis must include the geographical area of the competition set
forth in the SBA’s acceptance letter.
[54 FR 46005, Oct. 31, 1989, as amended at 61
FR 67421, Dec. 20, 1996; 62 FR 44823, Aug. 22,
1997; 64 FR 32744, June 17, 1999; 65 FR 46057,
July 26, 2000; 66 FR 27413, May 16, 2001]
19.804–3 SBA acceptance.
(a) Upon receipt of the contracting
agency’s offer, the SBA will determine
whether to accept the requirement for
the 8(a) Program. The SBA’s decision
whether to accept the requirement will
be transmitted to the contracting
agency in writing within 10 working
days of receipt of the offer if the contract is likely to exceed the simplified
acquisition threshold and within 2 days
of receipt if the contract is at or below
the simplified acquisition threshold.
The contracting agency may grant an
extension of these time periods. If SBA
does not respond to an offering letter
within 10 days, the contracting activity may seek SBA’s acceptance
through the Associate Administrator
(AA)/8(a)BD.
(b) If the acquisition is accepted as a
sole source, the SBA will advise the
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19.804–4
48 CFR Ch. 1 (10–1–03 Edition)
contracting activity of the 8(a) firm selected for negotiation. Generally, the
SBA will accept a contracting activity’s recommended source.
(c) For acquisitions not exceeding the
simplified acquisition threshold, when
the contracting activity makes an offer
to the 8(a) Program on behalf of a specific 8(a) firm and does not receive a
reply to its offer within 2 days, the
contracting activity may assume the
offer is accepted and proceed with
award of an 8(a) contract.
(d) As part of the acceptance process,
SBA will review the appropriateness of
the NAICS code designation assigned
to the requirement by the contracting
activity.
(1) SBA will not challenge the NAICS
code assigned to the requirement by
the contracting activity if it is reasonable, even though other NAICS codes
may also be reasonable.
(2) If SBA and the contracting activity are unable to agree on a NAICS
code designation for the requirement,
SBA may refuse to accept the requirement for the 8(a) Program, appeal the
contracting officer’s determination to
the head of the agency pursuant to
19.810, or appeal the NAICS code designation to the SBA Office of Hearings
and Appeals under subpart C of 13 CFR
part 134.
[48 FR 42240, Sept. 19, 1983, as amended at 56
FR 55380, Oct. 25, 1991; 61 FR 67421, Dec. 20,
1996; 64 FR 32744, June 17, 1999; 65 FR 46057,
July 26, 2000]
19.804–4
Repetitive acquisitions.
In order for repetitive acquisitions to
be awarded through the 8(a) Program,
there must be separate offers and acceptances. This allows the SBA to determine—
(a) Whether the requirement should
be a competitive 8(a) award;
(b) A nominated firm’s eligibility,
whether or not it is the same firm that
performed the previous contract;
(c) The effect that contract award
would have on the equitable distribution of 8(a) contracts; and
(d) Whether the requirement should
continue under the 8(a) Program.
10. Add sections 19.804–5 and 19.804–6
to read as follows:
[64 FR 32744, June 17, 1999]
19.804–5
Basic ordering agreements.
(a) The contracting activity must
offer, and SBA must accept, each order
under a basic ordering agreement
(BOA) in addition to offering and accepting the BOA itself.
(b) SBA will not accept for award on
a sole-source basis any order that
would cause the total dollar amount of
orders issued under a specific BOA to
exceed the competitive threshold
amount in 19.805–1.
(c) Once an 8(a) concern’s program
term expires, the concern otherwise
exits the 8(a) Program, or becomes
other than small for the NAICS code
assigned under the BOA, SBA will not
accept new orders for the concern.
[64 FR 32744, June 17, 1999, as amended at 65
FR 46057, July 26, 2000]
19.804–6 Multiple award and Federal
Supply Schedule contracts.
(a) Separate offers and acceptances
must not be made for individual orders
under multiple award or Federal Supply Schedule (FSS) contracts. SBA’s
acceptance of the original multiple
award or FSS contract is valid for the
term of the contract.
(b) The requirements of 19.805–1 do
not apply to individual orders that exceed the competitive threshold as long
as the original contract was competed.
(c) An 8(a) concern may continue to
accept new orders under a multiple
award or FSS contract even after a
concern’s program term expires, the
concern otherwise exits the 8(a) Program, or the concern becomes other
than small for the NAICS code assigned
under the contract.
[64 FR 32744, June 17, 1999, as amended at 65
FR 46057, July 26, 2000]
19.805
Competitive 8(a).
19.805–1
General.
(a) Except as provided in paragraph
(b) of this subsection, an acquisition offered to the SBA under the 8(a) Program shall be awarded on the basis of
competition limited to eligible 8(a)
firms if—
(1) There is a reasonable expectation
that at least two eligible and responsible 8(a) firms will submit offers and
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Federal Acquisition Regulation
19.805–2
that award can be made at a fair market price; and
(2) The anticipated total value of the
contract, including options, will exceed
$5,000,000 for acquisitions assigned
manufacturing North American Industry Classification System (NAICS)
codes and $3,000,000 for all other acquisitions.
(b) Where an acquisition exceeds the
competitive threshold, the SBA may
accept the requirement for a sole
source 8(a) award if—
(1) There is not a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers
at a fair market price;
(2) SBA accepts the requirement on
behalf of a concern owned by an Indian
tribe or an Alaska Native Corporation;
or
(3) The acquisition is conducted
under the authority of the Homeland
Security Act (Public Law 107–296) and—
(i) The acquisition is for supplies or
services that, as determined by the
head of the agency, are to be used to
facilitate defense against or recovery
from terrorism or nuclear, biological,
chemical, or radiological attack;
(ii) The solicitation is issued during
the period of January 24, 2003, through
November 24, 2003; and
(iii) There is either an approved 13.501
justification for sole source acquisition, or an approved 6.303 justification
using one of the authorities at 6.302–1,
6.302–2, 6.302–6, or 6.302–7.
(c) A proposed 8(a) requirement with
an estimated value exceeding the applicable competitive threshold amount
shall not be divided into several requirements for lesser amounts in order
to use 8(a) sole source procedures for
award to a single firm.
(d) The SBA Associate Administrator
for 8(a) Business Development (AA/
8(a)BD) may approve an agency request
for a competitive 8(a) award below the
competitive thresholds. Such requests
will be approved only on a limited basis
and will be primarily granted where
technical competitions are appropriate
or where a large number of responsible
8(a) firms are available for competition. In determining whether a request
to compete below the threshold will be
approved, the AA/8(a)BD will, in part,
consider the extent to which the re-
questing agency is supporting the 8(a)
Program on a noncompetitive basis.
The agency may include recommendations for competition below the threshold in the offering letter or by separate
correspondence to the AA/8(a)BD.
[54 FR 46005, Oct. 31, 1989, as amended at 61
FR 67421, Dec. 20, 1996; 64 FR 32744, June 17,
1999; 65 FR 46056, July 26, 2000; 68 FR 4051,
Jan. 27, 2003]
19.805–2 Procedures.
(a) Offers shall be solicited from
those sources identified in accordance
with 19.804–3.
(b) The SBA will determine the eligibility of the firms for award of the contract. Eligibility will be determined by
the SBA as of the time of submission of
initial offers which include price. Eligibility is based on Section 8(a) Program
criteria.
(1) In sealed bid acquisitions, upon
receipt of offers, the contracting officer will provide the SBA a copy of the
solicitation, the estimated fair market
price, and a list of offerors ranked in
the order of their standing for award
(i.e., first low, second low, etc.) with
the total evaluated price for each offer,
differentiating between basic requirements and any options. The SBA will
consider the eligibility of the first low
offeror. If the first low offeror is not
determined to be eligible, the SBA will
consider the eligibility of the next low
offeror until an eligible offeror is identified. The SBA will determine the eligibility of the firms and advise the contracting officer within 5 working days
after its receipt of the list of bidders.
Once eligibility has been established by
the SBA, the successful offeror will be
determined by the contracting activity
in accordance with normal contracting
procedures.
(2) In negotiated acquisition, the
SBA will determine eligibility when
the successful offeror has been established by the agency and the contract
transmitted for signature unless a referral has been made under 19.809, in
which case the SBA will determine eligibility at that point.
(c) In any case in which a firm is determined to be ineligible, the SBA will
notify the firm of that determination.
(d) The eligibility of an 8(a) firm for
a competitive 8(a) award may not be
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19.806
48 CFR Ch. 1 (10–1–03 Edition)
challenged or protested by another 8(a)
firm or any other party as part of a solicitation or proposed contract award.
Any party with information concerning
the eligibility of an 8(a) firm to continue participation in the 8(a) Program
may submit such information to the
SBA in accordance with 13 CFR 124.517.
[54 FR 46005, Oct. 31, 1989, as amended at 61
FR 67421, Dec. 20, 1996; 64 FR 32745, June 17,
1999]
19.806 Pricing the 8(a) contract.
(a) The contracting officer shall price
the 8(a) contract in accordance with
subpart 15.4. If required by subpart 15.4,
the SBA shall obtain cost or pricing
data from the 8(a) contractor. If the
SBA requests audit assistance to determine the reasonableness of the proposed price in a sole source acquisition,
the contracting activity shall furnish
it to the extent it is available.
(b) An 8(a) contract, sole source or
competitive, may not be awarded if the
price of the contract results in a cost
to the contracting agency which exceeds a fair market price.
(c) If requested by the SBA, the contracting officer shall make available
the data used to estimate the fair market price within 10 working days.
(d) The negotiated contract price and
the estimated fair market price are
subject to the concurrence of the SBA.
In the event of a disagreement between
the contracting officer and the SBA,
the SBA may appeal in accordance
with 19.810.
[54 FR 46005, Oct. 31, 1989, as amended at 62
FR 51270, Sept. 30, 1997; 64 FR 32745, 32748,
June 17, 1999]
19.807 Estimating the fair market
price.
(a) The contracting officer shall estimate the fair market price of the work
to be performed by the 8(a) contractor.
(b) In estimating the fair market
price for an acquisition other than
those covered in paragraph (c) of this
section, the contracting officer shall
use cost or price analysis and consider
commercial prices for similar products
and services, available in-house cost
estimates, data (including cost or pricing data) submitted by the SBA or the
8(a) contractor, and data obtained from
any other Government agency.
(c) In estimating a fair market price
for a repeat purchase, the contracting
officer shall consider recent award
prices for the same items or work if
there is comparability in quantities,
conditions, terms, and performance
times. The estimated price should be
adjusted to reflect differences in specifications, plans, transportation costs,
packaging and packing costs, and other
circumstances. Price indices may be
used as guides to determine the
changes in labor and material costs.
Comparison of commercial prices for
similar items may also be used.
19.808
Contract negotiation.
19.808–1
Sole source.
(a) The SBA is responsible for initiating negotiations with the agency
within the time established by the
agency. If the SBA does not initiate negotiations within the agreed time and
the agency cannot allow additional
time, the agency may, after notifying
the SBA, proceed with the acquisition
from other sources.
(b) The SBA should participate,
whenever practicable, in negotiating
the contracting terms. When mutually
agreeable, the SBA may authorize the
contracting activity to negotiate directly with the 8(a) contractor. Whether or not direct negotiations take
place, the SBA is responsible for approving the resulting contract before
award.
[54 FR 46005, Oct. 31, 1989, as amended at 55
FR 3883, Feb. 5, 1990; 56 FR 55378, Oct. 25, 1991;
61 FR 67421, Dec. 20, 1996]
19.808–2
Competitive.
In competitive 8(a) acquisitions subject to part 15, the contracting officer
conducts negotiations directly with the
competing 8(a) firms. Conducting competitive negotiations among 8(a) firms
prior to SBA’s formal acceptance of the
acquisition for the 8(a) Program may
be grounds for SBA’s not accepting the
acquisition for the 8(a) Program.
[64 FR 32745, June 17, 1999]
19.809
Preaward considerations.
The contracting officer should request a preaward survey of the 8(a)
contractor whenever considered useful.
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Federal Acquisition Regulation
19.811–1
If the results of the preaward survey or
other information available to the contracting officer raise substantial doubt
as to the firm’s ability to perform, the
contracting officer must refer the matter to SBA for Certificate of Competency consideration under subpart
19.6.
if appropriate. The decision shall be
made a part of the contract file.
[64 FR 32745, June 17, 1999]
19.811–1
19.810 SBA appeals.
(a) The SBA Administrator may submit the following matters for determination to the agency head if the
SBA and the contracting officer fail to
agree on them:
(1) The decision not to make a particular acquisition available for award
under the 8(a) Program.
(2) A contracting officer’s decision to
reject a specific 8(a) firm for award of
an 8(a) contract after SBA’s acceptance
of the requirement for the 8(a) Program.
(3) The terms and conditions of a proposed 8(a) contract, including the contracting activity’s NAICS code designation and estimate of the fair market price.
(b) Notification of a proposed appeal
to the agency head by the SBA must be
received by the contracting officer
within 5 working days after the SBA is
formally notified of the contracting officer’s decision. The SBA will provide
the agency Director for Small and Disadvantaged Business Utilization a copy
of this notification of the intent to appeal. The SBA must send the written
appeal to the head of the contracting
activity within 15 working days of
SBA’s notification of intent to appeal
or the contracting activity may consider the appeal withdrawn. Pending
issuance of a decision by the agency
head, the contracting officer must suspend action on the acquisition. The
contracting officer need not suspend
action on the acquisition if the contracting officer makes a written determination that urgent and compelling
circumstances that significantly affect
the interests of the United States will
not permit waiting for a decision.
(c) If the SBA appeal is denied, the
decision of the agency head shall specify the reasons for the denial, including
the reasons why the selected firm was
determined incapable of performance,
(a) The contract to be awarded by the
agency to the SBA shall be prepared in
accordance with agency procedures and
in the same detail as would be required
in a contract with a business concern.
The contracting officer shall use the
Standard Form 26 as the award form,
except for construction contracts, in
which case the Standard Form 1442
shall be used as required in 36.701(b).
(b) The agency shall prepare the contract that the SBA will award to the
8(a) contractor in accordance with
agency procedures, as if the agency
were awarding the contract directly to
the 8(a) contractor, except for the following.
(1) The award form shall cite 41
U.S.C. 253(c)(5) or 10 U.S.C. 2304(c)(5) (as
appropriate) as the authority for use of
other than full and open competition.
(2) Appropriate clauses shall be included, as necessary, to reflect that the
contract is between the SBA and the
8(a) contractor.
(3) The following items shall be inserted by the SBA—
(i) The SBA contract number.
(ii) The effective date.
(iii) The typed name of the SBA’s
contracting officer.
(iv) The signature of the SBA’s contracting officer.
(v) The date signed.
(4) The SBA will obtain the signature
of the 8(a) contractor prior to signing
and returning the prime contract to
the contracting officer for signature.
The SBA will make every effort to obtain signatures and return the contract, and any subsequent bilateral
modification, to the contracting officer
within a maximum of 10 working days.
(c) Except in procurements where the
SBA will make advance payments to
its 8(a) contractor, the agency contracting officer may, as an alternative
to the procedures in paragraphs (a) and
[54 FR 46005, Oct. 31, 1989, as amended at 64
FR 32745, June 17, 1999; 65 FR 46057, July 26,
2000]
19.811
Preparing the contracts.
Sole source.
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19.811–2
48 CFR Ch. 1 (10–1–03 Edition)
(b) of this subsection, use a single contract document for both the prime contract between the agency and the SBA
and its 8(a) contractor. The single contract document shall contain the information in paragraphs (b) (1), (2), and (3)
of this subsection. Appropriate blocks
on the Standard Form (SF) 26 or 1442
will be asterisked and a continuation
sheet appended as a tripartite agreement which includes the following:
(1) Agency acquisition office, prime
contract number, name of agency contracting officer and lines for signature,
date signed, and effective date.
(2) The SBA office, the SBA contract
number, name of the SBA contracting
officer, and lines for signature and date
signed.
(3) Name and lines for the 8(a) contractor’s signature and date signed.
(d) For acquisitions not exceeding
the simplified acquisition threshold,
the contracting officer may use the alternative procedures in paragraph (c)
of this subsection with the appropriate
simplified acquisition forms.
[54 FR 46005, Oct. 31, 1989, as amended at 55
FR 3883, Feb. 5, 1990; 61 FR 67421, Dec. 20,
1996; 62 FR 233, Jan. 2, 1997; 62 FR 64940, Dec.
9, 1997; 64 FR 32745, June 17, 1999]
19.811–2 Competitive.
(a) The contract will be prepared in
accordance with 14.408–1(d), except that
appropriate blocks on the Standard
Form 26 or 1442 will be asterisked and
a continuation sheet appended as a tripartite agreement which includes the
following:
(1) The agency contracting activity,
prime contract number, name of agency contracting officer, and lines for
signature, date signed, and effective
date.
(2) The SBA office, the SBA subcontract number, name of the SBA
contracting officer and lines for signature and date signed.
(b) The process for obtaining signatures shall be as specified in 19.811–
1(b)(4).
[54 FR 46005, Oct. 31, 1989, as amended at 60
FR 34739, July 3, 1995; 62 FR 233, Jan. 2, 1997;
64 FR 32745, June 17, 1999]
19.811–3 Contract clauses.
(a) The contracting officer shall insert the clause at 52.219–11, Special 8(a)
Contract Conditions, in contracts between the SBA and the agency when
the acquisition is accomplished using
the procedures of 19.811–1(a) and (b).
(b) The contracting officer shall insert the clause at 52.219–12, Special 8(a)
Subcontract Conditions, in contracts
between the SBA and its 8(a) contractor when the acquisition is accomplished using the procedures of 19.811–
1(a) and (b).
(c) The contracting officer shall insert the clause at 52.219–17, Section 8(a)
Award, in competitive solicitations and
contracts when the acquisition is accomplished using the procedures of
19.805 and in sole source awards which
utilize the alternative procedure in
19.811–1(c).
(d) The contracting officer shall insert the clause at 52.219–18, Notification of Competition Limited to Eligible
8(a) Concerns, in competitive solicitations and contracts when the acquisition is accomplished using the procedures of 19.805.
(1) The clause at 52.219–18 with its Alternate I will be used when competition is to be limited to 8(a) concerns
within one or more specific SBA districts pursuant to 19.804–2.
(2) The clause at 52.219–18 with its Alternate II will be used when the acquisition is for a product in a class for
which the Small Business Administration has waived the nonmanufacturer
rule (see 19.102(f) (4) and (5)).
(e) The contracting officer shall insert the clause at 52.219–14, Limitations
or Subcontracting, in any solicitation
and contract resulting from this subpart.
[54 FR 46005, Oct. 31, 1989, as amended at 55
FR 3883, Feb. 5, 1990; 55 FR 25529, June 21,
1990; 60 FR 48263, Sept. 18, 1995; 61 FR 39209,
July 26, 1996; 61 FR 67421, Dec. 20, 1996]
19.812 Contract administration.
(a) The contracting officer shall assign contract administration functions,
as required, based on the location of
the 8(a) contractor (see Federal Directory of Contract Administration Services Components (available via the
Internet
at
http://www.dcma.mil/
casbook/casbook.htm)).
(b) The agency shall distribute copies
of the contract(s) in accordance with
part 4. All contracts and modifications,
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Federal Acquisition Regulation
19.902
if any, shall be distributed to both the
SBA and the firm in accordance with
the timeframes set forth in 4.201.
(c) To the extent consistent with the
contracting activity’s capability and
resources, 8(a) contractors furnishing
requirements shall be afforded production and technical assistance, including, when appropriate, identification of
causes of deficiencies in their products
and suggested corrective action to
make such products acceptable.
(d) An 8(a) contract, whether in the
base or an option year, must be terminated for convenience if the 8(a) concern to which it was awarded transfers
ownership or control of the firm or if
the contract is transferred or novated
for any reason to another firm, unless
the Administrator of the SBA waives
the requirement for contract termination (13 CFR 124.515). The Administrator may waive the termination requirement only if certain conditions
exist. Moreover, a waiver of the requirement for termination is permitted
only if the 8(a) firm’s request for waiver is made to the SBA prior to the actual relinquishment of ownership or
control, except in the case of death or
incapacity where the waiver must be
submitted within 60 days after such an
occurrence. The clauses in the contract
entitled ‘‘Special 8(a) Contract Conditions’’ and ‘‘Special 8(a) Subcontract
Conditions’’ require the SBA and the
8(a) subcontractor to notify the contracting officer when ownership of the
firm is being transferred. When the
contracting officer receives information that an 8(a) contractor is planning
to transfer ownership or control to another firm, the contracting officer
must take action immediately to preserve the option of waiving the termination requirement. The contracting
officer should determine the timing of
the proposed transfer and its effect on
contract performance and mission support. If the contracting officer determines that the SBA does not intend to
waive the termination requirement,
and termination of the contract would
severely impair attainment of the
agency’s program objectives or mission, the contracting officer should immediately notify the SBA in writing
that the agency is requesting a waiver.
Within 15 business days thereafter, or
such longer period as agreed to by the
agency and the SBA, the agency head
must either confirm or withdraw the
request for waiver. Unless a waiver is
approved by the SBA, the contracting
officer must terminate the contract for
convenience upon receipt of a written
request by the SBA. This requirement
for a convenience termination does not
affect the Government’s right to terminate for default if the cause for termination of an 8(a) contract is other than
the transfer of ownership or control.
[54 FR 46005, Oct. 31, 1989, as amended at 56
FR 15151, Apr. 15, 1991; 64 FR 32745, June 17,
1999; 66 FR 2141, Jan. 10, 2001]
Subpart 19.9—Very Small Business
Pilot Program
AUTHORITY: 41 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 64 FR 10536, Mar. 4, 1999, unless
otherwise noted.
19.901
General.
(a) The Very Small Business Pilot
Program was established under Section
304 of the Small Business Administration Reauthorization and Amendments
Act of 1994 (Public Law 103–403).
(b) The purpose of the program is to
improve access to Government contract opportunities for concerns that
are substantially below SBA’s size
standards by reserving certain acquisitions for competition among such concerns.
(c) This pilot program terminates on
September 30, 2003. Therefore, any
award under this program must be
made on or before this date.
[64 FR 10536, Mar. 4, 1999, as amended at 66
FR 53500, Oct. 22, 2001]
19.902
Designated SBA district.
A designated SBA district is the geographic area served by any of the following SBA district offices:
(1) Albuquerque, NM, serving New
Mexico.
(2) Los Angeles, CA, serving the following counties in California: Los Angeles, Santa Barbara, and Ventura.
(3) Boston, MA, serving Massachusetts.
(4) Louisville, KY, serving Kentucky.
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19.903
48 CFR Ch. 1 (10–1–03 Edition)
(5) Columbus, OH, serving the following counties in Ohio: Adams, Allen,
Ashland, Athens, Auglaize, Belmont,
Brown, Butler, Champaign, Clark,
Clermont,
Clinton,
Coshocton,
Crawford, Darke, Delaware, Fairfield,
Fayette, Franklin, Gallia, Greene,
Guernsey, Hamilton, Hancock, Hardin,
Highland, Hocking, Holmes, Jackson,
Knox, Lawrence, Licking, Logan, Madison, Marion, Meigs, Mercer, Miami,
Monroe, Montgomery, Morgan, Morrow, Muskingum, Noble, Paulding,
Perry, Pickaway, Pike, Preble, Putnam, Richland, Ross, Scioto, Shelby,
Union, Van Wert, Vinton, Warren,
Washington, and Wyandot.
(6) New Orleans, LA, serving Louisiana.
(7) Detroit, MI, serving Michigan.
(8) Philadelphia, PA, serving the
State of Delaware and the following
counties in Pennsylvania: Adams,
Berks, Bradford, Bucks, Carbon, Chester, Clinton, Columbia, Cumberland,
Dauphin, Delaware, Franklin, Fulton,
Huntington,
Juniata,
Lackawanna,
Lancaster, Lebanon, Lehigh, Luzerne,
Lycoming, Mifflin, Monroe, Montgomery,
Montour,
Northampton,
Northumberland, Philadelphia, Perry,
Pike, Potter, Schuylkill, Snyder, Sullivan, Susquehanna, Tioga, Union,
Wayne, Wyoming, and York.
(9) El Paso, TX, serving the following
counties in Texas: Brewster, Culberson,
El Paso, Hudspeth, Jeff Davis, Pecos,
Presidio, Reeves, and Terrell.
(10) Santa Ana, CA, serving the following counties in California: Orange,
Riverside, and San Bernadino.
[64 FR 10536, Mar. 4, 1999, as amended at 66
FR 2130, Jan. 10, 2001]
19.903 Applicability.
(a) The Very Small Business Pilot
Program applies to acquisitions, including construction acquisitions, with
an estimated value exceeding $2,500 but
not greater than $50,000, when—
(1) In the case of an acquisition for
supplies, the contracting office is located within the geographical area
served by a designated SBA district; or
(2) In the case of an acquisition for
other than supplies, the contract will
be performed within the geographical
area served by a designated SBA district.
(b) The Very Small Business Pilot
Program does not apply to—
(1) Acquisitions that will be awarded
pursuant to the 8(a) Program;
(2) Any requirement that is subject
to the Small Business Competitiveness
Demonstration Program (see Subpart
19.10);
(3) Acquisitions of $7,500 or less for
acquisitions of supplies or services
that, as determined by the head of the
agency, are to be used to facilitate defense against or recovery from terrorism or nuclear, biological, chemical,
or radiological attack as described in
13.201(g)(1)(i); or
(4) Acquisitions of $15,000 or less facilitating the defense against terrorism
or biological or chemical attack
against the United States as described
in 13.201(g)(1)(ii).
[64 FR 10536, Mar. 4, 1999, as amended at 67
FR 56121, Aug. 30, 2002; 68 FR 4051, Jan. 27,
2003]
19.904 Procedures.
(a) A contracting officer must setaside for very small business concerns
each acquisition that has an anticipated dollar value exceeding $2,500 but
not greater than $50,000 if—
(1) In the case of an acquisition for
supplies—
(i) The contracting office is located
within the geographical area served by
a designated SBA district; and
(ii) There is a reasonable expectation
of obtaining offers from two or more
responsible very small business concerns headquartered within the geographical area served by the designated
SBA district that are competitive in
terms of market prices, quality, and
delivery; or
(2) In the case of an acquisition for
services—
(i) The contract will be performed
within the geographical area served by
a designated SBA district; and
(ii) There is a reasonable expectation
of obtaining offers from two or more
responsible very small business concerns headquartered within the geographical area served by the designated
SBA district that are competitive in
terms of market prices, quality, and
delivery.
(b) Contracting officers must determine the applicable designated SBA
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Federal Acquisition Regulation
19.1003
district office as defined at 19.902. The
geographic areas served by the SBA
Los Angeles and Santa Ana District offices will be treated as one designated
SBA district for the purposes of this
subpart.
(c) If no reasonable expectation exists under paragraphs (a)(1)(ii) and
(a)(2)(ii) of this section, the contracting officer must document the file
and proceed with the acquisition in accordance with Subpart 19.5.
(d) If the contracting officer receives
only one acceptable offer from a responsible very small business concern
in response to a very small business
set-aside,
the
contracting
officer
should make an award to that firm. If
there is no offer received from a very
small business concern, the contracting officer must cancel the very
small business set-aside and proceed
with the acquisition in accordance
with Subpart 19.5.
[64 FR 10536, Mar. 4, 1999, as amended at 64
FR 51830, Sept. 24, 1999]
19.905 Solicitation provision and contract clause.
Insert the clause at 52.219–5, Very
Small Business Set-Aside, in solicitations and contracts if the acquisition is
set aside for very small business concerns.
(a) Insert the clause at 52.219–5 with
its Alternate I—
(1) In construction or service contracts; or
(2) When the acquisition is for a product in a class for which the Small Business Administration has waived the
nonmanufacturer rule (see 19.102(f)(4)
and (5)).
(b) Insert the clause at 52.219–5 with
its Alternate II when Alternate I does
not apply, the acquisition is processed
under simplified acquisition procedures, and the total amount of the contract does not exceed $25,000.
[64 FR 10536, Mar. 4, 1999, as amended at 64
FR 51830, Sept. 24, 1999]
Subpart 19.10—Small Business
Competitiveness Demonstration Program
SOURCE: 54 FR 5055, Jan. 31, 1989, unless
otherwise noted.
19.1001
General.
The Small Business Competitiveness
Demonstration Program was established by the Small Business Competitiveness Demonstration Program Act
of 1988, Public Law 100–656 (15 U.S.C. 644
note). The program is implemented by
a joint OFPP and SBA Policy Directive
and Implementation Plan, dated May
25, 1999. The program consists of two
major components—
(a) Unrestricted competition in four
designated industry groups; and
(b) Enhanced small business participation in 10 agency targeted industry
categories.
[63 FR 9057, Feb. 23, 1998, as amended at 65
FR 16276, Mar. 27, 2000]
19.1002
Definitions.
Emerging small business, as used in
this subpart, means a small business
concern whose size is no greater than
50 percent of the numerical size standard applicable to the North American
Industry
Classification
System
(NAICS) code assigned to a contracting
opportunity.
Emerging
small
business
reserve
amount, for the designated groups described in 19.1005, means a threshold established by the Office of Federal Procurement Policy of—
(1) $25,000 for construction, refuse
systems and related services, and nonnuclear ship repair; and
(2) $50,000 for architectural and engineering services.
[54 FR 5055, Jan. 31, 1989, as amended at 65
FR 16276, Mar. 27, 2000; 65 FR 46056, July 26,
2000]
19.1003
Purpose.
The purpose of the Program is to—
(a) Assess the ability of small businesses to compete successfully in certain industry categories without competition being restricted by the use of
small business set-asides. This portion
of the program is limited to the four
designated industry groups listed in
section 19.1005.
(b) Expand small business participation in 10 targeted industry categories
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19.1004
48 CFR Ch. 1 (10–1–03 Edition)
through continued use of set-aside procedures, increased management attention, and specifically tailored acquisition
procedures,
as
implemented
through agency procedures.
(c) Measure the extent to which
awards are made to a new category of
small businesses (ESB’s), and to provide for certain acquisitions to be reserved for ESB participation only. This
portion of the program is also limited
to the four designated industry groups
listed in section 19.1005.
[54 FR 5055, Jan. 31, 1989, as amended at 55
FR 52792, Dec. 21, 1990; 63 FR 9057, Feb. 23,
1998; 65 FR 16276, Mar. 27, 2000]
19.1004 Participating agencies.
The following agencies have been
identified as participants in the demonstration program:
The Department of Agriculture.
The Department of Defense, except
the National Imagery and Mapping
Agency.
The Department of Energy.
The Department of Health and
Human Services.
The Department of Interior.
The Department of Transportation.
The Department of Veterans Affairs.
The Environmental Protection Agency.
The General Services Administration.
The National Aeronautics and Space
Administration.
[54 FR 5055, Jan. 31, 1989, as amended at 54
FR 29281, July 11, 1989; 55 FR 38516, Sept. 18,
1990; 63 FR 58602, Oct. 30, 1998]
19.1005
NAICS code
236115
236116
236117
236118
236210
236220
Applicability.
(a) Designated industry groups.
NAICS description
1. Construction (Except Dredging) Subsector 236—Construction of Buildings
....................... New Single-Family Housing Construction (except Operative Builders).
....................... New Multi-Family Housing Construction (except Operative Builders).
....................... New Housing Operative Builders.
....................... Residential Remodelers.
....................... Industrial Building Construction.
....................... Commercial and Institutional Building Construction.
Subsector 237—Heavy and Civil Engineering Construction
237110
237120
237130
237210
237310
237990
.......................
.......................
.......................
.......................
.......................
.......................
Water and Sewer Line and Related Structures Construction.
Oil and Gas Pipeline and Related Structures Construction.
Power and Communication Line and Related Structures Construction.
Land Subdivision.
Highway, Street, and Bridge Construction.
Other Heavy and Civil Engineering Construction (except dredging).
238110
238120
238130
238140
238150
238160
238170
238190
238210
238220
238290
238310
238320
238330
238340
238350
238390
238910
238990
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
Poured Concrete Foundation and Structure Contractors.
Structural Steel and Precast Concrete Contractors.
Framing Contractors.
Masonry Contractors.
Glass and Glazing Contractors.
Roofing Contractors.
Siding Contractors.
Other Foundation, Structure, and Building Exterior Contractors.
Electrical Contractors.
Plumbing, Heating, and Air-Conditioning Contractors.
Other Building Equipment Contractors.
Drywall and Insulation Contractors.
Painting and Wall Covering Contractors.
Flooring Contractors.
Tile and Terrazzo Contractors.
Finish Carpentry Contractors.
Other Building Finishing Contractors.
Site Preparation Contractors.
All Other Specialty Trade Contractors.
Subsector 238—Specialty Trade Contractors
2. Non-Nuclear Ship Repair
336611 .......................
PSC J998 ...................
Ship Building and Repairing.
Non-nuclear Ship Repair (East) Ship Repair (including overhauls and conversions) performed on nonnuclear propelled and nonpropelled ships east of the 108th meridian.
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Federal Acquisition Regulation
19.1007
NAICS code
NAICS description
PSC J999 ...................
Non-nuclear Ship Repair (West) Ship Repair (including overhauls and conversions) performed on nonnuclear propelled and nonpropelled ships west of the 108th meridian.
3. Architectural and Engineering Services (Including Surveying and Mapping)
541310 .......................
541330 .......................
PSC C111 ..................
PSC C112 ..................
PSC C113 ..................
PSC C114 ..................
PSC C115 ..................
PSC C116 ..................
PSC C117 ..................
PSC C118 ..................
PSC C119 ..................
PSC C121 ..................
PSC C122 ..................
PSC C123 ..................
PSC C124 ..................
PSC C129 ..................
PSC C130 ..................
PSC C211 ..................
PSC C212 ..................
PSC C213 ..................
PSC C214 ..................
PSC C215 ..................
PSC C216 ..................
PSC C219 ..................
541360 .......................
541370 .......................
PSC T002 ...................
PSC T004 ...................
PSC T008 ...................
PSC T009 ...................
PSC T014 ...................
PSC R404 ..................
Architectural Services or;
Engineering Services.
Administrative and Service Buildings.
Airfield, Communication and Missile Facilities.
Educational Buildings.
Hospital Buildings.
Industrial Buildings.
Residential Buildings.
Warehouse Buildings.
Research and Development Facilities.
Other Buildings.
Conservation and Development.
Highways, Roads, Streets, Bridges and Railways.
Electric Power Generation (EPG).
Utilities.
Other Non-Building Structures.
Restoration.
Architect-Engineering Services (including landscaping, interior layout, and designing).
Engineering Drafting Services.
A&E Inspection Services (non-construction).
A&E Management Engineering Services.
A&E Production Engineering Services (including Design and Control, and Building Programming).
Marine Architect and Engineering Services.
Other Architect and Engineering Services.
Geophysical Surveying and Mapping Services or;
Surveying and Mapping (except Geophysical) Services.
Cartography Services.
Charting Services.
Photogrammetry Services.
Aerial Photographic Services.
Topography Services.
Land Surveys, Cadastral Services (non-construction).
562111 .......................
562119 .......................
562219 .......................
PSC S205 ..................
Solid Waste Collection or;
Other Waste Collection or;
Other Nonhazardous Waste Treatment and Disposal.
Trash/Garbage Collection Services—including Portable Sanitation Services.
4. Refuse Systems and Related Services
(b) Targeted industry categories. Each
participating agency, in consultation
with the Small Business Administration, designates its own targeted industry categories for enhanced small business participation.
[55 FR 52792, Dec. 21, 1990, as amended at 59
FR 67036, Dec. 28, 1994; 64 FR 16276, Mar. 27,
2000; 65 FR 46056, July 26, 2000; 66 FR 65370,
Dec. 18, 2001; 68 FR 43874, July 24, 2003]
19.1006
Exclusions.
This subpart does not apply to—
(a) Orders placed against Federal
Supply Schedules;
(b) Contract awards to educational
and nonprofit organizations; or
(c) Contract awards to governmental
entities.
[65 FR 16276, Mar. 27, 2000]
19.1007
Procedures.
(a) General. (1) All solicitations must
include the applicable NAICS code and
size standards.
(2) The face of each award made pursuant to the program must contain a
statement that the award is being
issued pursuant to the Small Business
Competitiveness Demonstration Program.
(b) Solicitations greater than the ESB
reserve amount. (1) Solicitations for acquisitions in any of the four designated
industry groups that have an anticipated dollar value greater than the
emerging
small
business
reserve
amount must not be considered for
small business set-asides under subpart
19.5. However, agencies may reinstate
the use of small business set-asides as
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19.1008
48 CFR Ch. 1 (10–1–03 Edition)
necessary to meet their assigned goals,
but only within organizational units
that failed to meet the small business
participation goal.
(2) Acquisitions in the designated industry groups must continue to be considered for placement under the 8(a)
Program (see subpart 19.8) and the
HUBZone Program (see subpart 19.13).
(c) Solicitations equal to or less than
the ESB reserve amount. (1) Solicitations
for acquisitions in the four designated
industry groups with an estimated
value equal to or less than the emerging small business reserve amount
must be set aside for ESBs, provided
that the contracting officer determines
that there is a reasonable expectation
of obtaining offers from two or more
responsible ESBs that will be competitive in terms of market price, quality,
and delivery. If no such reasonable expectation exists, the contracting officer must—
(i) For acquisitions $25,000 or less,
proceed in accordance with subpart
19.5, 19.8, or 19.13; or
(ii) For acquisitions greater than
$25,000 and less than or equal to the
ESB reserve amount, proceed in accordance with paragraph (b) of this section.
(2) If the contracting officer proceeds
with the ESB set-aside and receives a
quotation from only one ESB at a reasonable price, the contracting officer
must make the award. If there is no
quote from an ESB, or the quote is not
at a reasonable price, then the contracting officer must cancel the ESB
set-aside and proceed in accordance
with paragraph (c)(1)(i) or (ii) of this
section.
(d) Expanding small business participation in targeted industry categories. Each
participating agency must develop and
implement a time-phased strategy with
incremental goals, including reporting
on goal attainment. To the extent
practicable, provisions that encourage
and promote teaming and joint ventures must be considered. These provisions should permit small business
firms to effectively compete for contracts that individual small businesses
would be ineligible to compete for be-
cause of lack of production capacity or
capability.
[65 FR 16276, Mar. 27, 2000, as amended at 65
FR 46057, July 26, 2000]
19.1008
Solicitation provisions.
(a) Insert in full text the provision at
52.219–19, Small Business Concern Representation for the Small Business
Competitiveness Demonstration Program, in all solicitations in the four
designated industry groups.
(b) Insert in full text the provision at
52.219–20, Notice of Emerging Small
Business Set-Aside, in all solicitations
for emerging small businesses in accordance with 19.1007(c).
(c) Insert in full text the provision at
52.219–21, Small Business Size Representation for Targeted Industry Categories under the Small Business Competitiveness Demonstration Program,
in all solicitations issued in each of the
targeted industry categories under the
Small Business Competitiveness Demonstration Program that are expected
to result in a contract award in excess
of $25,000.
[55 FR 52793, Dec. 21, 1990. Redesignated and
amended at 65 FR 16276, Mar. 27, 2000]
Subpart 19.11—Price Evaluation
Adjustment for Small Disadvantaged Business Concerns
SOURCE: 63 FR 35724, June 30, 1998, unless
otherwise noted.
19.1101
General.
A price evaluation adjustment for
small disadvantaged business concerns
shall be applied as determined by the
Department
of
Commerce
(see
19.201(b)). Joint ventures may qualify
provided the requirements set forth in
13 CFR 124.1002(f) are met.
19.1102
Applicability.
(a) Use the price evaluation adjustment in competitive acquisitions in
the authorized NAICS Industry Subsector.
(b) Do not use the price evaluation
adjustment in acquisitions—
(1) That are less than or equal to the
simplified acquisition threshold;
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Federal Acquisition Regulation
19.1201
(2) That are awarded pursuant to the
8(a) Program;
(3) That are set aside for small business concerns;
(4) That are set aside for HUBZone
small business concerns;
(5) Where price is not a selection factor so that a price evaluation adjustment would not be considered (e.g., architect/engineer acquisitions); or
(6) Where all fair and reasonable offers are accepted (e.g., the award of
multiple award schedule contracts).
[64 FR 36223, July 2, 1999, as amended at 65
FR 46057, July 26, 2000]
19.1103
Procedures.
(a) Give offers from small disadvantaged business concerns a price evaluation adjustment by adding the factor
determined by the Department of Commerce to all offers, except—
(1) Offers from small disadvantaged
business concerns that have not waived
the evaluation adjustment; or, if a
price evaluation adjustment for small
disadvantaged business concerns is authorized on a regional basis, offers
from small disadvantaged business concerns, whose address is in such a region, that have not waived the evaluation adjustment;
(2) An otherwise successful offer of
eligible products under the Trade
Agreements Act when the acquisition
equals or exceeds the dollar threshold
in 25.403;
(3) An otherwise successful offer
where application of the factor would
be inconsistent with a Memorandum of
Understanding or other international
agreement with a foreign government;
(4) For DoD, NASA, and Coast Guard
acquisitions, an otherwise successful
offer from a historically black college
or university or minority institution;
or
(5) For DoD acquisitions, an otherwise successful offer of qualifying
country end products (see DFARS
225.000–70 and 252.225–7001).
(b) Apply the factor to a line item or
a group of line items on which award
may be made. Add other evaluation
factors such as transportation costs or
rent-free use of Government facilities
to the offers before applying the price
evaluation adjustment.
(c) Do not evaluate offers using the
price evaluation adjustment when it
would cause award, as a result of this
adjustment, to be made at a price that
exceeds fair market price by more than
the factor as determined by the Department of Commerce (see 19.202–6(a)).
[63 FR 35724, June 30, 1998, as amended at 63
FR 52427, Sept. 30, 1998; 64 FR 36223, July 2,
1999; 64 FR 72419, Dec. 27, 1999]
19.1104 Contract clause.
Insert the clause at 52.219–23, Notice
of Price Evaluation Adjustment for
Small Disadvantaged Business Concerns, in solicitations and contracts
when the circumstances in 19.1101 and
19.1102 apply. If a price evaluation adjustment is authorized on a regional
basis, the clause shall be included in
the solicitation even if the place of performance is outside an authorized region. The contracting officer shall insert the authorized price evaluation adjustment factor. The clause shall be
used with its Alternate I when the contracting officer determines that there
are no small disadvantaged business
manufacturers that can meet the requirements of the solicitation. The
clause shall be used with its Alternate
II when a price evaluation adjustment
is authorized on a regional basis.
[63 FR 52427, Sept. 30, 1998, as amended at 64
FR 36223, July 2, 1999]
Subpart 19.12—Small Disadvantaged Business Participation
Program
SOURCE: 63 FR 36123, July 1, 1998, unless
otherwise noted.
19.1201 General.
This subpart addresses the evaluation of the extent of participation of
small disadvantaged business (SDB)
concerns in performance of contracts
in the North American Industry Classification System (NAICS) Industry Subsectors as determined by the Department of Commerce (see 19.201(b)), and
to the extent authorized by law. Two
mechanisms are addressed in this subpart—
(a) An evaluation factor or subfactor
for the participation of SDB concerns
in performance of the contract; and
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19.1202
48 CFR Ch. 1 (10–1–03 Edition)
(b) An incentive subcontracting program for SDB concerns.
[63 FR 36123, July 1, 1998, as amended at 65
FR 46057, July 26, 2000]
19.1202
Evaluation factor or subfactor.
19.1202–1
General.
The extent of participation of SDB
concerns in performance of the contract, in the NAICS Industry Subsector
as determined by the Department of
Commerce, and to the extent authorized by law, shall be evaluated consistent with this section. Participation
in performance of the contract includes
joint ventures, teaming arrangements,
and subcontracts. Credit under the
evaluation factor or subfactor is not
available to SDB concerns that receive
a price evaluation adjustment under
Subpart 19.11. If an SDB concern
waives the price evaluation adjustment
at Subpart 19.11, participation in performance of that contract includes the
work expected to be performed by the
SDB concern at the prime contract
level.
[63 FR 36123, July 1, 1998, as amended at 65
FR 46057, July 26, 2000]
19.1202–2
Applicability.
(a) Except as provided in paragraph
(b) of this subsection, the extent of participation of SDB concerns in performance of the contract in the authorized
NAICS Industry Subsector shall be
evaluated in competitive, negotiated
acquisitions expected to exceed $500,000
($1,000,000 for construction).
(b) The extent of participation of
SDB concerns in performance of the
contract in the authorized NAICS Industry Subsector (see paragraph (a) of
this subsection) shall not be evaluated
in—
(1) Small business set-asides (see subpart 19.5) and HUBZone set-asides (see
subpart 19.13);
(2) 8(a) acquisitions (see Subpart
19.8);
(3) Negotiated acquisitions where the
lowest price technically acceptable
source selection process is used (see
15.101–2); or
(4) Contract actions that will be performed entirely outside of the United
States and its outlying areas.
[63 FR 36123, July 1, 1998, as amended at 63
FR 70272, Dec. 18, 1998; 65 FR 46057, July 26,
2000; 68 FR 28082, May 22, 2003]
19.1202–3 Considerations
in
developing an evaluation factor or subfactor.
In developing an SDB participation
evaluation factor or subfactor for the
solicitation, agencies may consider—
(a) The extent to which SDB concerns are specifically identified;
(b) The extent of commitment to use
SDB concerns (for example, enforceable
commitments are to be weighted more
heavily than non-enforceable ones);
(c) The complexity and variety of the
work SDB concerns are to perform;
(d) The realism of the proposal;
(e) Past performance of offerors in
complying with subcontracting plan
goals for SDB concerns and monetary
targets for SDB participation; and
(f) The extent of participation of SDB
concerns in terms of the value of the
total acquisition.
[63 FR 36123, July 1, 1998, as amended at 64
FR 36224, July 2, 1999]
19.1202–4 Procedures.
(a) The solicitation shall describe the
SDB participation evaluation factor or
subfactor. The solicitation shall require offerors to provide, with their offers, targets, expressed as dollars and
percentages of total contract value, in
each of the applicable, authorized
NAICS Industry Subsector, and a total
target for SDB participation by the
contractor, including joint venture
partners, and team members, and a
total target for SDB participation by
subcontractors. The solicitation shall
require an SDB offeror that waives the
SDB price evaluation adjustment in
the clause at 52.219–23, Notice of Price
Evaluation Adjustment for Small Disadvantaged Business Concerns, to provide with its offer a target for the work
that it intends to perform as the prime
contractor. The solicitation shall state
that any targets will be incorporated
into and become part of any resulting
contract. Contractors with SDB participation targets shall be required to
report SDB participation.
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Federal Acquisition Regulation
19.1303
(b) When an evaluation includes an
SDB participation evaluation factor or
subfactor that considers the extent to
which SDB concerns are specifically
identified, the SDB concerns considered in the evaluation shall be listed in
the contract, and the contractor shall
be required to notify the contracting
officer of any substitutions of firms
that are not SDB concerns.
[63 FR 36123, July 1, 1998, as amended at 65
FR 46057, July 26, 2000]
19.1203 Incentive subcontracting with
small disadvantaged business concerns.
The contracting officer may encourage increased subcontracting opportunities in the NAICS Industry Subsector
as determined by the Department of
Commerce for SDB concerns in negotiated acquisitions by providing monetary incentives (see the clause at
52.219–26, Small Disadvantaged Business Participation Program Incentive
Subcontracting, and 19.1204(c)). Monetary incentives shall be based on actual
achievement as compared to proposed
monetary targets for SDB subcontracting. The incentive subcontracting
program is separate and distinct from
the establishment, monitoring, and enforcement of SDB subcontracting goals
in a subcontracting plan.
[63 FR 36123, July 1, 1998, as amended at 65
FR 46057, July 26, 2000]
19.1204 Solicitation provisions and
contract clauses.
(a) The contracting officer may insert a provision substantially the same
as the provision at 52.219–24, Small Disadvantaged
Business
Participation
Program Targets, in solicitations that
consider the extent of participation of
SDB concerns in performance of the
contract. The contracting officer may
vary the terms of this provision consistent with the policies in 19.1202–4.
(b) The contracting officer shall insert the clause at 52.219–25, Small Disadvantaged
Business
Participation
Program—Disadvantaged Status and
Reporting, in solicitations and contracts that consider the extent of participation of SDB concerns in performance of the contract.
(c) The contracting officer may, when
contracting by negotiation, insert in
solicitations and contracts containing
the clause at 52.219–25, Small Disadvantaged Business Participation Program—Disadvantaged Status and Reporting, a clause substantially the
same as the clause at 52.219–26, Small
Disadvantaged Business Participation
Program—Incentive
Subcontracting,
when authorized (see 19.1203). The contracting officer may include an award
fee provision in lieu of the incentive; in
such cases, however, the contracting
officer shall not use the clause at
52.219–26.
Subpart 19.13—Historically Underutilized
Business
Zone
(HUBZone) Program
AUTHORITY: 41 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 63 FR 70272, Dec. 18, 1998, unless
otherwise noted.
19.1301 General.
(a) The Historically Underutilized
Business Zone (HUBZone) Act of 1997
(15 U.S.C. 631 note) created the
HUBZone Program (sometimes referred
to as the ‘‘HUBZone Empowerment
Contracting Program’’).
(b) The purpose of the HUBZone Program is to provide Federal contracting
assistance for qualified small business
concerns located in historically underutilized business zones, in an effort to
increase employment opportunities, investment, and economic development
in those areas.
19.1302 Applicability.
The procedures in this subpart apply
to all Federal agencies that employ
one or more contracting officers.
[67 FR 13066, Mar. 20, 2002]
19.1303 Status as a qualified HUBZone
small business concern.
(a) Status as a qualified HUBZone
small business concern is determined
by the Small Business Administration
(SBA) in accordance with 13 CFR part
126.
(b) If the SBA determines that a concern is a qualified HUBZone small business concern, it will issue a certification to that effect and will add the
concern to the List of Qualified
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19.1304
48 CFR Ch. 1 (10–1–03 Edition)
HUBZone Small Business Concerns on
its
Internet
website
at
http://
www.sba.gov/hubzone. A firm on the
list is eligible for HUBZone program
preferences without regard to the place
of performance. The concern must appear on the list to be a HUBZone small
business concern.
(c) A joint venture (see 19.101) may be
considered a HUBZone small business if
the business entity meets all the criteria in 13 CFR 126.616.
(d) Except for construction or services, any HUBZone small business concern (nonmanufacturer) proposing to
furnish a product that it did not itself
manufacture must furnish the product
of a HUBZone small business concern
manufacturer to receive a benefit
under this subpart.
[63 FR 70272, Dec. 18, 1998, as amended at 64
FR 51832, Sept. 24, 1999]
19.1304 Exclusions.
This subpart does not apply to—
(a) Requirements that can be satisfied through award to—
(1) Federal Prison Industries, Inc.
(see subpart 8.6); or
(2) Javits-Wagner-O’Day Act participating non-profit agencies for the blind
or severely disabled (see subpart 8.7);
(b) Orders under indefinite delivery
contracts (see subpart 16.5);
(c) Orders against Federal Supply
Schedules (see subpart 8.4);
(d) Requirements currently being
performed by an 8(a) participant or requirements SBA has accepted for performance under the authority of the
8(a) Program, unless SBA has consented to release the requirements
from the 8(a) Program;
(e) Requirements that do not exceed
the micro-purchase threshold; or
(f) Requirements for commissary or
exchange resale items.
19.1305 HUBZone
set-aside
procedures.
(a) A participating agency contracting officer shall set aside acquisitions exceeding the simplified acquisition threshold for competition restricted to HUBZone small business
concerns when the requirements of
paragraph (b) of this section can be satisfied. The contracting officer shall
consider HUBZone set-asides before
considering HUBZone sole source
awards (see 19.1306) or small business
set-asides (see subpart 19.5).
(b) To set aside an acquisition for
competition restricted to HUBZone
small business concerns, the contracting officer must have a reasonable
expectation that—
(1) Offers will be received from two or
more HUBZone small business concerns; and
(2) Award will be made at a fair market price.
(c) A participating agency may set
aside acquisitions exceeding the micropurchase threshold, but not exceeding
the simplified acquisition threshold,
for competition restricted to HUBZone
small business concerns at the sole discretion of the contracting officer, provided the requirements of paragraph (b)
of this section can be satisfied.
(d) If the contracting officer receives
only one acceptable offer from a qualified HUBZone small business concern
in response to a set aside, the contracting officer should make an award
to that concern. If the contracting officer receives no acceptable offers from
HUBZone small business concerns, the
HUBZone set-aside shall be withdrawn
and the requirement, if still valid, set
aside for small business concerns, as
appropriate (see subpart 19.5).
(e) The procedures at 19.202–1 and, except for acquisitions not exceeding the
simplified acquisition threshold, at
19.402 apply to this section. When the
SBA intends to appeal a contracting officer’s decision to reject a recommendation of the SBA procurement
center representative to set aside an
acquisition for competition restricted
to HUBZone small business concerns,
the SBA procurement center representative shall notify the contracting officer, in writing, of its intent within 5
working days of receiving the contracting officer’s notice of rejection.
Upon receipt of notice of SBA’s intent
to appeal, the contracting officer shall
suspend action on the acquisition unless the head of the contracting activity makes a written determination
that urgent and compelling circumstances, which significantly affect
the interests of the Government, exist.
Within 15 working days of SBA’s notification to the contracting officer, SBA
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Federal Acquisition Regulation
19.1307
shall file its formal appeal with the
head of the contracting activity, or
that agency may consider the appeal
withdrawn. The head of the contracting activity shall reply to SBA
within 15 working days of receiving the
appeal. The decision of the head of the
contracting activity shall be final.
(2) The solicitation is issued, during
the period of January 24, 2003, through
November 24, 2003; and
(3) There is either an approved 13.501
justification for sole source acquisition, or an approved 6.303 justification
using one of the authorities at 6.302–1,
6.302–2, 6.302–6, or 6.302–7.
19.1306
[63 FR 70272, Dec. 18, 1998, as amended at 65
FR 46057, July 26, 2000; 68 FR 4051, Jan. 27,
2003]
HUBZone sole source awards.
(a) A participating agency contracting officer may award contracts
to HUBZone small business concerns
on a sole source basis without considering small business set-asides (see
subpart 19.5), provided—
(1) Only one HUBZone small business
concern can satisfy the requirement;
(2) Except as provided in paragraph
(c) of this section, the anticipated price
of the contract, including options, will
not exceed—
(i) $5,000,000 for a requirement within
the North American Industry Classification System (NAICS) codes for
manufacturing; or
(ii) $3,000,000 for a requirement within any other NAICS code;
(3) The requirement is not currently
being performed by a non-HUBZone
small business concern;
(4) The acquisition is greater than
the simplified acquisition threshold
(see part 13);
(5) The HUBZone small business concern has been determined to be a responsible contractor with respect to
performance; and
(6) Award can be made at a fair and
reasonable price.
(b) The SBA has the right to appeal
the contracting officer’s decision not
to make a HUBZone sole source award.
(c) The contracting officer may
award contracts exceeding the limits in
paragraph (a)(2) of this section to
HUBZone small business concerns on a
sole source basis if the acquisition is
conducted under the authority of the
Homeland Security Act (Public Law
107–296, Sec. 856(b)) and—
(1) The acquisition is for supplies or
services that, as determined by the
head of the agency, are to be used to
facilitate defense against or recovery
from terrorism or nuclear, biological,
chemical, or radiological attack;
19.1307 Price evaluation preference
for HUBZone small business concerns.
(a) The price evaluation preference
for HUBZone small business concerns
shall be used in acquisitions conducted
using full and open competition. The
preference shall not be used—
(1) In acquisitions expected to be less
than or equal to the simplified acquisition threshold;
(2) Where price is not a selection factor so that a price evaluation preference would not be considered (e.g.,
Architect/Engineer acquisitions);
(3) Where all fair and reasonable offers are accepted (e.g., the award of
multiple award schedule contracts).
(b) The contracting officer shall give
offers from HUBZone small business
concerns a price evaluation preference
by adding a factor of 10 percent to all
offers, except—
(1) Offers from HUBZone small business concerns that have not waived the
evaluation preference;
(2) Otherwise successful offers from
small business concerns;
(3) Otherwise successful offers of eligible products under the Trade Agreements Act when the acquisition equals
or exceeds the dollar threshold in
25.403; and
(4) Otherwise successful offers where
application of the factor would be inconsistent with a Memorandum of Understanding or other international
agreement with a foreign government
(see agency supplement).
(c) The factor of 10 percent shall be
applied on a line item basis or to any
group of items on which award may be
made. Other evaluation factors, such as
transportation costs or rent-free use of
Government facilities, shall be added
to the offer to establish the base offer
before adding the factor of 10 percent.
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19.1308
48 CFR Ch. 1 (10–1–03 Edition)
(d) A concern that is both a HUBZone
small business concern and a small disadvantaged business concern shall receive the benefit of both the HUBZone
small business price evaluation preference and the small disadvantaged
business price evaluation adjustment
(see subpart 19.11). Each applicable
price evaluation preference or adjustment shall be calculated independently
against an offeror’s base offer. These
individual preference and adjustment
amounts shall both be added to the
base offer to arrive at the total evaluated price for that offer.
[63 FR 70272, Dec. 18, 1998, as amended at 64
FR 72419, Dec. 27, 1999]
19.1308 Contract clauses.
(a) The contracting officer shall insert the clause 52.219–3, Notice of Total
HUBZone Set-Aside, in solicitations
and contracts for acquisitions that are
set aside for HUBZone small business
concerns under 19.1305 or 19.1306.
(b) The contracting officer shall insert the clause at 52.219–4, Notice of
Price
Evaluation
Preference
for
HUBZone Small Business Concerns, in
solicitations and contracts for acquisitions conducted using full and open
competition. The clause shall not be
used in acquisitions that do not exceed
the simplified acquisition threshold.
PARTS 20–21 [RESERVED]
PART 22—APPLICATION OF LABOR
LAWS TO GOVERNMENT ACQUISITIONS
Sec.
22.000
22.001
Scope of part.
Definition.
Subpart 22.1—Basic Labor Policies
22.101 Labor relations.
22.101–1 General.
22.101–2 Contract pricing and administration.
22.101–3 Reporting labor disputes.
22.101–4 Removal of items from contractors’
facilities affected by work stoppages.
22.102 Federal and State labor requirements.
22.102–1 Policy.
22.102–2 Administration.
22.103 Overtime.
22.103–1 Definition.
22.103–2 Policy.
22.103–3
22.103–4
22.103–5
Procedures.
Approvals.
Contract clauses.
Subpart 22.2—Convict Labor
22.201
22.202
General.
Contract clause.
Subpart 22.3—Contract Work Hours and
Safety Standards Act
22.300 Scope of subpart.
22.301 Statutory requirement.
22.302 Liquidated damages and overtime
pay.
22.303 Administration and enforcement.
22.304 Variations, tolerances, and exemptions.
22.305 Contract clause.
Subpart 22.4—Labor Standards for
Contracts Involving Construction
22.400 Scope of subpart.
22.401 Definitions.
22.402 Applicability.
22.403 Statutory and regulatory requirements.
22.403–1 Davis-Bacon Act.
22.403–2 Copeland Act.
22.403–3 Contract Work Hours and Safety
Standards Act.
22.403–4 Department of Labor regulations.
22.404 Davis-Bacon Act wage determinations.
22.404–1 Types of wage determinations.
22.404–2 General requirements.
22.404–3 Procedures for requesting wage determinations.
22.404–4 Solicitations issued without wage
determinations.
22.404–5 Expiration of project wage determinations.
22.404–6 Modifications of wage determinations.
22.404–7 Correction of wage determinations
containing clerical errors.
22.404–8 Notification of improper wage determination before award.
22.404–9 Award of contract without required
wage determination.
22.404–10 Posting wage determinations and
notice.
22.404–11 Wage determination appeals.
22.404–12 Labor standards for contracts containing construction requirements and
option provisions that extend the term of
the contract.
22.405 Labor standards for construction
work performed under facilities contracts.
22.406 Administration and enforcement.
22.406–1 Policy.
22.406–2 Wages, fringe benefits, and overtime.
22.406–3 Additional classifications.
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22.406–4 Apprentices and trainees.
22.406–5 Subcontracts.
22.406–6 Payrolls and statements.
22.406–7 Compliance checking.
22.406–8 Investigations.
22.406–9 Withholding from or suspension of
contract payments.
22.406–10 Disposition of disputes concerning
construction contract labor standards
enforcement.
22.406–11 Contract terminations.
22.406–12 Cooperation with the Department
of Labor.
22.406–13 Semiannual enforcement reports.
22.407 Contract clauses.
Subpart 22.5 [Reserved]
Subpart 22.6—Walsh-Healey Public
Contracts Act
22.601 [Reserved]
22.602 Statutory requirements.
22.603 Applicability.
22.604 Exemptions.
22.604–1 Statutory exemptions.
22.604–2 Regulatory exemptions.
22.605 Rulings and interpretations of the
Act.
22.606—22.607 [Reserved]
22.608 Procedures.
22.609 Regional jurisdictions of the Department of Labor, Wage and Hour Division.
22.610 Contract clause.
Subpart 22.7 [Reserved]
Subpart 22.8—Equal Employment
Opportunity
22.800 Scope of subpart.
22.801 Definitions.
22.802 General.
22.803 Responsibilities.
22.804 Affirmative action programs.
22.804–1 Nonconstruction.
22.804–2 Construction.
22.805 Procedures.
22.806 Inquiries.
22.807 Exemptions.
22.808 Complaints.
22.809 Enforcement.
22.810 Solicitation provisions and contract
clauses.
Subpart 22.9—Nondiscrimination Because
of Age
22.901
22.902
Policy.
Handling complaints.
Subpart 22.10—Service Contract Act of
1965, as Amended
22.1000
22.1001
22.1002
Scope of subpart.
Definitions.
Statutory requirements.
22.1002–1 General.
22.1002–2 Wage determinations based on prevailing rates.
22.1002–3 Wage determinations based on collective bargaining agreements.
22.1002–4 Application of the Fair Labor
Standards Act minimum wage.
22.1003 Applicability.
22.1003–1 General.
22.1003–2 Geographical coverage of the Act.
22.1003–3 Statutory exemptions.
22.1003–4 Administrative limitations, variations, tolerances, and exemptions.
22.1003–5 Some examples of contracts covered.
22.1003–6 Repair distinguished from remanufacturing of equipment.
22.1003–7 Questions concerning applicability
of the Act.
22.1004 Department of Labor responsibilities
and regulations.
22.1005 [Reserved]
22.1006 Contract clauses.
22.1007 Requirement to submit Notice (SF
98/98a).
22.1008 Procedures for preparing and submitting Notice (SF 98/98a).
22.1008–1 Preparation of Notice (SF 98/98a).
22.1008–2 Preparation of SF 98a.
22.1008–3 Section 4(c) successorship with incumbent contractor collective bargaining agreement.
22.1008–4 Procedures when place of performance is unknown.
22.1008–5 Multiple-year contracts.
22.1008–6 Contract modifications (options,
extensions, changes in scope) and anniversary dates.
22.1008–7 Required time of submission of Notice.
22.1009 Place of performance unknown.
22.1009–1 General.
22.1009–2 Attempt to identify possible places
of performance.
22.1009–3 All possible places of performance
identified.
22.1009–4 All possible places of performance
not identified.
22.1010 Notification to interested parties
under collective bargaining agreements.
22.1011 Response to Notice by Department
of Labor.
22.1011–1 Department of Labor action.
22.1011–2 Requests for status or expediting
of response.
22.1012 Late receipt or nonreceipt of wage
determination.
22.1012–1 General.
22.1012–2 Response to timely submission of
Notice—no collective bargaining agreement.
22.1012–3 Response to timely submission of
Notice—with collective bargaining agreement.
22.1012–4 Response to late submission of Notice—no collective bargaining agreement.
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22.000
48 CFR Ch. 1 (10–1–03 Edition)
22.1012–5 Response to late submission of Notice—with collective bargaining agreement.
22.1013 Review of wage determination.
22.1014 Delay of acquisition dates over 60
days.
22.1015 Discovery of errors by the Department of Labor.
22.1016 Statement of equivalent rates for
Federal hires.
22.1017 Notice of award.
22.1018 Notification to contractors and employees.
22.1019 Additional classes of service employees.
22.1020 Seniority lists.
22.1021 Requests for hearing.
22.1022 Withholding of contract payments.
22.1023 Termination for default.
22.1024 Cooperation with the Department of
Labor.
22.1025 Ineligibility of violators.
22.1026 Disputes concerning labor standards.
Subpart 22.11—Professional Employee
Compensation
22.1101 Applicability.
22.1102 Definition.
22.1103 Policy, procedures, and solicitation
provision.
Subpart 22.12 [Reserved]
Subpart 22.13—Special Disabled Veterans,
Veterans of the Vietnam Era, and
Other Eligible Veterans
22.1300 Scope of subpart.
22.1301 Definition.
22.1302 Policy.
22.1303 Applicability.
22.1304 Procedures.
22.1305 Waivers.
22.1306 Department of Labor notices and reports.
22.1307 Collective bargaining agreements.
22.1308 Complaint procedures.
22.1309 Actions because of noncompliance.
22.1310 Solicitation provision and contract
clauses.
Subpart 22.14—Employment of Workers
with Disabilities
22.1400 Scope of subpart.
22.1401 Policy.
22.1402 Applicability.
22.1403 Waivers.
22.1404 Department of Labor notices.
22.1405 Collective bargaining agreements.
22.1406 Complaint procedures.
22.1407 Actions because of noncompliance.
22.1408
Contract clause.
Subpart 22.15—Prohibition of Acquisition of
Products Produced by Forced or Indentured Child Labor
22.1500 Scope.
22.1501 Definitions.
22.1502 Policy.
22.1503 Procedures for acquiring end products on the List of Products Requiring
Contractor Certification as to Forced or
Indentured Child Labor.
22.1504 Violations and remedies.
22.1505 Solicitation provision and contract
clause.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42258, Sept. 19, 1983, unless
otherwise noted.
22.000 Scope of part.
This part—
(a) Deals with general policies regarding contractor labor relations as
they pertain to the acquisition process;
(b) Prescribes contracting policy and
procedures for implementing pertinent
labor laws; and
(c) Prescribes contract clauses with
respect to each pertinent labor law.
22.001 Definition.
Administrator or Administrator, Wage
and Hour Division, as used in this part,
means the Administrator, Wage and
Hour Division, Employment Standards
Administration, U.S. Department of
Labor, Washington, DC 20210 or an authorized representative.
[53 FR 4935, Feb. 18, 1988]
Subpart 22.1—Basic Labor Policies
22.101
Labor relations.
22.101–1 General.
(a) Agencies shall maintain sound relations with industry and labor to ensure (1) prompt receipt of information
involving labor relations that may adversely affect the Government acquisition process and (2) that the Government obtains needed supplies and services without delay. All matters regarding labor relations shall be handled in
accordance with agency procedures.
(b)(1) Agencies shall remain impartial concerning any dispute between
labor and contractor management and
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22.101–2
not undertake the conciliation, mediation, or arbitration of a labor dispute.
To the extent practicable, agencies
should ensure that the parties to the
dispute use all available methods for
resolving the dispute, including the
services of the National Labor Relations Board, Federal Mediation and
Conciliation Service, the National Mediation Board and other appropriate
Federal, State, local, or private agencies.
(2) For use of project labor agreements, see 36.202(d).
(c) Agencies should, when practicable, exchange information concerning labor matters with other affected agencies to ensure a uniform
Government approach concerning a
particular plant or labor-management
dispute.
(d) Agencies should take other actions concerning labor relations problems to the extent consistent with
their acquisition responsibilities. For
example, agencies should—
(1) Notify the agency responsible for
conciliation, mediation, arbitration, or
other related action of the existence of
any labor dispute affecting or threatening to affect agency acquisition programs;
(2) Furnish to the parties to a dispute
factual information pertinent to the
dispute’s potential or actual adverse
impact on these programs, to the extent consistent with security regulations; and
(3) Seek a voluntary agreement between management and labor, notwithstanding the continuance of the dispute, to permit uninterrupted acquisition of supplies and services. This shall
only be done, however, if the attempt
to obtain voluntary agreement does
not involve the agency in the merits of
the dispute and only after consultation
with the agency responsible for conciliation, mediation, arbitration, or other
related action.
(e) The head of the contracting activity may designate programs or requirements for which it is necessary that
contractors be required to notify the
Government of actual or potential
labor disputes that are delaying or
threaten to delay the timely contract
performance (see 22.103–5(a)).
[48 FR 42258, Sept. 19, 1983, as amended at
27415, May 16, 2001]
22.101–2 Contract pricing and administration.
(a) Contractor labor policies and
compensation practices, whether or not
included in labor-management agreements, are not acceptable bases for allowing costs in cost-reimbursement
contracts or for recognition of costs in
pricing fixed-price contracts if they result in unreasonable costs to the Government. For a discussion of allowable
costs resulting from labor-management
agreements, see 31.205–6(b).
(b) Labor disputes may cause work
stoppages that delay the performance
of Government contracts. Contracting
officers shall impress upon contractors
that each contractor shall be held accountable for reasonably avoidable
delays. Standard contract clauses dealing with default, excusable delays, etc.,
do not relieve contractors or subcontractors from the responsibility for
delays that are within the contractors’
or their subcontractors’ control. A
delay caused by a strike that the contractor or subcontractor could not reasonably prevent can be excused; however, it cannot be excused beyond the
point at which a reasonably diligent
contractor or subcontractor could have
acted to end the strike by actions such
as—
(1) Filing a charge with the National
Labor Relations Board to permit the
Board to seek injunctive relief in
court.
(2) Using other available Government
procedures.
(3) Using private boards or organizations to settle disputes.
(c) Strikes normally result in changing patterns of cost incurrence and
therefore may have an impact on the
allowability of costs for cost-reimbursement contracts or for recognition
of costs in pricing fixed-price contracts. Certain costs may increase because of strikes; e.g., guard services
and attorney’s fees. Other costs incurred during a strike may not fluctuate (e.g., fixed costs such as rent and
depreciation), but because of reduced
production, their proportion of the unit
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22.101–3
48 CFR Ch. 1 (10–1–03 Edition)
cost of items produced increases. All
costs incurred during strikes shall be
carefully examined to ensure recognition of only those costs necessary for
performing the contract in accordance
with the Government’s essential interest.
(d) If during a labor dispute, the inspectors’ safety is not endangered, the
normal functions of inspection at the
plant of a Government contractor shall
be continued without regard to the existence of a labor dispute, strike, or
picket line.
[48 FR 42258, Sept. 19, 1983, as amended at 68
FR 43866, July 24, 2003]
22.101–3
Reporting labor disputes.
The office administering the contract
shall report, in accordance with agency
procedures, any potential or actual
labor disputes that may interfere with
performing any contracts under its
cognizance. If a contract contains the
clause at 52.222–1, Notice to the Government of Labor Disputes, the contractor also must report any actual or
potential dispute that may delay contract performance.
22.101–4 Removal of items from contractors’ facilities affected by work
stoppages.
(a) Items shall be removed from contractors’ facilities affected by work
stoppages in accordance with agency
procedures. Agency procedures should
allow for the following:
(1) Determine whether removal of
items is in the Government’s interest.
Normally the determining factor is the
critical needs of an agency program.
(2) Attempt to arrange with the contractor and the union representative
involved their approval of the shipment
of urgently required items.
(3) Obtain appropriate approvals from
within the agency.
(4) Determine who will remove the
items from the plant(s) involved.
(b) Avoid the use or appearance of
force and prevent incidents that might
detrimentally affect labor-management relations.
(c) When two or more agencies’ requirements are or may become involved in the removal of items, the
contract administration office shall en-
sure that the necessary coordination is
accomplished.
22.102 Federal and
quirements.
22.102–1
State
labor
Policy.
Agencies shall cooperate, and encourage contractors to cooperate with Federal and State agencies responsible for
enforcing labor requirements such as—
(a) Safety;
(b) Health and sanitation;
(c) Maximum hours and minimum
wages;
(d) Equal employment opportunity;
(e) Child and convict labor;
(f) Age discrimination;
(g) Disabled and Vietnam veteran
employment; and
(h) Employment of the handicapped.
[48 FR 42258, Sept. 19, 1983, as amended at 56
FR 55374, Oct. 25, 1991]
22.102–2
Administration.
(a) Agencies shall cooperate with,
and encourage contractors to use to
the fullest extent practicable, the
United States Employment Service
(USES) and its affiliated local State
Employment Service offices in meeting
contractors’ labor requirements. These
requirements may be to staff new or
expanding plant facilities, including requirements for workers in all occupations and skills from local labor market areas or through the Federal-State
employment clearance system.
(b) Local State employment offices
are operated throughout the United
States, Puerto Rico, Guam, and the
U.S. Virgin Islands. In addition to providing recruitment assistance to contractors, cooperation with the local
State Employment Service offices will
further the national program of maintaining continuous assessment of manpower requirements and resources on a
national and local basis.
(c) The U.S. Department of Labor is
responsible for the administration and
enforcement of the Occupational Safety and Health Act.
[48 FR 42258, Sept. 19, 1983, as amended at 56
FR 55374, Oct. 25, 1991; 68 FR 28082, May 22,
2003]
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22.103
22.103–4
Overtime.
22.103–1
22.103–4
Definition.
Normal workweek, as used in this subpart, means, generally, a workweek of
40 hours. Outside the United States and
its outlying areas, a workweek longer
than 40 hours is considered normal if—
(1) The workweek does not exceed the
norm for the area, as determined by
local custom, tradition, or law; and
(2) The hours worked in excess of 40
in the workweek are not compensated
at a premium rate of pay.
[48 FR 42258, Sept. 19, 1983 as amended at 51
FR 12293, Apr. 9, 1986; 66 FR 2130, Jan. 10,
2001; 68 FR 28082, May 22, 2003]
22.103–2
Policy.
Contractors shall perform all contracts, so far as practicable, without
using overtime, particularly as a regular employment practice, except when
lower overall costs to the Government
will result or when it is necessary to
meet urgent program needs. Any approved overtime, extra-pay shifts, and
multishifts should be scheduled to
achieve these objectives.
22.103–3
Procedures.
(a) Solicitations normally shall not
specify delivery or performance schedules that may require overtime at Government expense.
(b) In negotiating contracts, contracting officers should, consistent
with the Government’s needs, attempt
to (1) ascertain the extent that offers
are based on the payment of overtime
and shift premiums and (2) negotiate
contract prices or estimated costs
without these premiums or obtain the
requirement from other sources.
(c) When it becomes apparent during
negotiations of applicable contracts
(see 22.103–5(b)) that overtime will be
required in contract performance, the
contracting officer shall secure from
the contractor a request for all overtime to be used during the life of the
contract, to the extent that the overtime can be estimated with reasonable
certainty. The contractor’s request
shall contain the information required
by paragraph (b) of the clause at 52.222–
2, Payment for Overtime Premiums.
Approvals.
(a) The contracting officer shall review the contractor’s request for overtime. Approval of the use of overtime
may be granted by an agency approving official after determining in writing that overtime is necessary to—
(1) Meet essential delivery or performance schedules;
(2) Make up for delays beyond the
control and without the fault or negligence of the contractor; or
(3) Eliminate foreseeable extended
production bottlenecks that cannot be
eliminated in any other way.
(b) Approval by the designated official of use and total dollar amount of
overtime is required before inclusion of
an amount in paragraph (a) of the
clause at 52.222–2, Payment for Overtime Premiums. This clause is to be inserted in cost-reimbursement contracts
over $100,000, except for those exempted
under 22.103–5(b).
(c) Contracting officer approval of
payment of overtime premiums is required for time-and-materials and
labor-hour contracts (see paragraph
(a)(3) of the clause at 52.232–7, Payments Under Time-and-Materials and
Labor-Hour Contracts).
(d) No approvals are required for paying overtime premiums under other
types of contracts.
(e) Approvals by the agency approving official (see 22.103–4(a)) may be for
an individual contract, project, program, plant, division, or company, as
practical.
(f) During contract performance, contractor requests for overtime exceeding
the amount authorized by paragraph
(a) of the clause at 52.222–2, Payment
for Overtime Premiums, shall be submitted as stated in paragraph (b) of the
clause to the office administering the
contract. That office will review the
request and if it approves, send the request to the contracting officer. If the
contracting officer determines that the
requested overtime should be approved
in whole or in part, the contracting officer shall request the approval of the
agency’s designated approving official
and modify paragraph (a) of the clause
to reflect any approval.
(g) Overtime premiums at Government expense should not be approved
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22.103–5
48 CFR Ch. 1 (10–1–03 Edition)
when the contractor is already obligated, without the right to additional
compensation, to meet the required delivery date.
(h) When the use of overtime is authorized under a contract, the office
administering the contract and the
auditor should periodically review the
use of overtime to ensure that it is allowable in accordance with the criteria
in part 31. Only overtime premiums for
work in those departments, sections,
etc., of the contractor’s plant that
have been individually evaluated and
the necessity for overtime confirmed
shall be considered for approval.
(i) Approvals for using overtime shall
ordinarily be prospective, but, if justified by emergency circumstances, approvals may be retroactive.
22.103–5 Contract clauses.
(a) The contracting officer shall insert the clause 52.222–1, Notice to the
Government of Labor Disputes, in solicitations and contracts that involve
programs or requirements that have
been designated under 22.101–1(e).
(b) The contracting officer shall include the clause at 52.222–2, Payment
for Overtime Premiums, in solicitations and contracts when a cost-reimbursement contract is contemplated
and the contract amount is expected to
be over $100,000; unless (a) a cost-reimbursement contract for operation of
vessels is contemplated, or (b) a costplus-incentive-fee contract that will
provide a swing from the target fee of
at least plus or minus 3 percent and a
contractor’s share of at least 10 percent
is contemplated.
Subpart 22.2—Convict Labor
22.201 General.
(a) Executive Order 11755, December
29, 1973, as amended by Executive Order
12608, September 9, 1987, and Executive
Order 12943, December 13, 1994, states:
‘‘The development of the occupational
and educational skills of prison inmates is essential to their rehabilitation and to their ability to make an effective return to free society. Meaningful employment serves to develop those
skills. It is also true, however, that
care must be exercised to avoid either
the exploitation of convict labor or any
unfair competition between convict
labor and free labor in the production
of goods and services.’’ The Executive
order does not prohibit the contractor,
in performing the contract, from employing—
(1) Persons on parole or probation;
(2) Persons who have been pardoned
or who have served their terms;
(3) Federal prisoners; or
(4) Nonfederal prisoners authorized to
work at paid employment in the community under the laws of a jurisdiction
listed in the Executive order if—
(i) The worker is paid or is in an approved work training program on a voluntary basis;
(ii) Representatives of local union
central bodies or similar labor union
organizations have been consulted;
(iii) Paid employment will not—
(A) Result in the displacement of employed workers;
(B) Be applied in skills, crafts, or
trades in which there is a surplus of
available gainful labor in the locality;
or
(C) Impair existing contracts for
services;
(iv) The rates of pay and other conditions of employment will not be less
than those for work of a similar nature
in the locality where the work is being
performed; and
(v) The Attorney General of the
United States has certified that the
work-release laws or regulations of the
jurisdiction involved are in conformity
with the requirements of Executive
Order 11755, as amended.
(b) Department of Justice regulations
authorize the Director of the Bureau of
Justice Assistance to exercise the
power and authority vested in the Attorney General by the Executive order
to certify and to revoke the certification of work-release laws or regulations (see 28 CFR 0.94–1(b)).
[61 FR 31644, June 20, 1996]
22.202 Contract clause.
Insert the clause at 52.222–3, Convict
Labor, in solicitations and contracts
above the micro-purchase threshold,
when the contract will be performed in
the United States, Puerto Rico, the
Northern Mariana Islands, American
Samoa, Guam, or the U.S. Virgin Islands; unless—
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Federal Acquisition Regulation
22.303
(a) The contract will be subject to
the Walsh-Healey Public Contracts Act
(see subpart 22.6), which contains a separate prohibition against the employment of convict labor;
(b) The supplies or services are to be
purchased from Federal Prison Industries, Inc. (see subpart 8.6); or
(c) The acquisition involves the purchase, from any State prison, of finished supplies that may be secured in
the open market or from existing
stocks, as distinguished from supplies
requiring special fabrication.
[48 FR 42258, Sept. 19, 1983, as amended at 60
FR 34758, July 3, 1995; 61 FR 31644, June 20,
1996; 68 FR 28082, May 22, 2003]
Subpart 22.3—Contract Work
Hours and Safety Standards Act
22.300 Scope of subpart.
This subpart prescribes policies and
procedures for applying the requirements of the Contract Work Hours and
Safety Standards Act (40 U.S.C. 327–333)
(the Act) to contracts that may require
or involve laborers or mechanics. In
this subpart, the term laborers or mechanics includes apprentices, trainees,
helpers,
watchmen,
guards,
firefighters, fireguards, and workmen who
perform services in connection with
dredging or rock excavation in rivers
or harbors, but does not include any
employee employed as a seaman.
[51 FR 12293, Apr. 9, 1986]
22.301 Statutory requirement.
The Act requires that certain contracts contain a clause specifying that
no laborer or mechanic doing any part
of the work contemplated by the contract shall be required or permitted to
work more than 40 hours in any workweek unless paid for all such overtime
hours at not less than 11⁄2 times the
basic rate of pay.
[48 FR 42258, Sept. 19, 1983 as amended at 51
FR 12293, Apr. 9, 1986]
22.302 Liquidated damages and overtime pay.
(a) When an overtime computation
discloses underpayments, the responsible contractor or subcontractor must
pay the affected employee any unpaid
wages and pay liquidated damages to
the Government. The contracting officer must assess liquidated damages at
the rate of $10 per affected employee
for each calendar day on which the employer required or permitted the employee to work in excess of the standard workweek of 40 hours without paying overtime wages required by the
Act.
(b) If the contractor or subcontractor
fails or refuses to comply with overtime pay requirements of the Act and
the funds withheld by Federal agencies
for labor standards violations do not
cover the unpaid wages due laborers
and mechanics and the liquidated damages due the Government, make payments in the following order—
(1) Pay laborers and mechanics the
wages they are owed (or prorate available funds if they do not cover the entire amount owed); and
(2) Pay liquidated damages.
(c) If the head of an agency finds that
the administratively determined liquidated damages due under paragraph
(a) of this section are incorrect, or that
the contractor or subcontractor inadvertently violated the Act despite the
exercise of due care, the agency head
may—
(1) Reduce the amount of liquidated
damages assessed for liquidated damages of $500 or less;
(2) Release the contractor or subcontractor from the liability for liquidated
damages of $500 or less; or
(3) Recommend that the Secretary of
Labor reduce or waive liquidated damages over $500.
(d) After the contracting officer determines the liquidated damages and
the contractor makes appropriate payments, disburse any remaining assessments in accordance with agency procedures.
[65 FR 46065, July 26, 2000]
22.303 Administration
ment.
and
The procedures and reports required
for construction contracts in subpart
22.4 also apply to investigations of alleged violations of the Act on other
than construction contracts.
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22.304
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 22.4—Labor Standards for
Contracts Involving Construction
22.304 Variations, tolerances, and exemptions.
(a) The Secretary of Labor under 40
U.S.C. 331, upon the Secretary’s initiative or at the request of any Federal
agency, may provide reasonable limitations and allow variations, tolerances,
and exemptions to and from any or all
provisions of the Act (see 29 CFR 5.15).
(b) The Secretary of Labor may make
variations, tolerances, and exemptions
from the regulatory requirements of
applicable parts of 29 CFR when the
Secretary finds that such action is necessary and proper in the public interest
or to prevent injustice and undue hardship (see 29 CFR 5.14).
[51 FR 12293, Apr. 9, 1986]
22.305
SOURCE: 53 FR 4935, Feb. 18, 1988, unless
otherwise noted.
22.400
Scope of subpart.
This subpart implements the statutes
which prescribe labor standards requirements for contracts in excess of
$2,000 for construction, alteration, or
repair, including painting and decorating, of public buildings and public
works. (See definition of Construction,
alteration, or repair in section 22.401.)
Labor relations requirements prescribed in other subparts of part 22
may also apply.
[53 FR 4935, Feb. 18, 1988; 65 FR 46074, July 26,
2000]
Contract clause.
Insert the clause at 52.222–4, Contract
Work Hours and Safety Standards
Act—Overtime Compensation, in solicitations and contracts (including, for
this purpose, basic ordering agreements) when the contract may require
or involve the employment of laborers
or mechanics. However, do not include
the clause in solicitations and contracts—
(a) Valued at or below the simplified
acquisition threshold;
(b) For commercial items;
(c) For transportation or the transmission of intelligence;
(d) To be performed outside the
United States, Puerto Rico, American
Samoa, Guam, the U.S. Virgin Islands,
Johnston Island, Wake Island, and
Outer Continental Shelf lands as defined in the Outer Continental Shelf
Lands Act (43 U.S.C. 1331) (29 CFR 5.15);
(e) For work to be done solely in accordance with the Walsh-Healey Public
Contracts Act (see subpart 22.6);
(f) For supplies that include incidental services that do not require substantial employment of laborers or mechanics; or
(g) Exempt under regulations of the
Secretary of Labor (29 CFR 5.15).
[68 FR 28082, May 22, 2003]
22.401
Definitions.
As used in this subpart—
Building or work generally means
construction activity as distinguished
from manufacturing, furnishing of materials, or servicing and maintenance
work. The terms include, without limitation, buildings, structures, and improvements of all types, such as
bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, pumping stations, heavy generators, railways, airports, terminals, docks, piers, wharves,
ways, lighhouses, buoys, jetties, breakwaters, levees, canals, dredging, shoring, rehabilitation and reactivation of
plants, scaffolding, drilling, blasting,
excavating, clearing, and landscaping.
The manufacture or furnishing of materials, articles, supplies, or equipment
(whether or not a Federal or State
agency acquires title to such materials, articles, supplies, or equipment
during the course of the manufacture
or furnishing, or owns the materials
from which they are manufactured or
furnished) is not building or work within the meaning of the regulations in
this subpart unless conducted in connection with and at the site of such
building or work as is described in the
foregoing sentence, or under the United
States Housing Act of 1937 and the
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Federal Acquisition Regulation
22.401
Housing Act of 1949 in the construction
or development of the project.
Construction, alteration, or repair
means all types of work done on a particular building or work at the site
thereof, including without limitation,
altering, remodeling, installation (if
appropriate) on the site of the work of
items fabricated off-site, painting and
decorating, the transporting of materials and supplies to or from the building or work by the employees of the
construction contractor or construction subcontractor, and the manufacturing or furnishing of materials, articles, supplies, or equipment on the site
of the building or work by persons employed by the contractor or subcontractor.
Laborers or mechanics includes—
(1) Those workers, utilized by a contractor or subcontractor at any tier,
whose duties are manual or physical in
nature (including those workers who
use tools or who are performing the
work of a trade), as distinguished from
mental or managerial;
(2) Apprentices, trainees, helpers,
and, in the case of contracts subject to
the Contract Work Hours and Safety
Standards Act, watchmen and guards.
The terms ‘‘apprentice’’ and ‘‘trainee’’
are defined as follows:
(i) Apprentice means (A) a person employed and individually registered in a
bona fide apprenticeship program registered with the U.S. Department of
Labor, Employment and Training Administration, Bureau of Apprenticeship
and Training, or with a State Apprenticeship Agency recognized by the Bureau, or (B) a person in the first 90 days
of probationary employment as an apprentice in such an apprenticeship program, who is not individually registered in the program, but who has
been certified by the Bureau of Apprenticeship and Training or a State Apprenticeship Agency (where appropriate) to be eligible for probationary
employment as an apprentice.
(ii) Trainee means a person registered
and receiving on-the-job training in a
construction occupation under a program which has been approved in advance by the U.S. Department of
Labor, Employment and Training Administration, as meeting its standards
for on-the-job training programs and
which has been so certified by the Administration.
(3) Working foremen who devote
more than 20 percent of their time during a workweek performing duties of a
laborer or mechanic, and who do not
meet the criteria of 29 CFR part 541, for
the time so spent; and
(4) Every person performing the duties of a laborer or mechanic, regardless of any contractual relationship alleged to exist between the contractor
and those individuals. The terms exclude workers whose duties are primarily executive, supervisory (except
as provided in paragraph (3) of this definition), administrative, or clerical,
rather than manual. Persons employed
in a bona fide executive, administrative, or professional capacity as defined in 29 CFR part 541 are not deemed
to be laborers or machanics.
Public building or public work means
building or work, the construction,
prosecution, completion, or repair of
which, as defined in this section, is carried on directly by authority of, or
with funds of, a Federal agency to
serve the interest of the general public
regardless of whether title thereof is in
a Federal agency.
Site of the work is defined as follows:
(1) The site of the work is limited to
the physical place or places where the
construction called for in the contract
will remain when work on it is completed, and nearby property, as described in paragraph (2) of this definition, used by the contractor or subcontractor during construction that, because of proximity, can reasonably be
included in the site.
(2) Except as provided in paragraph
(3) of this definition, fabrication
plants, mobile factories, batch plants,
borrow pits, job headquarters, tool
yards, etc., are parts of the site of the
work; provided they are dedicated exclusively, or nearly so, to performance
of the contract or project, and are so
located in proximity to the actual construction location that it would be reasonable to include them.
(3) The site of the work does not include permanent home offices, branch
plant
establishments,
fabrication
plants, or tool yards of a contractor or
subcontractor whose locations and continuance in operation are determined
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22.402
48 CFR Ch. 1 (10–1–03 Edition)
wholly without regard to a particular
Federal contract or project. In addition, fabrication plants, batch plants,
borrow pits, job headquarters, yards,
etc., of a commercial supplier or
materialman which are established by
a supplier of materials for the project
before opening of bids and not on the
project site, are not included in the site
of the work. Such permanent, previously established facilities are not a
part of the site of the work, even if the
operations for a period of time may be
dedicated exclusively, or nearly so, to
the performance of a contract.
Wages means the basic hourly rate of
pay; any contribution irrevocably
made by a contractor or subcontractor
to a trustee or to a third person pursuant to a bona fide fringe benefit fund,
plan, or program; and the rate of costs
to the contractor or subcontractor
which may be reasonably anticipated
in providing bona fide fringe benefits
to laborers and mechanics pursuant to
an enforceable commitment to carry
out a financially responsible plan or
program, which was communicated in
writing to the laborers and mechanics
affected. The fringe benefits enumerated in the Davis-Bacon Act include
medical or hospital care, pensions on
retirement or death, compensation for
injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing; unemployment benefits; life insurance, disability
insurance, sickness insurance, or accident insurance; vacation or holiday
pay; defraying costs of apprenticeship
or other similar programs; or other
bona fide fringe benefits. Fringe benefits do not include benefits required by
other Federal, State, or local law.
[53 FR 4935, Feb. 18, 1988, as amended at 57
FR 44263, Sept. 24, 1992; 59 FR 67038, Dec. 28,
1994; 66 FR 2130, Jan. 10, 2001]
22.402 Applicability.
(a) Contracts for construction work.
(1) The requirements of this subpart
apply—
(i) Only if the construction work is,
or reasonably can be foreseen to be,
performed at a particular site so that
wage rates can be determined for the
locality, and only to construction work
that is performed by laborers and mechanics at the site of the work;
(ii) To dismantling, demolition, or
removal of improvements if a part of
the construction contract, or if construction at that site is anticipated by
another contract as provided in subpart 37.3;
(iii) To the manufacture or fabrication of construction materials and
components conducted in connection
with the construction and on the site
of the work by the contractor or a subcontractor under a contract otherwise
subject to this subpart; and
(iv) To painting of public buildings or
public works, whether performed in
connection with the original construction or as alteration or repair of an existing structure.
(2) The requirements of this subpart
do not apply to—
(i) The manufacturing of components
or materials off the site of the work or
their subsequent delivery to the site by
the
commercial
supplier
or
materialman;
(ii) Contracts requiring construction
work that is so closely related to research, experiment, and development
that it cannot be performed separately,
or that is itself the subject of research,
experiment, or development (see paragraph (b) of this section for applicability of this subpart to research and
development contracts or portions
thereof involving construction, alteration, or repair of a public building or
public work);
(iii) Employees of railroads operating
under collective bargaining agreements
that are subject to the Railway Labor
Act; or
(iv) Employees who work at contractors’ or subcontractors’ permanent
home offices, fabrication shops, or tool
yards not located at the site of the
work. However, if the employees go to
the site of the work and perform construction activities there, the requirements of this subpart are applicable for
the actual time so spent, not including
travel unless the employees transport
materials or supplies to or from the
site of the work.
(b) Nonconstruction contracts involving
some construction work. (1) The requirements of this subpart apply to construction work to be performed as part
of nonconstruction contracts (supply,
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Federal Acquisition Regulation
22.403–4
service, research and development,
etc.) if—
(i) The construction work is to be
performed on a public building or public work;
(ii) The contract contains specific requirements for a substantial amount of
construction work exceeding the monetary threshold for application of the
Davis Bacon Act (the word substantial
relates to the type and quantity of construction work to be performed and not
merely to the total value of construction work as compared to the total
value of the contract); and
(iii) The construction work is physically or functionally separate from,
and is capable of being performed on a
segregated basis from, the other work
required by the contract.
(2) The requirements of this subpart
do not apply if—
(i) The construction work is incidental to the furnishing of supplies,
equipment, or services (for example,
the requirements do not apply to simple installation or alteration at a public building or public work that is incidental to furnishing supplies or equipment under a supply contract; however, if a substantial and segregable
amount of construction, alteration, or
repair is required, such as for installation of heavy generators or large refrigerator systems or for plant modification or rearrangement, the requirements of this subpart apply); or
(ii) The construction work is so
merged with nonconstruction work or
so fragmented in terms of the locations
or time spans in which it is to be performed, that it is not capable of being
segregated as a separate contractual
requirement.
22.403 Statutory and regulatory requirements.
22.403–1
Davis-Bacon Act.
The Davis-Bacon Act (40 U.S.C. 276a–
276a–7) provides that contracts in excess of $2,000 to which the United
States or the District of Columbia is a
party for construction, alteration, or
repair (including painting and decorating) of public buildings or public
works within the United States, shall
contain a clause (see 52.222–6) that no
laborer or mechanic employed directly
upon the site of the work shall receive
less than the prevailing wage rates as
determined by the Secretary of Labor.
22.403–2
Copeland Act.
The Copeland (Anti-Kickback) Act
(18 U.S.C. 874 and 40 U.S.C. 276c) makes
it unlawful to induce, by force, intimidation, threat of procuring dismissal
from employment, or otherwise, any
person employed in the construction or
repair of public buildings or public
works, financed in whole or in part by
the United States, to give up any part
of the compensation to which that person is entitled under a contract of employment. The Copeland Act also requires each contractor and subcontractor to furnish weekly a statement
of compliance with respect to the
wages paid each employee during the
preceding week. Contracts subject to
the Copeland Act shall contain a clause
(see 52.222–10) requiring contractors
and subcontractors to comply with the
regulations issued by the Secretary of
Labor under the Copeland Act.
22.403–3 Contract Work
Safety Standards Act.
Hours
The Contract Work Hours and Safety
Standards Act (40 U.S.C. 327–333) requires that certain contracts (see
22.305) contain a clause (see 52.222–4)
specifying that no laborer or mechanic
doing any part of the work contemplated by the contract shall be required or permitted to work more than
40 hours in any workweek unless paid
for all additional hours at not less than
11⁄2 times the basic rate of pay (see
22.301).
22.403–4 Department of Labor regulations.
(a) Under the statutes referred to in
this 22.403 and Reorganization Plan No.
14 of 1950 (3 CFR 1949–53 Comp., p. 1007),
the Secretary of Labor has issued regulations in Title 29, Subtitle A, Code of
Federal Regulations, prescribing standards and procedures to be observed by
the Department of Labor and the Federal contracting agencies. Those standards and procedures applicable to contracts involving construction are implemented in this subpart. The Department of Labor regulations include—
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22.404
48 CFR Ch. 1 (10–1–03 Edition)
(b) The Department of Labor regulations include—
(1) Part 1, relating to Davis-Bacon
Act minimum wage rates;
(2) Part 3, relating to the Copeland
(Anti-Kickback) Act and requirements
for submission of weekly statements of
compliance and the preservation and
inspection of weekly payroll records;
(3) Part 5, relating to enforcement of
the Davis-Bacon Act, Contract Work
Hours and Safety Standards Act, and
Copeland (Anti-Kickback) Act;
(4) Part 6, relating to rules of practice for appealing the findings of the
Administrator, Wage and Hour Division, in enforcement cases under the
Davis-Bacon Act, Contract Work Hours
and Safety Standards Act, Copeland
(Anti-Kickback) Act, and Service Contract Act, and by which Administrative
Law Judge hearings are held; and
(5) Part 7, relating to rules of practice by which contractors and other interested parties may appeal to the Department of Labor Administrative Review Board, decisions issued by the Administrator, Wage and Hour Division,
or administrative law judges under the
Davis-Bacon Act, Contract Work Hours
and Safety Standards Act, or Copeland
(Anti-Kickback) Act.
(c) Refer all questions relating to the
application and interpretation of wage
determinations (including the classifications therein) and the interpretation of the Department of Labor regulations in this subsection to the Administrator, Wage and Hour Division.
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 2141, Jan. 10, 2001; 66 FR 53480, Oct. 22,
2001]
22.404 Davis-Bacon Act wage determinations.
The Department of Labor is responsible for issuing wage determinations
reflecting prevailing wages, including
fringe benefits. The wage determinations apply only to those laborers and
mechanics employed by a contractor
upon the site of the work including
drivers who transport to or from the
site materials and equipment used in
the course of contract operations. Determinations are issued for different
types of construction, such as building,
heavy, highway, and residential (referred to as rate schedules), and apply
only to the types of construction designated in the determination.
22.404–1 Types
tions.
of
wage
determina-
(a) General wage determinations.
(1) A general wage determination
contains prevailing wage rates for the
types of construction designated in the
determination, and is used in contracts
performed within a specified geographical area. General wage determinations contain no expiration date
and remain valid until modified, superseded, or canceled by a notice in the
FEDERAL REGISTER by the Department
of Labor. Once incorporated in a contract, a general wage determination
normally remains effective for the life
of the contract, unless the contracting
officer exercises an option to extend
the term of the contract (see 22.404–12).
These determinations shall be used
whenever possible. They are issued at
the discretion of the Department of
Labor either upon receipt of an agency
request or on the Department of Labor’s own initiative.
(2) General wage determinations are
published weekly in the Government
Printing Office (GPO) document entitled ‘‘General Wage Determinations
Issued Under the Davis-Bacon and Related Acts.’’ Notices of general wage
determinations are published in the
FEDERAL REGISTER. General wage determinations are effective on the publication date of the notice or upon receipt of the determination by the contracting agency, whichever occurs
first.
(3) The GPO publication is available
for examination at each of the 50 Regional Government Depository Libraries and many other of the 1,400 Government Depository Libraries across the
country. Subscriptions may be obtained by contacting: Superintendent
of Documents, U.S. Government Printing Office, Washington, DC 20402. The
GPO publication is divided into three
volumes East, Central, and West which
may be ordered separately. The States
covered by each volume are as follows:
VOLUME I—EAST
Alabama
Connecticut
Delaware
Florida
Georgia
Kentucky
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Maine
Maryland
Massachusetts
Mississippi
New Hampshire
New Jersey
New York
North Carolina
Pennsylvania
22.404–2
Rhode Island
South Carolina
Tennessee
Vermont
Virginia
West Virginia
District of Columbia
Puerto Rico
Virgin Islands
22.404–2
VOLUME II—CENTRAL
Arkansas
Illinois
Iowa
Indiana
Kansas
Louisiana
Michigan
Minnesota
Missouri
Nebraska
Ohio
Oklahoma
Texas
Wisconsin
New Mexico
VOLUME III—WEST
Alaska
Arizona
California
Colorado
Guam
Idaho
Montana
Nevada
North Dakota
Hawaii
South Dakota
Utah
Washington
Wyoming
Oregon
(4) On or about January 1 of each
year, an annual edition will be issued
that includes all current general wage
determinations for the States covered
by each volume. Throughout the remainder of the year regular weekly updates will be distributed providing any
modifications or superseded wage determinations issued. Each volume’s annual and weekly editions will be provided in loose-leaf format.
(b) Project wage determinations. A
project wage determination is issued at
the specific request of a contracting
agency. It is used only when no general
wage determination applies, and is effective for 180 calendar days from the
date of the determination. However, if
a determination expires before contract award, it may be possible to obtain an extension to the 180-day life of
the determination (see 22.404–5(b)(2)).
Once incorporated in a contract, a
project wage determination normally
remains effective for the life of the
contract, unless the contracting officer
exercises an option to extend the term
of the contract (see 22.404–12).
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53480, Oct. 22, 2001]
General requirements.
(a) The contracting officer must incorporate only the appropriate wage
determinations in solicitations and
contracts and must designate the work
to which each determination or part
thereof applies. The contracting officer
must not include project wage determinations in contracts or options other
than those for which they are issued.
When exercising an option to extend
the term of a contract, the contracting
officer must select the most current
wage determination(s) from the same
schedule(s) as the wage determination(s) incorporated into the contract.
(b) If the wage determination is a
general wage determination or a
project wage determination containing
more than one rate schedule, the contracting officer shall either include
only the rate schedules that apply to
the particular types of construction
(building, heavy, highway, etc.) or include the entire wage determination
and clearly indicate the parts of the
work to which each rate schedule shall
be applied. Inclusion by reference is
not permitted.
(c) The Wage and Hour Division has
issued the following general guidelines
for use in selecting the proper schedule(s) of wage rates:
(1) Building construction is generally
the construction of sheltered enclosures with walk-in access, for housing
persons, machinery, equipment, or supplies. It typically includes all construction of such structures, installation of
utilities and equipment (both above
and below grade level), as well as incidental grading, utilities and paving,
unless there is an established area
practice to the contrary.
(2) Residential construction is generally the construction, alteration, or
repair of single family houses or apartment buildings of no more than four (4)
stories in height, and typically includes incidental items such as site
work, parking areas, utilities, streets
and sidewalks, unless there is an established area practice to the contrary.
(3) Highway construction is generally
the construction, alteration, or repair
of roads, streets, highways, runways,
taxiways, alleys, parking areas, and
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22.404–3
48 CFR Ch. 1 (10–1–03 Edition)
other similar projects that are not incidental to building, residential, or
heavy construction.
(4) Heavy construction includes those
projects that are not properly classified as either building, residential, or
highway, and is of a catch-all nature.
Such heavy projects may sometimes be
distinguished on the basis of their individual characteristics, and separate
schedules issued (e.g., dredging, water
and sewer line, dams, flood control, etc.).
(5) When the nature of a project is
not clear, it is necessary to look at additional factors, with primary consideration given to locally established
area practices. If there is any doubt as
to the proper application of wage rate
schedules to the type or types of construction involved, guidance shall be
sought before the opening of bids, or
receipt of best and final offers, from
the Administrator, Wage and Hour Division. Further examples are contained
in Department of Labor All Agency
Memoranda Numbers 130 and 131.
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53480, Oct. 22, 2001]
22.404–3 Procedures for
wage determinations.
requesting
(a) Requests for general wage determinations. If there is a general wage determination applicable to the project,
the agency may use it without notifying the Department of Labor. When
necessary, a request for a general wage
determination may be made by submitting Standard Form (SF) 308, Request
for Determination and Response to Request, to the Administrator, Wage and
Hour Division, attention: Branch of
Construction Contract Wage Determinations.
(b) Requests for project wage determinations. A contracting agency shall submit requests for project wage determinations on SF 308 to the Department
of Labor. The requests shall include
the following information:
(1) The location, including the county (or other civil subdivision) and
State in which the proposed project is
located.
(2) The name of the project and a sufficiently detailed description of the
work to indicate the types of construc-
tion involved (e.g., building, heavy,
highway, residential, or other type).
(3) Any available pertinent wage payment information, unless wage patterns in the area are clearly established.
(4) The estimated cost of each
project.
(5) All the classifications of laborers
and mechanics likely to be employed.
(c) Time for submission of requests. The
time required by the Department of
Labor for processing requests for
project wage determinations varies according to the facts and circumstances
in each case. An agency should expect
the processing to take at least 30 days.
Accordingly, agencies should submit
requests to the Department of Labor at
least 45 days (60 days if possible) before
issuing the solicitation or exercising
an option to extend the term of a contract.
(d) Review of wage determinations. Immediately upon receipt, the contracting agency shall examine the
wage determination and inform the Department of Labor of any changes necessary or appropriate to correct errors.
Private parties requesting changes
should be advised to submit their requests to the Department of Labor.
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53480, Oct. 22, 2001]
22.404–4 Solicitations issued without
wage determinations.
(a) If a solicitation is issued before
the wage determination is obtained, a
notice shall be included in the solicitation that the schedule of minimum
wage rates to be paid under the contract will be issued as an amendment
to the solicitation.
(b) In sealed bidding, bids may not be
opened until a reasonable time after
the wage determination has been furnished to all bidders.
(c) In negotiated acquisitions, the
contracting officer may open proposals
and conduct negotiations before obtaining the wage determination. However, the contracting officer shall incorporate the wage determination into
the solicitation before submission of
best and final offers.
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Federal Acquisition Regulation
22.404–5
22.404–5 Expiration of project wage
determinations.
(a) The contracting officer shall
make every effort to ensure that contract award is made before expiration
of the project wage determination included in the solicitation.
(b) The following procedure applies
when contracting by sealed bidding:
(1) If a project wage determination
expires before bid opening, or if it appears before bid opening that a project
wage determination may expire before
award, the contracting officer shall request a new determination early
enough to ensure its receipt before bid
opening. If necessary, the contracting
officer shall postpone the bid opening
date to allow a reasonable time to obtain the determination, amend the solicitation to incorporate the new determination, and permit bidders to amend
their bids. If the new determination
does not change the wage rates and
would not warrant amended bids, the
contracting officer shall amend the solicitation to include the number and
date of the new determination.
(2) If a project wage determination
expires after bid opening but before
award, the contracting officer shall request an extension of the project wage
determination expiration date from the
Administrator, Wage and Hour Division. The request for extension shall be
supported by a written finding, which
shall include a brief statement of factual support, that the extension is necessary and proper in the public interest
to prevent injustice or undue hardship
or to avoid serious impairment of the
conduct of Government business. If
necessary, the contracting officer shall
delay award to permit either receipt of
the extension or receipt and processing
of a new determination. If the request
is granted, the contracting officer shall
award the contract and modify it to
apply the extended expiration date to
the already incorporated project wage
determination. (See 43.103(b)(1).) If the
request is denied, the Administrator
will proceed to issue a new project
wage determination. Upon receipt, the
contracting officer shall process the
new determination as follows:
(i) If the new determination changes
any wage rates for classifications to be
used in the contract, the contracting
officer may cancel the solicitation only
in accordance with 14.404–1. Otherwise
the contracting officer shall award the
contract and incorporate the new determination to be effective on the date
of contract award. The contracting officer shall equitably adjust the contract price for any increased or decreased cost of performance resulting
from any changed wage rates.
(ii) If the new determination does not
change any wage rates, the contracting
officer shall award the contract and
modify it to include the number and
date of the new determination. (See
43.103(b)(1).)
(c) The following procedure applies
when contracting by negotiation:
(1) If a project wage determination
will or does expire before contract
award, the contracting officer shall request a new wage determination from
the Department of Labor. If necessary,
the contracting officer shall delay
award while the new determination is
obtained and processed.
(2) The contracting officer need not
delay opening and reviewing proposals
or discussing them with the offerors
while a new determination is being obtained. The contracting officer shall
request offerors to extend the period
for acceptance of any proposal if that
period expires or may expire before receipt and full processing of the new determination.
(3) If the new determination changes
any wage rates, the contracting officer
shall amend the solicitation to incorporate the new determination, and furnish the wage rate information to all
prospective offerors that were sent a
solicitation if the closing date for receipt of proposals has not yet occurred,
or to all offerors that submitted proposals if the closing date has passed.
All offerors to whom wage rate information has been furnished shall be
given reasonable opportunity to amend
their proposals.
(4) If the new determination does not
change any wage rates, the contracting
officer shall amend the solicitation to
include the number and date of the new
determination and award the contract.
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22.404–6
48 CFR Ch. 1 (10–1–03 Edition)
22.404–6 Modifications of wage determinations.
(a) General. (1) The Department of
Labor may modify a wage determination to make it current by specifying
only the items being changed or by reissuing the entire determination with
changes incorporated.
(2) All project wage determination
modifications expire on the same day
as the original determination. The
need to include a modification of a
project wage determination in a solicitation is determined by the time of receipt of the modification by the contracting agency. Therefore, the contracting agency must annotate the
modification of the project wage determination with the date and time immediately upon receipt.
(3) The need for inclusion of the
modification of a general wage determination in a solicitation is determined by the publication date of the
notice in the FEDERAL REGISTER, or by
the time of receipt of the modification
(annotated with the date and time immediately upon receipt) by the contracting agency, whichever occurs
first. (Note the distinction between receipt by the agency (modification is effective) and receipt by the contracting
officer, which may occur later.)
(b) The following applies when contracting by sealed bidding:
(1) A written action modifying a
wage determination shall be effective
if:
(i) It is received by the contracting
agency, or notice of the modification is
published in the FEDERAL REGISTER, 10
or more calendar days before the date
of bid opening, or
(ii) It is received by the contracting
agency, or notice of the modification is
published in the FEDERAL REGISTER,
less than 10 calendar days before the
date of bid opening, unless the contracting officer finds that there is not
reasonable time available before bid
opening to notify the prospective bidders. (If the contracting officer finds
that there is not reasonable time to notify bidders, a written report of the
finding shall be placed in the contract
file and shall be made available to the
Department of Labor upon request.)
(2) All written actions modifying
wage determinations received by the
contracting agency after bid opening,
or modifications to general wage determinations, notices of which are published in the FEDERAL REGISTER after
bid opening, shall not be effective and
shall not be included in the solicitation
(but see paragraph (b)(6) of this section).
(3) If an effective modification is received by the contracting officer before
bid opening, the contracting officer
shall postpone the bid opening, if necessary, to allow a reasonable time to
amend the solicitation to incorporate
the modification and permit bidders to
amend their bids. If the modification
does not change the wage rates and
would not warrant amended bids, the
contracting officer shall amend the solicitation to include the number and
date of the modification.
(4) If an effective modification is received by the contracting officer after
bid opening, but before award, the contracting officer shall follow the procedures in 22.404–5(b)(2)(i) or (ii).
(5) If an effective modification is received by the contracting officer after
award, the contracting officer shall
modify the contract to incorporate the
wage modification retroactive to the
date of award and equitably adjust the
contract price for any increased or decreased cost of performance resulting
from any changed wage rates. If the
modification does not change any wage
rates and would not warrant contract
price adjustment, the contracting officer shall modify the contract to include the number and date of the modification.
(6) If an award is not made within 90
days after bid opening, any modification to a general wage determination,
notice of which is published in the FEDERAL REGISTER before award, shall be
effective for any resultant contract unless an extension of the 90-day period is
obtained from the Administrator, Wage
and Hour Division. An agency head or a
designee may request such an extension from the Administrator. The request must be supported by a written
finding, which shall include a brief
statement of factual support, that the
extension is necessary and proper in
the public interest to prevent injustice,
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22.404–8
undue hardship, or to avoid serious impairment in the conduct of Government business. The contracting officer
shall follow the procedures in 22.404–
5(b)(2).
(c) The following applies when contracting by negotiation:
(1) All written actions modifying
wage determinations received by the
contracting agency before contract
award, or modifications to general
wage determinations notices of which
are published in the FEDERAL REGISTER
before award, shall be effective.
(2) If an effective wage modification
is received by the contracting officer
before award, the contracting officer
shall follow the procedures in 22.404–
5(c)(3) or (4).
(3) If an effective wage modification
is received by the contracting officer
after award, the contracting officer
shall follow the procedures in 22.404–
6(b)(5).
(d) The following applies when modifying a contract to exercise an option
to extend the term of a contract:
(1) A modified wage determination is
effective if—
(i) The contracting agency receives a
written action from the Department of
Labor prior to exercise of the option,
or within 45 days after submission of a
wage determination request (22.404–
3(c)), whichever is later; or
(ii) The Department of Labor publishes notice of modifications to general wage determinations in the FEDERAL REGISTER before exercise of the
option.
(2) If the contracting officer receives
an effective modified wage determination either before or after execution of
the contract modification to exercise
the option, the contracting officer
must modify the contract to incorporate the modified wage determination, and any changed wage rates, effective as of the date that the option to
extend was effective.
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53480, Oct. 22, 2001]
22.404–7 Correction of wage determinations containing clerical errors.
Upon the Department of Labor’s own
initiative or at the request of the contracting agency, the Administrator,
Wage and Hour Division, may correct
any wage determination found to contain clerical errors. Such corrections
will be effective immediately, and will
apply to any solicitation or active contract. Before contract award, the contracting officer must follow the procedures in 22.404–5(b)(1) or (2)(i) or (ii) in
sealed bidding, and the procedures in
22.404–5(c)(3) or (4) in negotiations.
After contract award, the contracting
officer must follow the procedures at
22.404–6(b)(5), except that for contract
modifications to exercise an option to
extend the term of the contract, the
contracting officer must follow the
procedures at 22.404–6(d)(2).
[66 FR 53480, Oct. 22, 2001]
22.404–8 Notification
of
improper
wage determination before award.
(a) Written notification by the Department of Labor received by the contracting officer prior to award that (1)
a solicitation includes the wrong wage
determination or the wrong rate schedule or (2) a wage determination is withdrawn by the Department of Labor as a
result of a decision by the Wage Appeals Board, shall be effective immediately without regard to 22.404–6.
(b) In sealed bidding, the contracting
officer shall proceed in accordance
with the following:
(1) If the notification reaches the
contracting officer before bid opening,
the contracting officer shall postpone
the bid opening date, if necessary, to
allow a reasonable time to (i) obtain
the appropriate determination if a new
wage determination is required, (ii)
amend the solicitation to incorporate
the determination (or rate schedule),
and (iii) permit bidders to amend their
bids. If the appropriate wage determination does not change any wage
rates and would not warrant amended
bids, the contracting officer shall
amend the solicitation to include the
number and date of the new determination.
(2) If the notification reaches the
contracting officer after bid opening
but before award, the contracting officer shall delay awarding the contract,
if necessary, and if required, obtain the
appropriate wage determination. The
appropriate wage determination shall
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22.404–9
48 CFR Ch. 1 (10–1–03 Edition)
be processed in accordance with 22.404–
5(b)(2)(i) or (ii).
(c) In negotiated acquisitions, the
contracting officer shall delay award,
if necessary, and process the notification in the manner prescribed for a new
wage determination at 22.404–5(c)(3).
22.404–9 Award of contract without required wage determination.
(a) If a contract is awarded without
the required wage determination (i.e.,
incorporating no determination, containing a clearly inapplicable general
wage determination, or containing a
project determination which is inapplicable because of an inaccurate description of the project or its location), the
contracting officer shall initiate action
to incorporate the required determination in the contract immediately upon
discovery of the error. If a required
wage determination (valid determination in effect on the date of award) is
not available, the contracting officer
shall expeditiously request a wage determination from the Department of
Labor, including a statement explaining the circumstances and giving the
date of the contract award.
(b) The contracting officer shall—
(1) Modify the contract to incorporate the required wage determination (retroactive to the date of award),
and equitably adjust the contract price
if appropriate; or
(2) Terminate the contract.
22.404–10 Posting wage
tions and notice.
determina-
The contractor must keep a copy of
the applicable wage determination (and
any approved additional classifications) posted at the site of the work in
a prominent place where the workers
can easily see it. The contracting officer shall furnish to the contractor, Department of Labor Form WH–1321, Notice to Employees Working on Federal
and Federally Financed Construction
Projects, for posting with the wage
rates. The name, address, and telephone number of the Government officer responsible for the administration
of the contract shall be indicated in
the poster to inform workers to whom
they may submit complaints or raise
questions concerning labor standards.
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53481, Oct. 22, 2001]
22.404–11 Wage determination appeals.
The Secretary of Labor has established an Administrative Review Board
which decides appeals of final decisions
made by the Department of Labor concerning Davis-Bacon Act wage determinations. A contracting agency or
other interested party may file a petition for review under the procedures in
29 CFR Part 7 if reconsideration by the
Administrator has been sought pursuant to 29 CFR 1.8 and denied.
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53481, Oct. 22, 2001]
22.404–12 Labor standards for contracts containing construction requirements and option provisions
that extend the term of the contract.
(a) Each time the contracting officer
exercises an option to extend the term
of a contract for construction, or a
contract that includes substantial and
segregable construction work, the contracting officer must modify the contract to incorporate the most current
wage determination.
(b) If a contract with an option to extend the term of the contract has indefinite-delivery or indefinite-quantity
construction requirements, the contracting officer must incorporate the
wage determination incorporated into
the contract at the exercise of the option into task orders issued during that
option period. The wage determination
will be effective for the complete period of performance of those task orders without further revision.
(c) The contracting officer must include in fixed-price contracts a clause
that specifies one of the following
methods, suitable to the interest of the
Government, to provide an allowance
for any increases or decreases in labor
costs that result from the inclusion of
the current wage determination at the
exercise of an option to extend the
term of the contract:
(1) The contracting officer may provide the offerors the opportunity to bid
or propose separate prices for each option period. The contracting officer
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Federal Acquisition Regulation
22.406–1
must not further adjust the contract
price as a result of the incorporation of
a new or revised wage determination at
the exercise of each option to extend
the term of the contract. Generally,
this method is used in constructiononly contracts (with options to extend
the term) that are not expected to exceed a total of 3 years.
(2) The contracting officer may include in the contract a separately specified pricing method that permits an
adjustment to the contract price or
contract labor unit price at the exercise of each option to extend the term
of the contract. At the time of option
exercise, the contracting officer must
incorporate a new wage determination
into the contract, and must apply the
specific pricing method to calculate
the contract price adjustment. An example of a contract pricing method
that the contracting officer might separately specify is incorporation in the
solicitation and resulting contract of
the pricing data from an annually published unit pricing book (e.g., the R.S.
Means Cost Estimating System, or the
U.S. Army Computer-Aided Cost Estimating System), which is multiplied in
the contract by a factor proposed by
the contractor (e.g., .95 or 1.1). At option exercise, the contracting officer
incorporates the pricing data from the
latest annual edition of the unit pricing book, multiplied by the factor
agreed to in the basic contract. The
contracting officer must not further
adjust the contract price as a result of
the incorporation of the new or revised
wage determination.
(3) The contracting officer may provide for a contract price adjustment
based solely on a percentage rate determined by the contracting officer using
a published economic indicator incorporated into the solicitation and resulting contract. At the exercise of
each option to extend the term of the
contract, the contracting officer will
apply the percentage rate, based on the
economic indicator, to the portion of
the contract price or contract unit
price designated in the contract clause
as labor costs subject to the provisions
of the Davis-Bacon Act. The contracting officer must insert 50 percent
as the estimated portion of the contract price that is labor unless the con-
tracting officer determines, prior to
issuance of the solicitation, that a different percentage is more appropriate
for a particular contract or requirement. This percentage adjustment to
the designated labor costs must be the
only adjustment made to cover increases in wages and/or benefits resulting from the incorporation of a new or
revised wage determination at the exercise of the option.
(4) The contracting officer may provide a computation method to adjust
the contract price to reflect the contractor’s actual increase or decrease in
wages and fringe benefits (combined) to
the extent that the increase is made to
comply with, or the decrease is voluntarily made by the contractor as a result of incorporation of, a new or revised wage determination at the exercise of the option to extend the term of
the contract. Generally, this method is
appropriate for use only if contract requirements are predominately services
subject to the Service Contract Act
and the construction requirements are
substantial and segregable. The methods used to adjust the contract price
for the service requirements and the
construction requirements would be
similar.
[66 FR 53481, Oct. 22, 2001]
22.405 Labor standards for construction work performed under facilities contracts.
If it is not certain at the time of contract award that construction work
may be required under a facilities contract (see 45.301), the clause at 52.222–
17, Labor Standards for Construction
Work—Facilities
Contracts
(see
22.407(c)) shall be included in the contract. When covered construction work
is necessary after contract award, the
contracting officer shall obtain the appropriate wage determination and incorporate it in the contract and identify the item or items of construction
work to which the clauses apply.
22.406 Administration
ment.
22.406–1
and
Policy.
(a) General. Contracting agencies are
responsible for ensuring the full and
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22.406–2
48 CFR Ch. 1 (10–1–03 Edition)
impartial enforcement of labor standards in the administration of construction contracts. Contracting agencies
shall maintain an effective program
that shall include—
(1) Ensuring that contractors and
subcontractors are informed, before
commencement of work, of their obligations under the labor standards
clauses of the contract;
(2) Adequate payroll reviews, on-site
inspections, and employee interviews
to determine compliance by the contractor
and
subcontractors,
and
prompt initiation of corrective action
when required;
(3) Prompt investigation and disposition of complaints; and
(4) Prompt submission of all reports
required by this subpart.
(b) Preconstruction letters and conferences. Before construction begins,
the contracting officer shall inform the
contractor of the labor standards
clauses and wage determination requirements of the contract and of the
contractor’s and any subcontractor’s
responsibilities under the contract. Unless it is clear that the contractor is
fully aware of the requirements, the
contracting officer shall issue an explanatory letter and/or arrange a conference with the contractor promptly
after award of the contract.
22.406–2 Wages, fringe benefits, and
overtime.
(a) In computing wages paid to a laborer or mechanic, the contractor may
include only the following items:
(1) Amounts paid in cash to the laborer or mechanic, or deducted from
payments under the conditions set
forth in 29 CFR 3.5.
(2) Contributions (except those required by Federal, State, or local law)
the contractor makes irrevocably to a
trustee or a third party under any bona
fide plan or program to provide for
medical or hospital care, pensions,
compensation for injuries or illness resulting from occupational activity, unemployment benefits, life insurance,
disability and sickness insurance, accident insurance, or any other bona fide
fringe benefit.
(3) Other contributions or anticipated
costs for bona fide fringe benefits to
the extent expressly approved by the
Secretary of Labor.
(b)(1) The contractor may satisfy the
obligation under the clause at 52.222–6,
Davis-Bacon Act, by providing wages
consisting of any combination of contributions or costs as specified in paragraph (a) of this subsection, if the total
cost of the combination is not less than
the total of the basic hourly rate and
fringe benefits payments prescribed in
the wage determination for the classification of laborer or mechanic concerned.
(2) Wages provided by the contractor
and fringe benefits payments required
by the wage determination may include items that are not stated as
exact cash amounts. In these cases, the
hourly cash equivalent of the cost of
these items shall be determined by dividing the employer’s contributions or
costs by the employee’s hours worked
during the period covered by the costs
or contributions. For example, if a contractor pays a monthly health insurance premium of $112 for a particular
employee who worked 125 hours during
the month, the hourly cash equivalent
is determined by dividing $112 by 125
hours, which equals $0.90 per hour.
Similarly, the calculation of hourly
cash equivalent for nine paid holidays
per year for an employee with an hourly rate of pay of $5.00 is determined by
multiplying $5.00 by 72 (9 days at 8
hours each), and dividing the result of
$360 by the number of hours worked by
the employee during the year. If the interested parties (contractor, contracting officer, and employees or their
representative) cannot agree on the
cash equivalent, the contracting officer
shall submit the question for final determination to the Department of
Labor as prescribed by agency procedures. The information submitted shall
include—
(i) A comparison of the payments,
contributions, or costs in the wage determination with those made or proposed as equivalents by the contractor;
and
(ii) The comments and recommendations of the contracting officer.
(c) In computing required overtime
payments, (i.e., 11⁄2 times the basic
hourly rate of pay) the contractor shall
use the basic hourly rate of pay in the
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wage determination, or the basic hourly rate actually paid by the contractor,
if higher. The basic rate of pay includes
employee contributions to fringe benefits, but excludes the contractor’s contributions, costs, or payment of cash
equivalents for fringe benefits. Overtime shall not be computed on a rate
lower than the basic hourly rate in the
wage determination.
22.406–3 Additional classifications.
(a) If any laborer or mechanic is to be
employed in a classification that is not
listed in the wage determination applicable to the contract, the contracting
officer, pursuant to the clause at
52.222–6, Davis-Bacon Act, shall require
that the contractor submit to the contracting officer, Standard Form (SF)
1444, Request for Authorization of Additional Classification and Rate, which,
along with other pertinent data, contains the proposed additional classification and minimum wage rate including any fringe benefits payments.
(b) Upon receipt of SF 1444 from the
contractor, the contracting officer
shall review the request to determine
whether it meets the following criteria:
(1) The classification is appropriate
and the work to be performed by the
classification is not performed by any
classification contained in the applicable wage determination.
(2) The classification is utilized in
the area by the construction industry.
(3) The proposed wage rate, including
any fringe benefits, bears a reasonable
relationship to the wage rates in the
wage determination in the contract.
(c)(1) If the criteria in paragraph (b)
of this section are met and the contractor and the laborers or mechanics
to be employed in the additional classification (if known) or their representatives agree to the proposed additional
classification, and the contracting officer approves, the contracting officer
shall submit a report (including a copy
of SF 1444) of that action to the Administrator, Wage and Hour Division, for
approval, modification, or disapproval
of the additional classification and
wage rate (including any amount designated for fringe benefits); or
(2) If the contractor, the laborers or
mechanics to be employed in the classification or their representatives, and
the contracting officer do not agree on
the proposed additional classification,
or if the criteria are not met, the contracting officer shall submit a report
(including a copy of SF 1444) giving the
views of all interested parties and the
contracting officer’s recommendation
to the Administrator, Wage and Hour
Division, for determination of appropriate classification and wage rate.
(d)(1) Within 30 days of receipt of the
report, the Administrator, Wage and
Hour Division, will complete action
and so advise the contracting officer,
or will notify the contracting officer
that additional time is necessary.
(2) Upon receipt of the Department of
Labor’s action, the contracting officer
shall forward a copy of the action to
the contractor, directing that the classification and wage rate be posted in
accordance with paragraph (a) of the
clause at 52.222–6 and that workers in
the affected classification receive no
less than the minimum rate indicated
from the first day on which work under
the contract was performed in the classification.
(e) In each option to extend the term
of the contract, if any laborer or mechanic is to be employed during the option in a classification that is not listed (or no longer listed) on the wage determination incorporated in that option, the contracting officer must require that the contractor submit a request for conformance using the procedures noted in paragraphs (a) through
(d) of this section.
[53 FR 4935, Feb. 18, 1988, as amended at 57
FR 44263, Sept. 24, 1992; 59 FR 67038, Dec. 28,
1994; 66 FR 53481, Oct. 22, 2001]
22.406–4 Apprentices and trainees.
(a) The contracting officer shall review the contractor’s employment and
payment records of apprentices and
trainees made available pursuant to
the clause at 52.222–8, Payrolls and
Basic Records, to ensure that the contractor has complied with the clause at
52.222–9, Apprentices and Trainees.
(b) If a contractor has classified employees as apprentices or trainees without complying with the requirements
of the clause at 52.222–9, the contracting officer shall reject the classification and require the contractor to
pay the affected employees at the rates
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22.406–5
48 CFR Ch. 1 (10–1–03 Edition)
applicable to the classification of the
work actually performed.
22.406–5
Subcontracts.
In accordance with the requirements
of the clause at 52.222–11, Subcontracts
(Labor Standards), the contractor and
subcontractors at any tier are required
to submit a fully executed SF 1413,
Statement and Acknowledgment, upon
award of each subcontract.
22.406–6
Payrolls and statements.
(a) Submission. In accordance with the
clause at 52.222–8, Payrolls and Basic
Records, the contractor must submit
or cause to be submitted, within 7 calendar days after the regular payment
date of the payroll week covered, for
the contractor and each subcontractor,
(1) copies of weekly payrolls applicable
to the contract, and (2) weekly payroll
statements of compliance. The contractor may use the Department of
Labor Form WH–347, Payroll (For Contractor’s Optional Use), or a similar
form that provides the same data and
identical representation.
(b) Withholding for nonsubmission. If
the contractor fails to submit copies of
its or its subcontractors’ payrolls
promptly, the contracting officer shall,
from any payment due to the contractor, withhold approval of an
amount that the contracting officer
considers necessary to protect the interest of the Government and the employees of the contractor or any subcontractor.
(c) Examination. (1) The contracting
officer shall examine the payrolls and
payroll statements to ensure compliance with the contract and any statutory or regulatory requirements. Particular attention should be given to—
(i) The correctness of classifications
and rates;
(ii) Fringe benefits payments;
(iii) Hours worked;
(iv) Deductions; and
(v) Disproportionate employment ratios of laborers, apprentices, or trainees, to journeymen.
(2) Fringe benefits payments, contributions made, or costs incurred on
other than a weekly basis shall be considered as a part of weekly payments
to the extent they are creditable to the
particular weekly period involved and
are otherwise acceptable.
(d) Preservation. The contracting
agency shall retain payrolls and statements of compliance for 3 years after
completion of the contract and make
them available when requested by the
Department of Labor at any time during that period. Submitted payrolls
shall not be returned to a contractor or
subcontractor for any reasons, but copies thereof may be furnished to the
contractor or subcontractor who submitted them, or to a higher tier contractor or subcontractor.
(e) Disclosure of payroll records. Contractor payroll records in the Government’s possession must be carefully
protected from any public disclosure
which is not required by law, since payroll records may contain information
in which the contractor’s employees
have a privacy interest, as well as information in which the contractor may
have a proprietary interest that the
Government may be obliged to protect.
Questions concerning release of this information may involve the Freedom of
Information Act (FOIA).
22.406–7 Compliance checking.
(a) General. The contracting officer
shall make checks and investigations
on all contracts covered by this subpart as may be necessary to ensure
compliance with the labor standards
requirement of the contract.
(b) Regular compliance checks. Regular
compliance checking includes the following activities:
(1) Employee interviews to determine
correctness of classifications, rates of
pay, fringe benefits payments, and
hours worked. (See Standard Form
1445.)
(2) On-site inspections to check type
of work performed, number and classification of workers, and fulfillment of
posting requirements.
(3) Payroll reviews to ensure that
payrolls of prime contractors and subcontractors have been submitted on
time and are complete and in compliance with contract requirements.
(4) Comparison of the information in
this paragraph (b) with available data,
including daily inspector’s report and
daily logs of construction, to ensure
consistency.
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22.406–8
(c) Special compliance checks. Situations that may require special compliance checks include—
(1) Inconsistencies, errors, or omissions detected during regular compliance checks; or
(2) Receipt of a complaint alleging
violations. If the complaint is not specific enough, the complainant shall be
so advised and invited to submit additional information.
22.406–8
Investigations.
Conduct labor standards investigations when available information indicates such action is warranted. In addition, the Department of Labor may
conduct an investigation on its own
initiative or may request a contracting
agency to do so.
(a) Contracting agency responsibilities.
Conduct an investigation when a compliance check indicates that substantial or willful violations may have occurred or violations have not been corrected.
(1) The investigation must—
(i) Include all aspects of the contractor’s compliance with contract labor
standards requirements;
(ii) Not be limited to specific areas
raised in a complaint or uncovered during compliance checks; and
(iii) Use personnel familiar with
labor laws and their application to contracts.
(2) Do not disclose contractor employees’ oral or written statements
taken during an investigation or the
employee’s identity to anyone other
than an authorized Government official
without that employee’s prior signed
consent.
(3) Send a written request to the Administrator, Wage and Hour Division,
to obtain—
(i) Investigation and enforcement instructions; or
(ii) Available pertinent Department
of Labor files.
(4) Obtain permission from the Department of Labor before disclosing
material obtained from Labor Department files, other than computations of
back wages and liquidated damages and
summaries of back wages due, to anyone other than Government contract
administrators.
(b) Investigation report. The contracting officer must review the investigation report on receipt and make
preliminary findings. The contracting
officer normally must not base adverse
findings solely on employee statements
that the employee does not wish to
have disclosed. However, if the investigation establishes a pattern of possible violations that are based on employees’ statements that are not authorized for disclosure, the pattern
itself may support a finding of noncompliance.
(c) Contractor notification. After completing the review, the contracting officer must—
(1) Provide the contractor any written preliminary findings and proposed
corrective actions, and notice that the
contractor has the right to request
that the basis for the findings be made
available and to submit written rebuttal information.
(2) Upon request, provide the contractor with rationale for the findings.
However, under no circumstances will
the contracting officer permit the contractor to examine the investigation
report. Also, the contracting officer
must not disclose the identity of any
employee who filed a complaint or who
was interviewed, without the prior consent of the employee.
(3)(i) The contractor may rebut the
findings in writing within 60 days after
it receives a copy of the preliminary
findings. The rebuttal becomes part of
the official investigation record. If the
contractor submits a rebuttal, evaluate
the preliminary findings and notify the
contractor of the final findings.
(ii) If the contracting officer does not
receive a timely rebuttal, the contracting officer must consider the preliminary findings final.
(4) If appropriate, request the contractor to make restitution for underpaid wages and assess liquidated damages. If the request includes liquidated
damages, the request must state that
the contractor has 60 days to request
relief from such assessment.
(d) Contracting officer’s report. After
taking the actions prescribed in paragraphs (b) and (c) of this subsection—
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22.406–9
48 CFR Ch. 1 (10–1–03 Edition)
(1) The contracting officer must prepare and forward a report of any violations, including findings and supporting evidence, to the agency head.
Standard Form 1446, Labor Standards
Investigation Summary Sheet, is the
first page of the report; and
(2) The agency head must process the
report as follows:
(i) The contracting officer must send
a detailed enforcement report to the
Administrator, Wage and Hour Division, within 60 days after completion of
the investigation, if—
(A) A contractor or subcontractor
underpaid by $1,000 or more;
(B) The contracting officer believes
that the violations are aggravated or
willful (or there is reason to believe
that the contractor has disregarded its
obligations to employees and subcontractors under the Davis-Bacon
Act);
(C) The contractor or subcontractor
has not made restitution; or
(D) Future compliance has not been
assured.
(ii) If the Department of Labor expressly requested the investigation and
none of the conditions in paragraph
(d)(2)(i) of this subsection exist, submit
a summary report to the Administrator, Wage and Hour Division. The
report must include—
(A) A summary of any violations;
(B) The amount of restitution paid;
(C) The number of workers who received restitution;
(D) The amount of liquidated damages assessed under the Contract Work
Hours and Safety Standards Act;
(E) Corrective measures taken; and
(F) Any information that may be
necessary to review any recommendations for an appropriate adjustment in
liquidated damages.
(iii) If none of the conditions in paragraphs (d)(2)(i) or (ii) of this subsection
are present, close the case and retain
the report in the appropriate contract
file.
(iv) If substantial evidence is found
that violations are willful and in violation of a criminal statute, (generally 18
U.S.C. 874 or 1001), forward the report
(supplemented if necessary) to the Attorney General of the United States for
prosecution if the facts warrant. Notify
the Administrator, Wage and Hour Di-
vision, when the report is forwarded for
the Attorney General’s consideration.
(e) Department of Labor investigations.
The Department of Labor will furnish
the contracting officer an enforcement
report detailing violations found and
any corrective action taken by the contractor, in investigations that disclose—
(1) Underpayments totaling $1,000 or
more;
(2) Aggravated or willful violations
(or, when the contracting officer believes that the contractor has disregarded its obligations to employees
and subcontractors under the DavisBacon Act); or
(3) Potential assessment of liquidated
damages under the Contract Work
Hours and Safety Standards Act.
(f) Other investigations. The Department of Labor will provide a letter
summarizing the findings of the investigation to the contracting officer for
all investigations that are not described in paragraph (e) of this subsection.
[65 FR 46065, July 26, 2000]
22.406–9 Withholding from or suspension of contract payments.
(a) Withholding from contract payments. If the contracting officer believes a violation exists
(see 22.406–
8), or upon request of the Department
of Labor, the contracting officer must
withhold from payments due the contractor an amount equal to the estimated wage underpayment and estimated liquidated damages due the
United States under the Contract Work
Hours and Safety Standards Act. (See
22.302.)
(1) If the contracting officer believes
a violation exists or upon request of
the Department of Labor, the contracting officer must withhold funds
from any current Federal contract or
Federally assisted contract with the
same prime contractor that is subject
to either Davis-Bacon Act or Contract
Work Hours and Safety Standards Act
requirements.
(2) If a subsequent investigation confirms violations, the contracting officer must adjust the withholding as necessary. However, if the Department of
Labor requested the withholding, the
contracting officer must not reduce or
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release the withholding without written approval of the Department of
Labor.
(3) Use withheld funds as provided in
paragraph (c) of this subsection to satisfy assessed liquidated damages, and
unless the contractor makes restitution, validated wage underpayments.
(b) Suspension of contract payments. If
a contractor or subcontractor fails or
refuses to comply with the labor standards clauses of the Davis-Bacon Act
and related statutes, the agency, upon
its own action or upon the written request of the Department of Labor,
must suspend any further payment, advance, or guarantee of funds until the
violations cease or until the agency
has withheld sufficient funds to compensate employees for back wages, and
to cover any liquidated damages due.
(c) Disposition of contract payments
withheld or suspended. (1) Forwarding
wage underpayments to the Secretary of
the Treasury. Upon final administrative
determination, if the contractor or
subcontractor has not made restitution, the contracting officer must forward to the appropriate disbursing office Standard Form (SF) 1093, Schedule
of Withholdings Under the Davis-Bacon
Act (40 U.S.C. 276(a)) and/or Contract
Work Hours and Safety Standards Act
(40 U.S.C. 327–333). Attach to the SF
1093 a list of the name, social security
number, and last known address of
each affected employee; the amount
due each employee; employee claims if
feasible; and a brief rationale for restitution. Also, the contracting officer
must indicate if restitution was not
made because the employee could not
be located. The Government may assist
underpaid employees in preparation of
their claims. The disbursing office
must submit the SF 1093 with attached
additional data and the funds withheld
(by check) to the Secretary of the
Treasury.
(2) Returning of withheld funds to contractor. When funds withheld exceed the
amount required to satisfy validated
wage underpayments and assessed liquidated damages, return the funds to
the contractor.
(3) Limitation on forwarding or returning funds. If the Department of Labor
requested the withholding or if the
findings are disputed (see 22.406–10(e)),
the contracting officer must not forward the funds to the Secretary of the
Treasury, or return them to the contractor without approval by the Department of Labor.
(4) Liquidated damages. Upon final administrative determination, the contracting officer must dispose of funds
withheld or collected for liquidated
damages in accordance with agency
procedures.
[65 FR 46066, July 26, 2000]
22.406–10 Disposition of disputes concerning construction contract labor
standards enforcement.
(a) The areas of possible differences
of opinion between contracting officers
and contractors in construction contract labor standards enforcement include—
(1) Misclassification of workers;
(2) Hours of work;
(3) Wage rates and payment;
(4) Payment of overtime;
(5) Withholding practices; and
(6) The applicability of the labor
standards requirements under varying
circumstances.
(b) Generally, these differences are
settled administratively at the project
level by the contracting agency. If necessary, these differences may be settled
with assistance from the Department
of Labor.
(c) When requesting the contractor to
take corrective action in labor violation cases, the contracting officer shall
inform the contractor of the following:
(1) Disputes concerning the labor
standards requirements of the contract
are handled under the contract clause
at 52.222–14, Disputes Concerning Labor
Standards, and not under the clause at
52.233–1, Disputes.
(2) The contractor may appeal the
contracting officer’s findings or part
thereof by furnishing the contracting
officer a complete statement of the
reasons for the disagreement with the
findings.
(d) The contracting officer shall
promptly transmit the contracting officer’s findings and the contractor’s
statement to the Administrator, Wage
and Hour Division.
(e) The Administrator, Wage and
Hour Division, will respond directly to
the contractor or subcontractor, with a
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22.406–11
48 CFR Ch. 1 (10–1–03 Edition)
copy to the contracting agency. The
contractor or subcontractor may appeal the Administrator’s findings in accordance with the procedures outlined
in Labor Department Regulations (29
CFR 5.11). Hearings before administrative law judges are conducted in accordance with 29 CFR part 6, and hearings before the Labor Department Administrative Review Board are conducted in accordance with 29 CFR part
7.
(f) The Administrator, Wage and
Hour Division, may institute debarment proceedings against the contractor or subcontractor if the Administrator finds reasonable cause to believe that the contractor or subcontractor has committed willful or aggravated violations of the Contract Work
Hours and Safety Standards Act or the
Copeland (Anti-Kickback) Act, or any
of the applicable statutes listed in 29
CFR 5.1 other than the Davis-Bacon
Act, or has committed violations of the
Davis-Bacon Act that constitute a disregard of its obligations to employees
or subcontractors under section 3(a) of
that Act.
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53481, Oct. 22, 2001]
22.406–11 Contract terminations.
If a contract or subcontract is terminated for violation of the labor standards clauses, the contracting agency
shall submit a report to the Administrator, Wage and Hour Division, and
the Comptroller General. The report
shall include—
(a) The number of the terminated
contract;
(b) The name and address of the terminated contractor or subcontractor;
(c) The name and address of the contractor or subcontractor, if any, who is
to complete the work;
(d) The amount and number of the replacement contract, if any; and
(e) A description of the work.
22.406–12 Cooperation with the Department of Labor.
(a) The contracting agency shall cooperate with representatives of the Department of Labor in the inspection of
records, interviews with workers, and
all other aspects of investigations undertaken by the Department of Labor.
When requested, the contracting agency shall furnish to the Secretary of
Labor any available information on
contractors, subcontractors, current
and previous contracts, and the nature
of the contract work.
(b) If a Department of Labor representative undertakes an investigation at a construction project, the contracting officer shall inquire into the
scope of the investigation, and request
to be notified immediately of any violations discovered under the DavisBacon Act, the Contract Work Hours
and Safety Standards Act, or the
Copeland (Anti-Kickback) Act.
22.406–13 Semiannual enforcement reports.
A semiannual report on compliance
with and enforcement of the construction labor standards requirements of
the Davis-Bacon Act and Contract
Work Hours and Safety Standards Act
is required from each contracting agency. The reporting periods are October 1
through March 31 and April 1 through
September 30. The reports shall only
contain information as to the enforcement actions of the contracting agency
and shall be prepared as prescribed in
Department of Labor memoranda and
submitted to the Department of Labor
within 30 days after the end of the reporting period. This report has been assigned interagency report control number 1482–DOL–SA.
22.407
Contract clauses.
(a) The contracting officer shall insert the following clauses in solicitations and contracts in excess of $2,000
for construction within the United
States:
(1) The clause at 52.222–6, DavisBacon Act.
(2) The clause at 52.222–7, Withholding of Funds.
(3) The clause at 52.222–8, Payrolls
and Basic Records.
(4) The clause at 52.222–9, Apprentices
and Trainees.
(5) The clause at 52.222–10, Compliance with Copeland Act Requirements.
(6) The clause at 52.222–11, Subcontracts (Labor Standards).
(7) The clause at 52.222–12, Contract
Termination—Debarment.
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(8) The clause at 52.222–13, Compliance with Davis-Bacon and Related Act
Regulations.
(9) The clause at 52.222–14, Disputes
Concerning Labor Standards.
(10) The clause at 52.222–15, Certification of Eligibility.
(b) The contracting officer shall insert the clause at 52.222–16, Approval of
Wage Rates, in solicitations and contracts in excess of $2,000 for cost-reimbursement construction to be performed within the United States, except for contracts with a State or political subdivision thereof.
(c) A contract that is not primarily
for construction may contain a requirement for some construction work
to be performed in the United States. If
under 22.402(b) the requirements of this
subpart apply to the construction
work, the contracting officer shall insert in such solicitations and contracts
the applicable construction labor
standards clauses required in this section and identify the item or items of
construction work to which the clauses
apply.
(d) The contracting officer shall insert the clause at 52.222–17, Labor
Standards for Construction Work—Facilities Contracts, in solicitations and
contracts, if a facilities contract (see
45.301) may require covered construction work (see 22.402(b)) to be performed in the United States.
(e) Insert the clause at 52.222–30,
Davis-Bacon Act—Price Adjustment
(None or Separately Specified Pricing
Method), in solicitations and contracts
if the contract is expected to be—
(1) A fixed-price contract subject to
the Davis-Bacon Act that will contain
option provisions by which the contracting officer may extend the term of
the contract, and the contracting officer determines the most appropriate
contract price adjustment method is
the method at 22.404–12(c)(1) or (2); or
(2) A cost-reimbursable type contract
subject to the Davis-Bacon Act that
will contain option provisions by which
the contracting officer may extend the
term of the contract.
(f) Insert the clause at 52.222–31,
Davis-Bacon Act—Price Adjustment
(Percentage Method), in solicitations
and contracts if the contract is expected to be a fixed-price contract sub-
ject to the Davis-Bacon Act that will
contain option provisions by which the
contracting officer may extend the
term of the contract, and the contracting officer determines the most
appropriate contract price adjustment
method is the method at 22.404–12(c)(3).
(g) Insert the clause at 52.222–32,
Davis-Bacon Act—Price Adjustment
(Actual Method), in solicitations and
contracts if the contract is expected to
be a fixed-price contract subject to the
Davis-Bacon Act that will contain option provisions by which the contracting officer may extend the term of
the contract, and the contracting officer determines the most appropriate
method to establish contract price is
the method at 22.404–12(c)(4).
[53 FR 4935, Feb. 18, 1988, as amended at 66
FR 53481, Oct. 22, 2001]
Subpart 22.5 [Reserved]
Subpart 22.6—Walsh-Healey
Public Contracts Act
22.601
[Reserved]
22.602 Statutory requirements.
Except for the exemptions at 22.604,
all contracts subject to the WalshHealey Public Contracts Act (the Act)
(41 U.S.C. 35–45) and entered into by
any executive department, independent
establishment, or other agency or instrumentality of the United States, or
by the District of Columbia, or by any
corporation (all the stock of which is
beneficially owned by the United
States) for the manufacture or furnishing of materials, supplies, articles,
and equipment (referred to in this subpart as supplies) in any amount exceeding $10,000, shall include or incorporate
by reference the stipulations required
by the Act pertaining to such matters
as minimum wages, maximum hours,
child labor, convict labor, and safe and
sanitary working conditions.
[61 FR 67410, Dec. 20, 1996]
22.603 Applicability.
The requirements in 22.602 apply to
contracts (including for this purpose,
indefinite-delivery contracts, basic ordering agreements, and blanket purchase agreements) and subcontracts
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22.604
48 CFR Ch. 1 (10–1–03 Edition)
under Section 8(a) of the Small Business Act, for the manufacture or furnishing of supplies that—
(a) Will be performed in the United
States, Puerto Rico, or the U.S. Virgin
Islands;
(b) Exceed or may exceed $10,000; and
(c) Are not exempt under 22.604.
[68 FR 28082, May 22, 2003]
22.604
Exemptions.
22.604–1 Statutory exemptions.
Contracts for acquisition of the following supplies are exempt from the
Act:
(a) Any item in those situations
where the contracting officer is authorized by the express language of a statute to purchase ‘‘in the open market’’
generally (such as commercial items,
see part 12); or where a specific purchase is made under the conditions described in 6.302–2 in circumstances
where immediate delivery is required
by the public exigency.
(b) Perishables, including dairy, livestock, and nursery products.
(c) Agricultural or farm products
processed for first sale by the original
producers.
(d) Agricultural commodities or the
products thereof purchased under contract by the Secretary of Agriculture.
[48 FR 42258, Sept. 19, 1983, as amended at 53
FR 4944, Feb. 18, 1988; 60 FR 48248, Sept. 18,
1995]
22.604–2 Regulatory exemptions.
(a) Contracts for the following acquisitions are fully exempt from the Act
(see 41 CFR 50–201.603):
(1) Public utility services.
(2) Supplies manufactured outside
the United States, Puerto Rico, and
the U.S. Virgin Islands.
(3) Purchases against the account of
a defaulting contractor where the stipulations of the Act were not included
in the defaulted contract.
(4) Newspapers, magazines, or periodicals, contracted for with sales
agents or publisher representatives,
which are to be delivered by the publishers thereof.
(b)(1) Upon the request of the agency
head, the Secretary of Labor may exempt specific contracts or classes of
contracts from the inclusion or appli-
cation of one or more of the Act’s stipulations; provided, that the request includes a finding by the agency head
stating the reasons why the conduct of
Government business will be seriously
impaired unless the exemption is
granted.
(2) Those requests for exemption that
relate solely to safety and health
standards shall be transmitted to the
Assistant Secretary for Occupational
Safety and Health, U.S. Department of
Labor, Washington, DC 202l0. All other
requests shall be transmitted to the
Administrator of the Wage and Hour
Division, U.S. Department of Labor,
Washington, DC 202l0.
[48 FR 42258, Sept. 19, 1983, as amended at 61
FR 67410, Dec. 20, 1996; 68 FR 28082, May 22,
2003]
22.605 Rulings and interpretations of
the Act.
(a) As authorized by the Act, the Secretary of Labor has issued rulings and
interpretations concerning the administration of the Act (see 41 CFR 50–206).
The substance of certain rulings and
interpretations is as follows:
(1) If a contract for $10,000 or less is
subsequently
modified
to
exceed
$10,000, the contract becomes subject to
the Act for work performed after the
date of the modification.
(2) If a contract for more than $10,000
is subsequently modified by mutual
agreement to $10,000 or less, the contract is not subject to the Act for work
performed after the date of the modification.
(3) If a contract awarded to a prime
contractor contains a provision whereby the prime contractor is made an
agent of the Government, the prime
contractor is required to include the
stipulations of the Act in contracts in
excess of $10,000 awarded for and on behalf of the Government for supplies
that are to be used in the construction
and equipment of Government facilities.
(4) If a contract subject to the Act is
awarded to a contractor operating Government-owned facilities, the stipulations of the Act affect the employees of
that contractor the same as employees
of contractors operating privately
owned facilities.
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Federal Acquisition Regulation
22.801
(5) Indefinite-delivery contracts, including basic ordering agreements and
blanket purchase agreements, are subject to the Act unless it can be determined in advance that the aggregate
amount of all orders estimated to be
placed thereunder for 1 year after the
effective date of the agreement will not
exceed $10,000. A determination shall be
made annually thereafter if the contract or agreement is extended, and the
contract or agreement modified if necessary.
(b) [Reserved]
22.606–22.607
22.608
[Reserved]
Procedures.
(a) Award. When a contract subject to
the Act is awarded, the contracting officer, in accordance with regulations or
instructions issued by the Secretary of
Labor and individual agency procedures, shall furnish to the contractor
DOL publication WH–1313, Notice to
Employees Working on Government
Contracts.
(b) Breach of stipulation. In the event
of a violation of a stipulation required
under the Act, the contracting officer
shall, in accordance with agency procedures, notify the appropriate regional
office of the DOL, Wage and Hour Division (see 22.609), and furnish any information available.
(c) The Region IV office located in
Atlanta, Georgia, has jurisdiction for
Alabama, Florida, Georgia, Kentucky,
Mississippi, North Carolina, South
Carolina, and Tennessee.
(d) The Region V and Region VII office located in Chicago, Illinois, has jurisdiction for Illinois, Indiana, Iowa,
Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, and Wisconsin.
(e) The Region VI and Region VIII office located in Dallas, Texas, has jurisdiction for Arkansas, Colorado, Louisiana, Montana, New Mexico, North
Dakota, Oklahoma, South Dakota,
Texas, Utah, and Wyoming.
(f) The Region IX and Region X office
located in San Francisco, California,
has jurisdiction for Alaska, Arizona,
California, Guam, Hawaii, Idaho, Nevada, Oregon, and Washington.
[64 FR 32748, June 17, 1999]
22.610
The contracting officer shall insert
the clause at 52.222–20, Walsh-Healey
Public Contracts Act, in solicitations
and contracts covered by the Act (see
22.603, 22.604, and 22.605).
[61 FR 67411, Dec. 20, 1996]
Subpart 22.7 [Reserved]
Subpart 22.8—Equal Employment
Opportunity
[61 FR 67411, Dec. 20, 1996]
22.609 Regional jurisdictions of the
Department of Labor, Wage and
Hour Division.
Geographic jurisdictions of the following regional offices of the DoL,
Wage and Hour Division, are shown
here, and contracting officers should
contact them in all situations required
by this subpart, unless otherwise specified:
(a) The Region I and Region II office
located in New York, New York, has jurisdiction for Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Puerto Rico, Rhode Island, Vermont, and the Virgin Islands.
(b) The Region III office located in
Philadelphia, Pennsylvania, has jurisdiction for Delaware, the District of
Columbia, Maryland, Pennsylvania,
Virginia, and West Virginia.
Contract clause.
22.800
Scope of subpart.
This subpart prescribes policies and
procedures
pertaining
to
nondiscrimination in employment by contractors and subcontractors.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70283, Dec. 18, 1998]
22.801
Definitions.
As used in this subpart—
Affirmative action program means a
contractor’s program that complies
with Department of Labor regulations
to ensure equal opportunity in employment to minorities and women.
Compliance evaluation means any one
or combination of actions that the Office of Federal Contract Compliance
Programs (OFCCP) may take to examine a Federal contractor’s compliance
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22.802
48 CFR Ch. 1 (10–1–03 Edition)
with one or more of the requirements
of E.O. 11246.
Contractor includes the terms ‘‘prime
contractor’’ and ‘‘subcontractor.’’
Deputy Assistant Secretary means the
Deputy Assistant Secretary for Federal
Contract Compliance, U.S. Department
of Labor, or a designee.
Equal Opportunity clause means the
clause at 52.222–26, Equal Opportunity,
as prescribed in 22.810(e).
E.O. 11246 means Parts II and IV of
Executive Order 11246, September 24,
1965 (30 FR 12319), and any Executive
order amending or superseding this
order (see 22.802). This term specifically includes the Equal Opportunity
clause at 52.222–26, and the rules, regulations, and orders issued pursuant to
E.O. 11246 by the Secretary of Labor or
a designee.
Prime contractor means any person
who holds, or has held, a Government
contract subject to E.O. 11246.
Recruiting and training agency means
any person who refers workers to any
contractor or provides or supervises apprenticeship or training for employment by any contractor.
Site of construction means the general
physical location of any building, highway, or other change or improvement
to real property that is undergoing
construction,
rehabilitation,
alteration, conversion, extension, demolition, or repair; and any temporary location or facility at which a contractor
or other participating party meets a
demand or performs a function relating
to a Government contract or subcontract.
Subcontract means any agreement or
arrangement between a contractor and
any person (in which the parties do not
stand in the relationship of an employer and an employee)—
(1) For the purchase, sale, or use of
personal property or nonpersonal services that, in whole or in part, are necessary to the performance of any one
or more contracts; or
(2) Under which any portion of the
contractor’s obligation under any one
or more contracts is performed, undertaken, or assumed.
Subcontractor means any person who
holds, or has held, a subcontract subject to E.O. 11246. The term first-tier
subcontractor means a subcontractor
holding a subcontract with a prime
contractor.
United States means the 50 States, the
District of Columbia, Puerto Rico, the
Northern Mariana Islands, American
Samoa, Guam, the U.S. Virgin Islands,
and Wake Island.
[63 FR 70283, Dec. 18, 1998, as amended at 68
FR 28082, May 22, 2003]
22.802
General.
(a) Executive Order 11246, as amended, sets forth the Equal Opportunity
clause and requires that all agencies (1)
include this clause in all nonexempt
contracts and subcontracts (see 22.807),
and (2) act to ensure compliance with
the clause and the regulations of the
Secretary of Labor to promote the full
realization of equal employment opportunity for all persons, regardless of
race, color, religion, sex, or national
origin.
(b) No contract or modification involving new acquisition shall be entered into, and no subcontract shall be
approved by a contracting officer, with
a person who has been found ineligible
by the Deputy Assistant Secretary for
reasons of noncompliance with the requirements of E.O. 11246.
(c) No contracting officer or contractor shall contract for supplies or
services in a manner so as to avoid applicability of the requirements of E.O.
11246.
(d) Contractor disputes related to
compliance with its obligation shall be
handled according to the rules, regulations, and relevant orders of the Secretary of Labor (see 41 CFR 60–1.1).
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70283, 70285, Dec. 18, 1998]
22.803
Responsibilities.
(a) The Secretary of Labor is responsible for the—
(1) Administration and enforcement
of prescribed parts of E.O. 11246; and
(2) Adoption of rules and regulations
and the issuance of orders necessary to
achieve the purposes of E.O. 11246.
(b) The Secretary of Labor has delegated authority and assigned responsibility to the Deputy Assistant Secretary for carrying out the responsibilities assigned to the Secretary by E.O.
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Federal Acquisition Regulation
22.805
11246, except for the issuance of rules
and regulations of a general nature.
(c) The head of each agency is responsible for ensuring that the requirements of this subpart are carried out
within the agency, and for cooperating
with and assisting the OFCCP in fulfilling its responsibilities.
(d) In the event the applicability of
E.O. 11246 and implementing regulations is questioned, the contracting officer shall forward the matter to the
Deputy Assistant Secretary, through
agency channels, for resolution.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70283, 70285, Dec. 18, 1998]
22.804
Affirmative action programs.
22.804–1
Nonconstruction.
Except as provided in 22.807, each
nonconstruction prime contractor and
each subcontractor with 50 or more employees and either a contract or subcontract of $50,000 or more, or Government bills of lading that in any 12month period total, or can reasonably
be expected to total, $50,000 or more, is
required to develop a written affirmative action program for each of its establishments. Each contractor and subcontractor shall develop its written affirmative action programs within 120
days from the commencement of its
first such Government contract, subcontract, or Government bill of lading.
[63 FR 70284, Dec. 18, 1998]
22.804–2
Construction.
(a) Construction contractors that
hold a nonexempt (see 22.807) Government construction contract are required to meet (1) the contract terms
and conditions citing affirmative action requirements applicable to covered geographical areas or projects and
(2) applicable requirements of 41 CFR
60–1 and 60–4.
(b) Each agency shall maintain a listing of covered geographical areas that
are subject to affirmative action requirements that specify goals for minorities and women in covered construction trades. Information concerning, and additions to, this listing
will be provided to the principally affected contracting officers in accordance with agency procedures. Any con-
tracting officer contemplating a construction project in excess of $10,000
within a geographic area not known to
be covered by specific affirmative action goals shall request instructions on
the most current information from the
OFCCP regional office, or as otherwise
specified in agency regulations, before
issuing the solicitation.
(c) Contracting officers shall give
written notice to the OFCCP regional
office within 10 working days of award
of a construction contract subject to
these affirmative action requirements.
The notification shall include the
name, address, and telephone number
of the contractor; employer identification number; dollar amount of the contract; estimated starting and completion dates of the contract; the contract
number; and the geographical area in
which the contract is to be performed.
When requested by the OFCCP regional
office, the contracting officer shall arrange a conference among contractor,
contracting activity, and compliance
personnel to discuss the contractor’s
compliance responsibilities.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70284, Dec. 18, 1998]
22.805 Procedures.
(a) Preaward clearances for contracts
and subcontracts of $10 million or more
(excluding construction). (1) Except as
provided in paragraphs (a)(4) and (a)(8)
of this section, if the estimated
amount of the contract or subcontract
is $10 million or more, the contracting
officer shall request clearance from the
appropriate OFCCP regional office before—
(i) Award of any contract, including
any indefinite delivery contract or letter contract; or
(ii) Modificaton of an existing contract for new effort that would constitute a contract award.
(2) Preaward clearance for each proposed contract and for each proposed
first-tier subcontract of $10 million or
more shall be requested by the contracting officer directly from the
OFCCP regional office(s). Verbal requests shall be confirmed by letter or
facsimile transmission.
(3) When the contract work is to be
performed outside the United States
with employees recruited within the
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22.805
48 CFR Ch. 1 (10–1–03 Edition)
United States, the contracting officer
shall send the request for a preaward
clearance to the OFCCP regional office
serving the area where the proposed
contractor’s corporate home or branch
office is located in the United States,
or the corporate location where personnel recruiting is handled, if different from the contractor’s corporate
home or branch office. If the proposed
contractor has no corporate office or
location within the United States, the
preaward clearance request action
should be based on the location of the
recruiting and training agency in the
United States.
(4) The contracting officer does not
need to request a preaward clearance
if—
(i) The specific proposed contractor
is listed in OFCCP’s National Preaward
Registry via the Internet at http://
www.dol-esa.gov/preaward/;
(ii) The projected award date is within 24 months of the proposed contractor’s Notice of Compliance completion
date in the Registry; and
(iii) The contracting officer documents the Registry review in the contract file.
(5) The contracting officer shall include the following information in the
preaward clearance request:
(i) Name, address, and telephone
number of the prospective contractor
and of any corporate affiliate at which
work is to be performed.
(ii) Name, address, and telephone
number of each proposed first-tier subcontractor with a proposed subcontract
estimated at $10 million or more.
(iii) Anticipated date of award.
(iv) Information as to whether the
contractor and first-tier subcontractors have previously held any Government contracts or subcontracts.
(v) Place or places of performance of
the prime contract and first-tier subcontracts estimated at $10 million or
more, if known.
(vi) The estimated dollar amount of
the contract and each first-tier subcontract, if known.
(6) The contracting officer shall
allow as much time as feasible before
award for the conduct of necessary
compliance evaluation by OFCCP. As
soon as the apparently successful offeror can be determined, the contracting
officer shall process a preaward clearance request in accordance with agency
procedures, assuring, if possible, that
the preaward clearance request is submitted to the OFCCP regional office at
least 30 days before the proposed award
date.
(7) Within 15 days of the clearance request, OFCCP will inform the awarding
agency of its intention to conduct a
preaward compliance evaluation. If
OFCCP does not inform the awarding
agency within that period of its intention to conduct a preaward compliance
evaluation, clearance shall be presumed and the awarding agency is authorized to proceed with the award. If
OFCCP informs the awarding agency of
its intention to conduct a preaward
compliance evaluation, OFCCP shall be
allowed an additional 20 days after the
date that it so informs the awarding
agency to provide its conclusions. If
OFCCP does not provide the awarding
agency with its conclusions within
that period, clearance shall be presumed and the awarding agency is authorized to proceed with the award.
(8) If the procedures specified in paragraphs (a)(6) and (a)(7) of this section
would delay award of an urgent and
critical contract beyond the time necessary to make award or beyond the
time specified in the offer or extension
thereof, the contracting officer shall
immediately inform the OFCCP regional office of the expiration date of
the offer or the required date of award
and request clearance be provided before that date. If the OFCCP regional
office advises that a preaward evaluation cannot be completed by the required date, the contracting officer
shall submit written justification for
the award to the head of the contracting activity, who, after informing
the OFCCP regional office, may then
approve
the
award
without
the
preaward clearance. If an award is
made under this authority, the contracting officer shall immediately request a postaward evaluation from the
OFCCP regional office.
(9) If, under the provisions of paragraph (a)(8) of this section, a postaward
evaluation determines the contractor
to be in noncompliance with E.O. 11246,
the Deputy Assistant Secretary may
authorize the use of the enforcement
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Federal Acquisition Regulation
22.807
procedures at 22.809 against the noncomplying contractor.
(b) Furnishing posters. The contracting officer shall furnish to the
contractor appropriate quantities of
the poster entitled Equal Employment
Opportunity Is The Law. These shall be
obtained in accordance with agency
procedures.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70284, Dec. 18, 1998]
22.806 Inquiries.
(a) An inquiry from a contractor regarding status of its compliance with
E.O. 11246, or rights of appeal to any of
the actions in 22.809, shall be referred
to the OFCCP regional office.
(b) Labor union inquiries regarding
the revision of a collective bargaining
agreement in order to comply with
E.O. 11246 shall be referred to the Deputy Assistant Secretary.
[63 FR 70284, Dec. 18, 1998]
22.807 Exemptions.
(a) Under the following exemptions,
all or part of the requirements of E.O.
11246 may be excluded from a contract
subject to E.O. 11246:
(1) National security. The agency head
may determine that a contract is essential to the national security and
that the award of the contract without
complying with one or more of the requirements of this subpart is necessary
to the national security. Upon making
such a determination, the agency shall
notify the Deputy Assistant Secretary
in writing within 30 days.
(2) Specific contracts. The Deputy Assistant Secretary may exempt an agency from requiring the inclusion of one
or more of the requirements of E.O.
11246 in any contract if the Deputy Assistant Secretary deems that special
circumstances in the national interest
so require. Groups or categories of contracts of the same type may also be exempted if the Deputy Assistant Secretary finds it impracticable to act
upon each request individually or if
group exemptions will contribute to
convenience in the administration of
E.O. 11246.
(b) The following exemptions apply
even though a contract or subcontract
contains the Equal Opportunity clause:
(1) Transactions of $10,000 or less. The
Equal Opportunity clause is required to
be included in prime contracts and subcontracts by 22.802(a). Individual prime
contracts or subcontracts of $10,000 or
less are exempt from application of the
Equal Opportunity clause, unless the
aggregate value of all prime contracts
or subcontracts awarded to a contractor in any 12-month period exceeds,
or can reasonably be expected to exceed, $10,000. (Note: Government bills
of lading, regardless of amount, are not
exempt.)
(2) Work outside the United States.
Contracts are exempt from the requirements of E.O. 11246 for work performed
outside the United States by employees
who were not recruited within the
United States.
(3) Contracts with State or local governments. The requirements of E.O. 11246
in any contract with a State or local
government (or any agency, instrumentality, or subdivision thereof) shall not
be applicable to any agency, instrumentality, or subdivision of such government that does not participate in
work on or under the contract.
(4) Work on or near Indian reservations.
It shall not be a violation of E.O. 11246
for a contractor to extend a publicly
announced preference in employment
to Indians living on or near an Indian
reservation in connection with employment opportunities on or near an Indian reservation. This applies to that
area where a person seeking employment could reasonably be expected to
commute to and from in the course of
a work day. Contractors extending
such a preference shall not, however,
discriminate among Indians on the
basis of religion, sex, or tribal affiliation, and the use of such preference
shall not excuse a contractor from
complying with E.O. 11246, rules and
regulations of the Secretary of Labor,
and applicable clauses in the contract.
(5) Facilities not connected with contracts. The Deputy Assistant Secretary
may exempt from the requirements of
E.O. 11246 any of a contractor’s facilities that the Deputy Assistant Secretary finds to be in all respects separate and distinct from activities of the
contractor related to performing the
contract, provided, that the Deputy Assistant Secretary also finds that the
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22.808
48 CFR Ch. 1 (10–1–03 Edition)
exemption will not interfere with, or
impede the effectiveness of, E.O. 11246.
(6) Indefinite-quantity contracts. With
respect to indefinite-quantity contracts and subcontracts, the Equal Opportunity clause applies unless the
contracting officer has reason to believe that the amount to be ordered in
any year under the contract will not
exceed $10,000. The applicability of the
Equal Opportunity clause shall be determined by the contracting officer at
the time of award for the first year,
and annually thereafter for succeeding
years, if any. Notwithstanding the
above, the Equal Opportunity clause
shall be applied to the contract whenever the amount of a single order exceeds $10,000. Once the Equal Opportunity clause is determined to be applicable, the contract shall continue to be
subject to such clause for its duration
regardless of the amounts ordered, or
reasonably expected to be ordered, in
any year.
(c) To request an exemption under
paragraph (a)(2) or (b)(5) of this section, the contracting officer shall submit, under agency procedures, a detailed justification for omitting all, or
part of, the requirements of E.O. 11246.
Requests for exemptions under paragraph (a)(2) or (b)(5) of this section
shall be submitted to the Deputy Assistant Secretary for approval.
(d) The Deputy Assistant Secretary
may withdraw the exemption for a specific contract, or group of contracts, if
the Deputy Assistant Secretary deems
that such action is necessary and appropriate to achieve the purposes of
E.O. 11246. Such withdrawal shall not
apply—
(1) To contracts awarded before the
withdrawal; or
(2) To any sealed bid contract (including restricted sealed bidding), unless the withdrawal is made more than
10 days before the bid opening date.
[48 FR 42258, Sept. 19, 1983, as amended at 52
FR 19803, May 27, 1987; 63 FR 70284, 70285, Dec.
18, 1998]
22.808 Complaints.
Complaints received by the contracting officer alleging violation of
the requirements of E.O. 11246 shall be
referred immediately to the OFCCP regional office. The complainant shall be
advised in writing of the referral. The
contractor that is the subject of a complaint shall not be advised in any manner or for any reason of the complainant’s name, the nature of the complaint, or the fact that the complaint
was received.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70285, Dec. 18, 1998]
22.809
Enforcement.
Upon the written direction of the
Deputy Assistant Secretary, one or
more of the following actions, as well
as administrative sanctions and penalties, may be exercised against contractors found to be in violation of E.O.
11246, the regulations of the Secretary
of Labor, or the applicable contract
clauses:
(a) Publication of the names of the
contractor or its unions.
(b) Cancellation, termination, or suspension of the contractor’s contracts
or portion thereof.
(c) Debarment from future Government contracts, or extensions or modifications of existing contracts, until
the contractor has established and carried out personnel and employment
policies in compliance with E.O. 11246
and the regulations of the Secretary of
Labor.
(d) Referral by the Deputy Assistant
Secretary of any matter arising under
E.O. 11246 to the Department of Justice
or to the Equal Employment Opportunity Commission (EEOC) for the institution of appropriate civil or criminal proceedings.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70285, Dec. 18, 1998]
22.810 Solicitation provisions and contract clauses.
(a) When a contract is contemplated
that will include the clause at 52.222–26,
Equal Opportunity, the contracting officer shall insert—
(1) The clause at 52.222–21, Prohibition of Segregated Facilities, in the solicitation and contract; and
(2) The provision at 52.222–22, Previous Contracts and Compliance Reports, in the solicitation.
(b) The contracting officer shall insert the provision at 52.222–23, Notice of
Requirement for Affirmative Action to
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Federal Acquisition Regulation
22.1000
Ensure Equal Employment Opportunity for Construction, in solicitations for construction when a contract
is contemplated that will include the
clause at 52.222–26, Equal Opportunity,
and the amount of the contract is expected to be in excess of $10,000.
(c) The contracting officer shall insert
the
provision
at
52.222–24,
Preaward On-Site Equal Opportunity
Compliance Evaluation, in solicitations other than those for construction
when a contract is contemplated that
will include the clause at 52.222–26,
Equal Opportunity, and the amount of
the contract is expected be $10 million
or more.
(d) The contracting officer shall insert the provision at 52.222–25, Affirmative Action Compliance, in solicitations, other than those for construction, when a contract is contemplated
that will include the clause at 52.222–26,
Equal Opportunity.
(e) The contracting officer shall insert the clause at 52.222–26, Equal Opportunity, in solicitations and contracts (see 22.802) unless the contract is
exempt from all of the requirements of
E.O. 11246 (see 22.807(a)). If the contract
is exempt from one or more, but not
all, of the requirements of E.O. 11246,
the contracting officer shall use the
clause with its Alternate I.
(f) The contracting officer shall insert the clause at 52.222–27, Affirmative
Action Compliance Requirements for
Construction, in solicitations and contracts for construction that will include the clause at 52.222–26, Equal Opportunity, when the amount of the contract is expected to be in excess of
$10,000.
(g) The contracting officer shall insert the clause at 52.222–29, Notification of Visa Denial, in contracts that
will include the clause at 52.222–26,
Equal Opportunity, if the contractor is
required to perform in or on behalf of a
foreign country.
[48 FR 42258, Sept. 19, 1983, as amended at 50
FR 23606, June 4, 1985; 52 FR 19803, May 27,
1987; 63 FR 34060, June 22, 1998; 63 FR 70285,
Dec. 18, 1998]
Subpart 22.9—Nondiscrimination
Because of Age
22.901 Policy.
Executive Order 11141, February 12,
1964 (29 FR 2477), states that the Government policy is as follows:
(a) Contractors and subcontractors
shall not, in connection with employment, advancement, or discharge of
employees, or the terms, conditions, or
privileges of their employment, discriminate against persons because of
their age except upon the basis of a
bona fide occupational qualification,
retirement plan, or statutory requirement.
(b) Contractors and subcontractors,
or persons acting on their behalf, shall
not specify in solicitations or advertisements for employees to work on
Government contracts, a maximum age
limit for employment unless the specified maximum age limit is based upon
a bona fide occupational qualification,
retirement plan, or statutory requirement.
(c) Agencies will bring this policy to
the attention of contractors. The use of
contract clauses is not required.
22.902 Handling complaints.
Agencies shall bring complaints regarding a contractor’s compliance with
this policy to that contractor’s attention (in writing, if appropriate), stating
the policy, indicating that the contractor’s compliance has been questioned,
and requesting that the contractor
take any appropriate steps that may be
necessary to comply.
Subpart 22.10—Service Contract
Act of 1965, as Amended
SOURCE: 54 FR 19816, May 8, 1989, unless
otherwise noted.
22.1000 Scope of subpart.
This subpart prescribes policies and
procedures implementing the provisions of the Service Contract Act of
1965, as amended (41 U.S.C. 351, et seq.),
the applicable provisions of the Fair
Labor Standards Act of 1938, as amended (29 U.S.C. 201, et seq.), and related
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22.1001
48 CFR Ch. 1 (10–1–03 Edition)
Secretary of Labor regulations and instructions (29 CFR parts 4, 6, 8, and
1925).
22.1001
Definitions.
As used in this subpart—
Act or Service Contract Act means the
Service Contract Act of 1965.
Agency labor advisor means an individual responsible for advising contracting agency officials on Federal
contract labor matters.
Contractor includes a subcontractor
at any tier whose subcontract is subject to the provisions of the Act.
Multiple year contracts means contracts having a term of more than 1
year regardless of fiscal year funding.
The term includes multi-year contracts
(see 17.103).
Notice means Standard Form (SF) 98,
Notice of Intention to Make a Service
Contract and Response to Notice, and SF
98a Attachment A. The term Notice is always capitalized in this subpart when
it means Standard Forms 98 and 98a.
Service contract means any Government contract, the principal purpose of
which is to furnish services in the
United States through the use of service employees, except as exempted
under section 7 of the Act (41 U.S.C.
356; see 22.1003–3 and 22.1003–4), or any
subcontract at any tier thereunder. See
22.1003–5 and 29 CFR 4.130 for a partial
list of services covered by the Act.
Service employee means any person engaged in the performance of a service
contract other than any person employed in a bona fide executive, administrative, or professional capacity, as
those terms are defined in part 541 of
title 29, Code of Federal Regulations.
The term service employee includes all
such persons regardless of any contractual relationship that may be alleged
to exist between a contractor or subcontractor and such persons.
United States means the 50 States, the
District of Columbia, Puerto Rico, the
Northern Mariana Islands, American
Samoa, Guam, the U.S. Virgin Islands,
Johnston Island, Wake Island, and
Outer Continental Shelf lands as defined in the Outer Continental Shelf
Lands Act (43 U.S.C. 1331, et seq.,) but
does not include any other place subject to U.S. jurisdiction or any U.S.
base or possession in a foreign country
(29 CFR 4.112).
Wage and Hour Division means the
unit in the Employment Standards Administration of the Department of
Labor to which is assigned functions of
the Secretary of Labor under the Act.
Wage determination means a determination of minimum wages or fringe
benefits made under sections 2(a) or
4(c) of the Act (41 U.S.C. 351(a) or
353(c)) applicable to the employment in
a given locality of one or more classes
of service employees.
[54 FR 19816, May 8, 1989, as amended at 61
FR 39207, July 26, 1996; 66 FR 2130, Jan. 10,
2001; 68 FR 28082, May 22, 2003]
22.1002
Statutory requirements.
22.1002–1
General.
Service contracts over $2,500 shall
contain mandatory provisions regarding minimum wages and fringe benefits, safe and sanitary working conditions, notification to employees of the
minimum allowable compensation, and
equivalent Federal employee classifications and wage rates. Under 41 U.S.C.
353(d), service contracts may not exceed 5 years.
22.1002–2 Wage determinations based
on prevailing rates.
Contractors performing on service
contracts in excess of $2,500 to which
no predecessor contractor’s collective
bargaining agreement applies shall pay
their employees at least the wages and
fringe benefits found by the Department of Labor to prevail in the locality
or, in the absence of a wage determination, the minimum wage set forth in
the Fair Labor Standards Act.
22.1002–3 Wage determinations based
on collective bargaining agreements.
(a) Successor contractors performing
on contracts in excess of $2,500 for substantially the same services performed
in the same locality must pay wages
and fringe benefits (including accrued
wages and benefits and prospective increases) at least equal to those contained in any bona fide collective bargaining agreement entered into under
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22.1003–4
the predecessor contract. This requirement is self-executing and is not contingent upon incorporating a wage determination or the wage and fringe
benefit terms of the predecessor contractor’s collective bargaining agreement in the successor contract. This
requirement will not apply if the Secretary of Labor determines (1) after a
hearing, that the wages and fringe benefits are substantially at variance with
those which prevail for services of a
similar character in the locality or (2)
that the wages and fringe benefits are
not the result of arm’s length negotiations.
(b) Paragraphs in this subpart 22.10
which deal with this statutory requirement and the Department of Labor’s
implementing regulations are 22.1008–3,
concerning applicability of this requirement and the forwarding of a collective bargaining agreement with a
Notice (SF 98, 98a); 22.1010, concerning
notification to contractors and bargaining representatives of procurement
dates; 22.1012–3, explaining when a collective bargaining agreement will not
apply due to late receipt by the contracting officer; and 22.1013 and 22.1021,
explaining when the application of a
collective bargaining agreement can be
challenged due to a variance with prevailing rates or lack of arm’s length
bargaining.
[54 FR 19816, May 8, 1989, as amended at 59
FR 67039, Dec. 28, 1994]
22.1002–4 Application of the Fair
Labor Standards Act minimum
wage.
No contractor or subcontractor holding a service contract for any dollar
amount shall pay any of its employees
working on the contract less than the
minimum wage specified in section
6(a)(1) of the Fair Labor Standards Act
(29 U.S.C. 206).
22.1003
Applicability.
22.1003–1 General.
This subpart 22.10 applies to all Government contracts, the principal purpose of which is to furnish services in
the United States through the use of
service employees, except as exempted
in 22.1003–3 and 22.1003–4 of this section,
or any subcontract at any tier there-
under. This subpart does not apply to
individual contract requirements for
services in contracts not having as
their principal purpose the furnishing
of services. The nomenclature, type, or
particular form of contract used by
contracting agencies is not determinative of coverage.
22.1003–2 Geographical coverage of
the Act.
The Act applies to service contracts
performed in the United States (see
22.1001). The Act does not apply to contracts performed outside the United
States.
22.1003–3 Statutory exemptions.
The Act does not apply to—
(a) Any contract for construction, alteration, or repair of public buildings
or public works, including painting and
decorating;
(b) Any work required to be done in
accordance with the provisions of the
Walsh-Healey Public Contracts Act (41
U.S.C. 35–45);
(c) Any contract for transporting
freight or personnel by vessel, aircraft,
bus, truck, express, railroad, or oil or
gas pipeline where published tariff
rates are in effect;
(d) Any contract for furnishing services by radio, telephone, telegraph, or
cable companies subject to the Communications Act of 1934;
(e) Any contract for public utility
services;
(f) Any employment contract providing for direct services to a Federal
agency by an individual or individuals;
or
(g) Any contract for operating postal
contract stations for the U.S. Postal
Service.
22.1003–4 Administrative limitations,
variations, tolerances, and exemptions.
(a) The Secretary of Labor may provide reasonable limitations and may
make rules and regulations allowing
reasonable variations, tolerances, and
exemptions to and from any or all provisions of the Act other than section 10
(41 U.S.C. 358). These will be made only
in special circumstances where it has
been determined that the limitation,
variation, tolerance, or exemption is
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22.1003–4
48 CFR Ch. 1 (10–1–03 Edition)
necessary and proper in the public interest or to avoid the serious impairment of Government business, and is in
accord with the remedial purpose of
the Act to protect prevailing labor
standards (41 U.S.C. 353(b)). See 29 CFR
4.123 for a listing of administrative exemptions, tolerances, and variations.
Requests for limitations, variances,
tolerances, and exemptions from the
Act shall be submitted in writing
through contracting channels and the
agency labor advisor to the Wage and
Hour Administrator.
(b) In addition to the statutory exemptions cited in 22.1003–3 of this subsection, the Secretary of Labor has exempted the following types of contracts from all provisions of the Act:
(1) Contracts entered into by the
United States with common carriers
for the carriage of mail by rail, air (except air star routes), bus, and ocean
vessel, where such carriage is performed on regularly scheduled runs of
the trains, airplanes, buses, and vessels
over regularly established routes and
accounts for an insubstantial portion
of the revenue therefrom.
(2) Any contract entered into by the
U.S. Postal Service with an individual
owner-operator for mail service if it is
not contemplated at the time the contract is made that the owner-operator
will hire any service employee to perform the services under the contract
except for short periods of vacation
time or for unexpected contingencies
or emergency situations such as illness, or accident.
(3) Contracts for the carriage of
freight or personnel if such carriage is
subject to rates covered by section
10721 of the Interstate Commerce Act.
(4) Contracts as follows:
(i) Contracts principally for the
maintenance, calibration, or repair of
the following types of equipment are
exempt, subject to the restrictions in
subdivisions (b)(4)(ii), (b)(4)(iii), and
(b)(4)(iv) of this subsection.
(A) Automated data processing equipment and office information/word processing systems.
(B) Scientific equipment and medical
apparatus or equipment if the application of micro-electronic circuitry or
other technology of at least similar sophistication is an essential element
(for example, Federal Supply Classification (FSC) Group 65, Class 6515,
Medical Diagnostic Equipment; Class
6525, X-Ray Equipment; FSC Group 66,
Class 6630, Chemical Analysis Instruments; and Class 6665, Geographical and
Astronomical Instruments, are largely
composed of the types of equipment exempted hereunder).
(C) Office/business machines not otherwise exempt pursuant to subdivision
(b)(4)(i)(A) of this subsection, if such
services are performed by the manufacturer or supplier of the equipment.
(ii) The exemption set forth in this
subparagraph (b)(4) of this subsection
shall apply only under the following
circumstances:
(A) The items of equipment are commercial items which are used regularly
for other than Government purposes
and are sold or traded by the contractor in substantial quantities to the
general public in the course of normal
business operations.
(B) The contract services are furnished at prices which are, or are based
on, established catalog or market
prices (see 29 CFR 4.123(e)(1)(ii)(B)) for
the maintenance, calibration, or repair
of such commercial items.
(C) The contractor utilizes the same
compensation (wage and fringe benefits) plan for all service employees performing work under the contract as the
contractor uses for equivalent employees servicing the same equipment of
commercial customers.
(D) The contractor certifies in the
contract to the provisions in subdivision (b)(4)(ii) of this subsection. (See
22.1006(e).)
(iii)(A) Determinations of the applicability of this exemption shall be
made in the first instance by the contracting officer before contract award.
In determining that the exemption applies, the contracting officer shall consider all factors and make an affirmative determination that all of the
above conditions have been met.
(B) If any potential offerors would
not qualify for the exemption, the contracting officer shall incorporate in the
solicitation the Service Contract Act
clause (see 22.1006(a)) and, if the contract will exceed $2,500, the appropriate
Department of Labor wage determination (see 22.1007).
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22.1003–6
(iv) If the Department of Labor determines after contract award that any of
the requirements for exemption in subparagraph (b)(4) of this subsection have
not been met, the exemption will be
deemed inapplicable, and the contract
shall become subject to the Service
Contract Act, effective as of the date of
the Department of Labor determination.
[54 FR 19816, May 8, 1989, as amended at 61
FR 39198, July 26, 1996]
22.1003–5 Some examples of contracts
covered.
The following examples, while not
definitive or exclusive, illustrate some
of the types of services that have been
found to be covered by the Act (see 29
CFR 4.130 for additional examples):
(a) Motor pool operation, parking,
taxicab, and ambulance services.
(b) Packing, crating, and storage.
(c) Custodial, janitorial, housekeeping, and guard services.
(d) Food service and lodging.
(e) Laundry, dry-cleaning, linen-supply, and clothing alteration and repair
services.
(f) Snow, trash, and garbage removal.
(g) Aerial spraying and aerial reconnaissance for fire detection.
(h) Some support services at installations, including grounds maintenance
and landscaping.
(i) Certain specialized services requiring specific skills, such as drafting,
illustrating, graphic arts, stenographic
reporting, or mortuary services.
(j) Electronic equipment maintenance and operation and engineering
support services.
(k) Maintenance and repair of all
types of equipment, for example, aircraft, engines, electrical motors, vehicles, and electronic, office and related
business and construction equipment.
(But see 22.1003–4(b)(4).)
(l) Operation, maintenance, or logistics support of a Federal facility.
(m) Data collection, processing and
analysis services.
[48 FR 42258, Sept. 19, 1983, as amended at 56
FR 67136, Dec. 27, 1991]
22.1003–6 Repair distinguished from
remanufacturing of equipment.
(a) Contracts principally for remanufacturing of equipment which is so ex-
tensive as to be equivalent to manufacturing are subject to the Walsh-Healey
Public Contracts Act, rather than to
the Service Contract Act. Remanufacturing shall be deemed to be manufacturing when the criteria in either subparagraphs (a)(1) or (a)(2) of this subsection are met.
(1) Major overhaul of an item, piece
of equipment, or materiel which is degraded or inoperable, and under which
all of the following conditions exist:
(i) The item or equipment is required
to be completely or substantially torn
down into individual component parts.
(ii) Substantially all of the parts are
reworked, rehabilitated, altered and/or
replaced.
(iii) The parts are reassembled so as
to furnish a totally rebuilt item or
piece of equipment.
(iv) Manufacturing processes similar
to those which were used in the manufacturing of the item or piece of equipment are utilized.
(v) The disassembled components, if
usable (except for situations where the
number of items or pieces of equipment
involved are too few to make it practicable) are commingled with existing
inventory and, as such, lose their identification with respect to a particular
piece of equipment.
(vi) The items or equipment overhauled are restored to original life expectancy, or nearly so.
(vii) Such work is performed in a facility owned or operated by the contractor.
(2) Major modification of an item,
piece of equipment, or material which
is wholly or partially obsolete, and
under which all of the following conditions exist:
(i) The item or equipment is required
to be completely or substantially torn
down.
(ii) Outmoded parts are replaced.
(iii) The item or equipment is rebuilt
or reassembled.
(iv) The contract work results in the
furnishing of a substantially modified
item in a usable and serviceable condition.
(v) The work is performed in a facility owned or operated by the contractor.
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22.1003–7
48 CFR Ch. 1 (10–1–03 Edition)
(b) Remanufacturing does not include
the repair of damaged or broken equipment which does not require a complete teardown, overhaul, and rebuild
as described in subparagraphs (a)(1) and
(a)(2) of this subsection, or the periodic
and routine maintenance, preservation,
care, adjustment, upkeep, or servicing
of equipment to keep it in usable, serviceable, working order. Such contracts
typically are billed on an hourly rate
(labor plus materials and parts) basis.
Any contract principally for this type
of work is subject to the Service Contract Act. Examples of such work include the following:
(1) Repair of an automobile, truck, or
other vehicle, construction equipment,
tractor, crane, aerospace, air conditioning and refrigeration equipment,
electric motors, and ground powered
industrial or vehicular equipment.
(2) Repair of typewriters and other
office equipment (but see 22.1003–
4(b)(4)).
(3) Repair of appliances, radios, television sets, calculators, and other electronic equipment.
(4) Inspecting, testing, calibration,
painting, packaging, lubrication, tuneup, or replacement of internal parts of
equipment listed in subparagraphs
(b)(1), (b)(2), and (b)(3) of this subsection.
(5) Reupholstering, reconditioning,
repair, and refinishing of furniture.
22.1003–7 Questions concerning applicability of the Act.
If the contracting officer questions
the applicability of the Act to an acquisition, the contracting officer shall
request the advice of the agency labor
advisor. Unresolved questions shall be
submitted in a timely manner to the
Administrator, Wage and Hour Division, for determination.
22.1004 Department of Labor responsibilities and regulations.
Under the Act, the Secretary of
Labor is authorized and directed to enforce the provisions of the Act, make
rules and regulations, issue orders,
hold hearings, make decisions, and
take other appropriate action. The Department of Labor has issued implementing regulations on such matters
as—
(a) Service contract labor standards
provisions and procedures (29 CFR part
4, subpart A);
(b) Wage determination procedures
(29 CFR part 4, subpart B);
(c) Application of the Act (rulings
and interpretations) (29 CFR part 4,
subpart C);
(d) Compensation standards (29 CFR
part 4, subpart D);
(e) Enforcement (29 CFR part 4, subpart E);
(f) Safe and sanitary working conditions (29 CFR part 1925);
(g) Rules of practice for administrative proceedings enforcing service contract labor standards (29 CFR part 6);
and
(h) Practice before the Board of Service Contract Appeals (29 CFR part 8).
22.1005
[Reserved]
22.1006
Contract clauses.
(a) The contracting officer shall insert the clause at 52.222–41, Service
Contract Act of 1965, as amended, in solicitations and contracts if the contract is subject to the Act and is (1) for
over $2,500 or (2) for an indefinite dollar
amount and the contracting officer
does not know in advance that the contract amount will be $2,500 or less.
(b) The contracting officer shall insert the clause at 52.222–42, Statement
of Equivalent Rates for Federal Hires,
in solicitations and contracts if the
contract amount is expected to be over
$2,500 and the Act is applicable. (See
22.1016.)
(c)(1) The contracting officer shall insert the clause at 52.222–43, Fair Labor
Standards Act and Service Contract
Act—Price Adjustment (Multiple Year
and Option Contracts), or another
clause which accomplishes the same
purpose, in solicitations and contracts
if the contract is expected to be a
fixed-price service contract containing
the clause at 52.222–41, Service Contract Act of 1965, as amended, and is a
multiple year contract or is a contract
with options to renew which exceeds
the simplified acquisition threshold.
The clause may be used in contracts
that do not exceed the simplified acquisition threshold. The clause at
52.222–43, Fair Labor Standards Act and
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Federal Acquisition Regulation
22.1007
Service Contract Act—Price Adjustment (Multiple Year and Option Contracts), applies to both contracts subject to area prevailing wage determinations and contracts subject to the incumbent contractor’s collective bargaining agreement in effect during this
contract’s preceding contract period
(see 22.1002–2 and 22.1002–3). Contracting
officers shall ensure that contract
prices or contract unit price labor
rates are adjusted only to the extent
that a contractor’s increases or decreases in applicable wages and fringe
benefits are made to comply with the
requirements set forth in the clauses at
52.222–43 (subparagraphs (c) (1), (2) and
(3)), or 52.222–44 (subparagraphs (b) (1)
and (2)). (For example, the prior year
wage determination required a minimum wage rate of $4.00 per hour. The
contractor actually paid $4.10. The new
wage determination increases the minimum rate to $4.50. The contractor increases the rate actually paid to $4.75
per hour. The allowable price adjustment is $.40 per hour.)
(2) The contracting officer shall insert the clause at 52.222–44, Fair Labor
Standards Act and Service Contract
Act—Price Adjustment, in solicitations
and contracts if the contract is expected to be a fixed-price service contract containing the clause at 52.222–41,
Service Contract Act of 1965, as amended, exceeds the simplified acquisition
threshold, and is not a multiple year
contract or is not a contract with options to renew. The clause may be used
in contracts that do not exceed the
simplified acquisition threshold. The
clause at 52.222–44, Fair Labor Standards Act and Service Contract Act—
Price Adjustment, applies to both contracts subject to area prevailing wage
determinations and contracts subject
to contractor collective bargaining
agreements (see 22.1002–2 and 22.1002–3).
(3) The clauses prescribed in paragraph 22.1006(c)(1) cover situations in
which revised minimum wage rates are
applied to contracts by operation of
law, or by revision of a wage determination in connection with (i) exercise of a contract option or (ii) extension of a multiple year contract into a
new program year. If a clause prescribed in 16.203–4(d) is used, it must
not conflict with, or duplicate payment
under, the clauses prescribed in this
paragraph 22.1006(c).
(d) The contracting officer shall insert the clause at 52.222–47, Service
Contract Act (SCA) Minimum Wages
and Fringe Benefits, if—
(1) The clause at 52.222–41 applies;
(2) The contract resulting from the
solicitation succeeds a contract for
substantially the same services to be
performed in the same locality;
(3) The incumbent contractor has negotiated or is negotiating a collective
bargaining agreement with some or all
of its service employees; and
(4) All applicable Department of
Labor wage determinations have been
requested but not received.
(e)(1) The contracting officer shall insert the clause at 52.222–48, Exemption
from Application of Service Contract
Act Provisions, in any solicitation and
resulting contract calling for the maintenance, calibration, and/or repair of
information technology, scientific and
medical, and office and business equipment if the contracting officer determines that the resultant contract may
be exempt from Service Contract Act
coverage as described at 22.1003–4(b)(4).
(2) If the successful offeror does not
certify that the exemption applies, the
contracting officer shall not insert the
clause at 52.222–48 and instead shall insert in the contract (i) the applicable
Service Contract Act clause(s) and (ii)
the appropriate Department of Labor
wage determination if the contract exceeds $2,500.
(f) The contracting officer shall insert the clause at 52.222–49, Service
Contract Act—Place of Performance
Unknown, if using the procedures prescribed in 22.1009–4.
[54 FR 19816, May 8, 1989, as amended at 60
FR 34758, July 3, 1995; 61 FR 41470, Aug. 8,
1996]
22.1007 Requirement to submit Notice
(SF 98/98a).
The contracting officer shall submit
Standard Forms 98 and 98a (see 53.301–
98 and 53.301–98a), ‘‘Notice of Intention
to Make a Service Contract and Response to Notice’’ and ‘‘Attachment A’’
(both forms hereinafter referred to as
‘‘Notice’’), together with any required
supplemental information to the Administrator, Wage and Hour Division,
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22.1008
48 CFR Ch. 1 (10–1–03 Edition)
Employment Standards Administration, U.S. Department of Labor, Washington, DC 20210, for the following service contracts:
(a) Each new solicitation and contract in excess of $2,500.
(b) Each contract modification which
brings the contract above $2,500 and—
(1) Extends the existing contract pursuant to an option clause or otherwise;
or
(2) Changes the scope of the contract
whereby labor requirements are affected significantly.
(c) Each multiple year contract in
excess of $2,500 upon—
(1) Annual anniversary date if the
contract is subject to annual appropriations; or
(2) Biennial anniversary date if the
contract is not subject to annual appropriations and its proposed term exceeds 2 years—unless otherwise advised
by the Wage and Hour Division (see
22.1008–5).
22.1008 Procedures for preparing and
submitting Notice (SF 98/98a).
22.1008–1 Preparation of Notice (SF
98/98a).
The contracting officer shall complete and submit the Notice in accordance with the instructions on the SF 98
and shall supplement it with information required under this section. Care
should be taken to ensure that all required information is provided to avert
return without action by the Department of Labor. The contracting officer
shall retain a copy of the completed
Notice and any required supplementary
information until the signed and dated
response to the Notice is received from
the Department of Labor and placed in
the contract file.
22.1008–2 Preparation of SF 98a.
(a) The SF 98a shall contain the following information concerning the
service employees expected to be employed by the contractor and any
known subcontractors in performing
the contract:
(1) All classes of service employees to
be utilized.
(i) If a wage determination is to be
based on a collective bargaining agreement (CBA) (see 22.1002–3 and 22.1008–3),
use the exact title shown in the CBA.
(ii) For other than subdivision
(a)(1)(i) of this subsection—
(A) Use the exact title shown in the
Wage and Hour Division’s Service Contract Act Directory of Occupations (see
paragraph (b) of this subsection).
(B) Provide an appropriate job title
and job description if the Directory
cannot be used.
(2) The estimated number of service
employees in each class; and
(3) The wage rate that would be paid
each class if employed by the agency
and subject to the wage provisions of 5
U.S.C. 5341 or 5332 (see 22.1016).
(b)(1) The Wage and Hour Division’s
Service Contract Act Directory of Occupations (Directory) contains standard job
titles and definitions (descriptions) for
many commonly utilized service employee occupations. Contracting officers shall use this Directory to the
maximum extent possible in listing
service employee classes on the SF 98a.
This usage will enhance the timely
issuance of comprehensive wage determinations.
(2) If the job title contained in the
Directory differs from that contained
in the statement of work but the job
definition (description) in the Directory and the statement of work match
sufficiently, the contracting officer
shall use the Directory job title.
(3) The latest edition of the Directory
is available for sale by the Superintendent of Documents and may be ordered by calling (202) 783–3238 or writing to Superintendent of Documents,
U.S. Government Printing Office,
Washington, DC 20402. Contracting
agencies, in accordance with agency
procedures, are responsible for notifying their own personnel of a new edition of the Directory.
22.1008–3 Section 4(c) successorship
with incumbent contractor collective bargaining agreement.
(a) Early in the acquisition cycle, the
contracting officer shall determine
whether section 4(c) of the Act affects
the new acquisition. The contracting
officer shall determine whether there
is a predecessor contract and, if so,
whether the incumbent prime contractor or its subcontractors and any
of their employees have a collective
bargaining agreement.
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22.1008–3
(b) Section 4(c) of the Act provides
that a successor contractor must pay
wages and fringe benefits (including accrued wages and benefits and prospective increases) to service employees at
least equal to those agreed upon by a
predecessor contractor under the following conditions:
(1) The services to be furnished under
the proposed contract will be substantially the same as services being furnished by an incumbent contractor
whose contract the proposed contract
will succeed.
(2) The services will be performed in
the same locality.
(3) The incumbent prime contractor
or subcontractor is furnishing such
services through the use of service employees whose wages and fringe benefits are the subject of one or more collective bargaining agreements.
(c) The application of section 4(c) of
the Act is subject to the following limitations:
(1) Section 4(c) of the Act will not
apply if the incumbent contractor enters into a collective bargaining agreement for the first time and the agreement does not become effective until
after the expiration of the incumbent’s
contract.
(2) If the incumbent contractor enters into a new or revised collective
bargaining agreement during the period of the incumbent’s performance on
the current contract, the terms of the
new or revised agreement shall not be
effective for the purposes of section
4(c) of the Act under the following conditions:
(i)(A) In sealed bidding, the contracting agency receives notice of the
terms of the collective bargaining
agreement less than 10 days before bid
opening and finds that there is not reasonable time still available to notify
bidders (see 22.1012–3(a)); or
(B) For contractual actions other
than sealed bidding, the contracting
agency receives notice of the terms of
the collective bargaining agreement
after award, provided that the start of
performance is within 30 days of award
(see 22.1012–3(b)); and
(ii) The contracting officer has given
both the incumbent contractor and its
employees’ collective bargaining agent
timely written notification of the applicable acquisition dates (see 22.1010).
(d) If section 4(c) of the Act applies,
the contracting officer shall obtain a
copy of any collective bargaining
agreement between an incumbent contractor or subcontractor and its employees. Obtaining a copy of an incumbent contractor’s collective bargaining
agreement may involve coordination
with the administrative contracting officer responsible for administering the
predecessor contract. (Paragraph (m) of
the clause at 52.222–41, Service Contract Act of 1965, as amended, requires
the incumbent prime contractor to furnish the contracting officer a copy of
each collective bargaining agreement.)
The contracting officer shall submit a
copy of each collective bargaining
agreement together with any related
documents specifying the wage rates
and fringe benefits currently or prospectively payable under each agreement with the Notice.
(e) Section 4(c) of the Act will not
apply if the Secretary of Labor determines (1) after a hearing, that the
wages and fringe benefits in the predecessor contractor’s collective bargaining agreement are substantially at
variance with those which prevail for
services of a similar character in the
locality, or (2) that the wages and
fringe benefits in the predecessor contractor’s collective bargaining agreement are not the result of arm’s length
negotiations (see 22.1013 and 22.1021).
The Department of Labor (DOL) has
concluded that contingent collective
bargaining agreement provisions that
attempt to limit a contractor’s obligations by means such as requiring
issuance of a wage determination by
the DOL, requiring inclusion of the
wage determination in the contract, or
requiring the Government to adequately reimburse the contractor, generally reflect a lack of arm’s length negotiations.
(f) If the services are being furnished
at more than one location and the collectively bargained wage rates and
fringe benefits are different at different
locations or do not apply to one or
more locations, the contracting officer
shall identify the locations to which
the agreements apply.
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22.1008–4
48 CFR Ch. 1 (10–1–03 Edition)
(g) If the collective bargaining agreement does not apply to all service employees under the contract, the contracting officer shall separately list on
the SF 98a the service employee classifications (1) subject to the collective
bargaining agreement and (2) not subject to any collective bargaining agreement.
[54 FR 19816, May 8, 1989, as amended at 59
FR 67040, Dec. 28, 1994]
22.1008–4 Procedures when place of
performance is unknown.
See 22.1009.
22.1008–5 Multiple-year contracts.
If the proposed contract is multiple
year and is not subject to annual appropriations, the contracting officer
shall furnish with the Notice a statement in writing describing the type of
funding and giving the length of the
performance period. Unless otherwise
advised by the wage and hour division
that a Notice must be filed on the annual anniversary date, the contracting
officer shall submit a new Notice on
each biannual anniversary date of the
multiple year contract if its term is for
a period in excess of 2 years.
22.1008–6 Contract modifications (options, extensions, changes in scope)
and anniversary dates.
If the purpose of the Notice is to obtain a wage determination for an exercise of an option, an extension to the
contract term, a change in scope (see
22.1007(b)(2)), or the anniversary date of
a multiple year contract, the contracting officer shall fill in Box 2 of the
SF 98 as follows:
(a) In the Estimated solicitation date
subbox, indicate, as appropriate: ModExercise of Option; Mod-Extension; ModChange in Scope; Annual Anniversary; or
Biennial Anniversary; and
(b) In the month/day/year subbox, indicate the date the wage determination
is required.
22.1008–7 Required time of submission
of Notice.
(a) If the contract action is for a recurring or known requirement, the
contracting officer shall submit the
Notice not less than 60 days (nor more
than 120 days, except with the approval
of the Wage and Hour Division) before
the earlier of (1) issuance of any invitation for bids, (2) issuance of any request for proposals, (3) commencement
of negotiations, (4) issuance of modification for exercise of option, contract
extension, or change in scope, (5) annual anniversary date of a contract for
more than 1 year subject to annual appropriations, or (6) each biennial anniversary date of a contract for more
than 2 years not subject to annual appropriations unless otherwise advised
by the Wage and Hour Division (see
22.1008–5).
(b) If the contract action is for a nonrecurring or unknown requirement for
which the advance planning described
in paragraph (a) of this subsection is
not feasible, the contracting officer
shall submit the Notice as soon as possible, but not later than 30 days before
the contracting actions in paragraph
(a) of this subsection. The contracting
officer should indicate on the Notice
that the requirement is nonrecurring
or unknown and advance planning was
not feasible.
(c) If exceptional circumstances prevent timely submission, as required by
paragraphs (a) and (b) of this subsection, the contracting officer shall
submit the Notice and the required
supplemental information with a written statement of the reason for delay
as soon as practicable.
(d) In an emergency situation requiring an immediate wage determination
response, the contracting officer shall,
in accordance with contracting agency
procedures, contact the Wage and Hour
Division by telephone for guidance before submitting the Notice.
22.1009 Place
known.
22.1009–1
of
performance
General.
If the place of performance is unknown, the contracting officer may use
the procedures in this section. The contracting officer should first attempt to
identify the specific places or geographical areas where the services
might be performed (see 22.1009–2) and
then may follow the procedures either
in 22.1009–3 or in 22.1009–4.
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22.1009–4
22.1009–2 Attempt to identify possible
places of performance.
The contracting officer should attempt to identify the specific places or
geographical areas where the services
might be performed. The following may
indicate possible places of performance:
(a) Locations of previous contractors
and their competitors.
(b) Databases available via the Internet for lists of prospective offerors and
contractors.
(c) Responses to a presolicitation notice (see 5.204).
[48 FR 42258, Sept. 19, 1983, as amended at 68
FR 43856, July 24, 2003]
22.1009–3 All possible places of performance identified.
(a) If the contracting officer can
identify all the possible places or areas
of performance (even though the actual
place of performance will not be known
until the successful offeror is chosen),
the contracting officer, as required in
22.1008, shall submit the Notice to the
Wage and Hour Division. If the number
of places of performance exceeds the
space available on the Notice, the contracting officer shall provide a listing
by state-county-city/town in an attachment to the Notice.
(b) The Wage and Hour Division may
issue a wage determination for each
different geographical area of performance identified by the contracting officer, or in unusual situations it may
issue a wage determination for one or
more composite areas of performance.
If there is a substantial number of
places or areas of performance indicating the need for a wage determination for one or more composite areas of
performance, the contracting officer
should, before submitting the Notice,
contact the Wage and Hour Division
concerning the issuance of such a wage
determination.
(c) If the contracting officer subsequently learns of any potential offerors
in previously unidentified places before
the closing date for submission of offers, the contracting officer shall follow one of the following procedures:
(1) Continue to follow the procedures
in this subsection and:
(i) Submit Notices for the additional
places of performance to the Wage and
Hour Division, and
(ii) Amend the solicitation to include
all wage determinations and, if necessary, extend the time for submission
of final offers.
(2) Follow the procedures in 22.1009–4.
22.1009–4 All possible places of performance not identified.
If the contracting officer believes
that there may be offerors interested
in performing in unidentified places or
areas, the contracting officer may use
the following procedures:
(a) If the contracting officer has identified possible places or areas where
services might be performed, the contracting officer must submit the Notice
to the Wage and Hour Division (see
22.1009–3 (a) and (b)).
(b) Include the following information
in the notice of contract action:
(1) That the place of performance is
unknown.
(2) The possible places or areas of
performance for which the contracting
officer has requested wage determinations.
(3) That the contracting officer will
request wage determinations for additional possible places of performance if
asked to do so in writing.
(4) The time and date by which requests for wage determinations for additional places must be received by the
contracting officer.
(c) Insert the clause at 52.222–49,
Service Contract Act—Place of Performance Unknown, in solicitations
and contracts. Include the information
required in the clause by subparagraphs (b)(2) and (b)(4) of this subsection. The closing date for receipt of
offerors’ requests for wage determinations for additional possible places of
performance should allow reasonable
time for potential offerors to review
the solicitation and determine their interest in competing. Generally, 10 to 15
days from the date of issuance of the
solicitation may be considered a reasonable period of time.
(d) The procedures in 14.304 shall
apply to late receipt of offerors’ requests for wage determinations for additional places of performance. However, late receipt of an offeror’s request
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22.1010
48 CFR Ch. 1 (10–1–03 Edition)
for a wage determination for additional
places of performance does not preclude the offeror’s competing for the
proposed acquisition.
(e) If the contracting officer receives
any timely requests for wage determinations for additional places of performance
the
contracting
officer
shall—
(1) Submit Notices for the additional
places of performance to the Wage and
Hour Division; and
(2) Amend the solicitation to include
all wage determinations and, if necessary, extend the time for submission
of final offers.
(f) If the successful offeror did not
make a timely request for a wage determination and will perform in a place
of performance for which the contracting officer therefore did not request a wage determination, the contracting officer shall—
(1) Award the contract;
(2) Request a wage determination;
and
(3) Incorporate the wage determination in the contract, retroactive to the
date of contract award and with no adjustment in contract price, pursuant to
the clause at 52.222–49, Service Contract—Place of Performance Unknown.
[54 FR 19816, May 8, 1989, as amended at 64
FR 51840, Sept. 24, 1999; 66 FR 27414, May 16,
2001; 68 FR 56679, Oct. 1, 2003]
22.1010 Notification to interested parties under collective bargaining
agreements.
(a) The contracting officer should determine whether the incumbent prime
contractor’s or its subcontractors’
service employees performing on the
current contract are represented by a
collective bargaining agent. If there is
a collective bargaining agent, the contracting officer shall give both the incumbent contractor and its employees’
collective bargaining agent written notification of—
(1) The forthcoming successor contract and the applicable acquisition
dates (issuance of solicitation, opening
of bids, commencement of negotiations, award of contract, or start of
performance, as the case may be); or
(2) The forthcoming contract modification and applicable acquisition
dates (exercise of option, extension of
contract, change in scope, or start of
performance, as the case may be); or
(3) The forthcoming multiple year
contract anniversary date (annual anniversary date or biennial date, as the
case may be).
(b) This written notification must be
given at least 30 days in advance of the
earliest applicable acquisition date or
the applicable annual or biennial anniversary date in order for the time-ofreceipt limitations in 22.1012–3 (a) and
(b) to apply. The contracting officer
shall retain a copy of the notification
in the contract file.
22.1011 Response to Notice by Department of Labor.
22.1011–1
Department of Labor action.
The Wage and Hour Division will
mark, date, and sign the section of the
SF 98 titled Response to Notice and return the signed original together with
appropriate additional material (wage
determination, position/classification
descriptions, etc.). The Wage and Hour
Division will take one of the following
four actions:
(a) Issue and attach applicable wage
determination(s); or
(b) Indicate that no wage determination is in effect for the locality of contract performance; or
(c) Indicate that the Service Contract
Act is not applicable based on information submitted; or
(d) Return the Notice for additional
information (see 22.1008–1).
22.1011–2 Requests for status or expediting of response.
Checking the status or the expediting
of wage determination responses shall
be made in accordance with contracting agency procedures.
22.1012 Late receipt or nonreceipt of
wage determination.
22.1012–1
General.
The Wage and Hour Administrator,
generally, will issue a wage determination or revision to it in response to a
Notice. The contracting officer shall
incorporate the determination or revision in the particular solicitation and
contract for which the wage determination was sought.
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22.1012–3
22.1012–2 Response to timely submission of Notice—no collective bargaining agreement.
(a) If the contracting officer has not
received a response from the Department of Labor within 60 days (or 30
days if a nonrecurring or unknown requirement), the contracting agency
shall contact the Wage and Hour Division to determine when the wage determination or revision can be expected.
(b) In sealed bidding, a revision of a
wage determination shall not be effective if a collective bargaining agreement does not exist, the revision is received by the contracting agency less
than 10 days before the opening of bids,
and the contracting officer finds that
there is not reasonable time to incorporate the revision in the solicitation.
(c) For contractual actions other
than sealed bidding where a collective
bargaining agreement does not exist, a
revision of a wage determination received by the contracting agency after
award of a new contract or a modification as specified in 22.1007(b) shall not
be effective provided that the start of
performance is within 30 days of the
award or the specified modification. If
the contract does not specify a start of
performance date which is within 30
days of the award or the specified
modification, and if contract performance does not commence within 30 days
of the award or the specified modification, the Department of Labor shall be
notified and any revision received by
the contracting agency not less than 10
days before commencement of the
work shall be effective.
(d) The limitations in paragraphs (b)
and (c) of this subsection shall apply
only if a timely Notice required in
22.1008–7 (a) and (b) has been submitted.
22.1012–3 Response to timely submission of Notice—with collective bargaining agreement.
(a) In sealed bidding, a wage determination or revision based on a new or
changed collective bargaining agreement shall not be effective if the contracting agency has received notice of
the terms of the new or changed collective bargaining agreement less than 10
days before bid opening and the contracting officer determines that there
is not reasonable time to incorporate
the new or changed terms of the collective bargaining agreement in the solicitation (see 52.222–47).
(b) For contractual actions other
than sealed bidding, a wage determination or revision based on a new or
changed collective bargaining agreement shall not be effective if notice of
the terms of the new or changed collective bargaining agreement is received
by the contracting agency after award
of a successor contract or a modification as specified in 22.1007(b), provided
that the contract start of performance
is within 30 days of the award of the
contract or of the specified modification. If the contract does not specify a
start of performance date which is
within 30 days of the award of the contract or of the specified modification,
or if contract performance does not
commence within 30 days of the award
of the contract or of the specified
modification, any notice of the terms
of a new or changed collective bargaining agreement received by the
agency not less than 10 days before
commencement of the work shall be effective for purposes of the successor
contract under section 4(c) of the Act.
(c) The limitations in paragraphs (a)
and (b) of this subsection shall apply
only if timely Notices and notifications required in 22.1008–7 and 22.1010
have been given.
(d) If the contracting officer has not
received a response from the Department of Labor within 60 days (or 30
days if a nonrecurring or unknown requirement), the contracting agency
shall contact the Wage and Hour Division to determine when the wage determination or revision can be expected.
If the Department of Labor is unable to
provide the wage determination or revision by the latest date needed to
maintain the acquisition schedule, the
solicitation/contract action should proceed according to the following instructions:
(1) If a successorship/same locality/
incumbent collective bargaining agreement situation exists, the contracting
officer shall incorporate in the solicitation the wage and fringe benefit terms
of the collective bargaining agreement,
or the collective bargaining agreement
itself, and the clause at 52.222–47, Service Contract Act (SCA) Minimum
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22.1012–4
48 CFR Ch. 1 (10–1–03 Edition)
Wages and Fringe Benefits. The contracting officer may incorporate the
wage and fringe benefit terms of the
collective bargaining agreement, or the
collective bargaining agreement itself,
in other contract actions such as the
exercise of options in order to facilitate price adjustments in fixed-price
type contracts (but see 22.1008–3(e) and
22.1013(a)).
(2) The terms of a new or changed
collective bargaining agreement, negotiated by the predecessor contractor
during the period of performance of the
predecessor contract, will not apply to
the successor contract under the conditions set forth in paragraphs (a), (b),
and (c) of this subsection.
[54 FR 19816, May 8, 1989, as amended at 59
FR 67040, Dec. 28, 1994]
22.1012–4 Response to late submission
of Notice—no collective bargaining
agreement.
If the contracting officer has not
filed the Notice within the time limits
in 22.1008–7, and thus has not received a
response from the Department of
Labor, and a successorship/same locality/incumbent collective bargaining
agreement situation does not exist, the
contracting officer shall contact the
Wage and Hour Division to determine
when the wage determination or revision can be expected. If the Department of Labor is unable to provide the
wage determination or revision by the
latest date needed to maintain the acquisition schedule, the contracting officer shall use the latest wage determination or revision, if any, incorporated in the existing contract. If any
new or revised wage determination is
received later in response to the Notice, the contracting officer shall include it in the solicitation or contract
within 30 calendar days of receipt. If
the contract has been awarded, the
contracting officer shall equitably adjust the contract price to reflect any
changed cost of performance resulting
from incorporating the wage determination or revision. The Administrator, Wage and Hour Division, may
require retroactive application of the
wage determination for a contractual
action over $2,500 using more than five
service employees. These provisions
are not intended to alter the con-
tracting officer’s responsibility to
make timely submissions as required
in 22.1008–7.
22.1012–5 Response to late submission
of Notice—with collective bargaining agreement.
If the contracting officer has not
filed the Notice within the time limits
in 22.1008–7, has not received a response
from the Department of Labor, and a
successorship/same locality/incumbent
collective bargaining agreement situation exists, the contracting officer
shall contact the Wage and Hour Division to determine when the wage determination or revision can be expected.
If the Department of Labor is unable to
provide the wage determination or revision by the latest date needed to
maintain the acquisition schedule, the
contracting officer shall incorporate in
the solicitation the wage and fringe
benefit terms of the collective bargaining agreement, or the collective
bargaining agreement itself, and the
clause at 52.222–47, Service Contract
Act (SCA) Minimum Wages and Fringe
Benefits. If the contract has been
awarded, an equitable adjustment following receipt of the wage determination or revision will not be required,
since the wage determination or revision will be based on the economic
terms of the collective bargaining
agreement. The contracting officer
may incorporate the wage and fringe
benefit terms of the collective bargaining agreement, or the collective
bargaining agreement itself, in other
contract actions such as the exercise of
options in order to facilitate price adjustments for options in fixed-price
type contracts (but see 22.1008–3(e) and
22.1013(a)).
[54 FR 19816, May 8, 1989, as amended at 59
FR 67040, Dec. 28, 1994]
22.1013 Review of wage determination.
(a) Based on incumbent collective bargaining agreement. (1) If wages, fringe
benefits, or periodic increases provided
for in a collective bargaining agreement vary substantially from those
prevailing for similar services in the
locality, the contracting officer shall
immediately contact the agency labor
advisor to consider instituting the procedures in 22.1021.
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22.1017
(2) If the contracting officer believes
that an incumbent or predecessor contractor’s agreement was not the result
of arm’s length negotiations, the contracting officer shall contact the agency labor advisor to determine appropriate action.
(b) Based on other than incumbent collective bargaining agreement. Upon receiving a wage determination not
predicated upon a collective bargaining
agreement, the contracting officer
shall ascertain—
(1) If the wage determination does
not conform with wages and fringe benefits prevailing for similar services in
the locality; or
(2) If the wage determination contains significant errors or omissions. If
either subparagraph (b)(1) or (b)(2) of
this section is evident, the contracting
officer shall contact the agency labor
advisor to determine appropriate action.
22.1014 Delay of acquisition dates over
60 days.
If any invitation for bids, request for
proposals, bid opening, or commencement of negotiation for a proposed contract for which a wage determination
was provided in response to a Notice
has been delayed, for whatever reason,
more than 60 days from such date as indicated on the submitted Notice, the
contracting officer shall, in accordance
with agency procedures, contact the
Wage and Hour Division for the purpose of determining whether the wage
determination issued under the initial
submission is still current. Any revision of a wage determination received
by the contracting agency as a result
of that communication, or upon discovery by the Department of Labor of
a delay, shall supersede the earlier response as the wage determination applicable to the particular acquisition
subject to the time frames in 22.1012–
2(a) and (b).
22.1015 Discovery of errors by the Department of Labor.
If the Department of Labor discovers
and determines, whether before or after
a contract award, that a contracting
officer made an erroneous determination that the Service Contract Act did
not apply to a particular acquisition or
failed to include an appropriate wage
determination in a covered contract,
the contracting officer, within 30 days
of notification by the Department of
Labor, shall include in the contract the
clause at 52.222–41 and any applicable
wage determination issued by the Administrator. If the contract is subject
to section 10 of the Act (41 U.S.C. 358),
the Administrator may require retroactive application of that wage determination. The contracting officer shall
equitably adjust the contract price to
reflect any changed cost of performance resulting from incorporating a
wage determination or revision.
22.1016 Statement of equivalent rates
for Federal hires.
(a) The statement required under the
clause at 52.222–42, Statement of Equivalent Rates for Federal Hires, (see
22.1006(b)) shall set forth those wage
rates and fringe benefits that would be
paid by the contracting activity to the
various classes of service employees expected to be utilized under the contract
if 5 U.S.C. 5332 (General Schedule—
white collar) and/or 5 U.S.C. 5341 (Wage
Board—blue collar) were applicable.
(b) Procedures for computation of
these rates are as follows:
(1) Wages paid blue collar employees
shall be the basic hourly rate for each
class. The rate shall be Wage Board pay
schedule step two for nonsupervisory
service employees and step three for
supervisory service employees.
(2) Wages paid white collar employees shall be an hourly rate for each
class. The rate shall be obtained by dividing the general pay schedule step
one biweekly rate by 80.
(3) Local civilian personnel offices
can assist in determining and providing
grade and salary data.
22.1017 Notice of award.
Whenever an agency awards a service
contract subject to the Act which may
be in excess of $25,000 and that agency
does not report the award to the Federal Procurement Data System, it shall
furnish an original and one copy of
Standard Form 99, Notice of Award of
Contract (see 53.301–99) to the Wage and
Hour Division, Employment Standards
Administration, Department of Labor,
unless it makes other arrangements
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22.1018
48 CFR Ch. 1 (10–1–03 Edition)
with the Wage and Hour Division for
notifying it of contract awards.
22.1018 Notification to contractors and
employees.
The contracting officer shall take the
following steps to ensure that service
employees are notified of minimum
wages and fringe benefits.
(a) As soon as possible after contract
award, inform the contractor of the
labor standards requirements of the
contract relating to the Act and of the
contractor’s
responsibilities
under
these requirements, unless it is clear
that the contractor is fully informed.
(b) At the time of award, furnish the
contractor Department of Labor Publication WH–1313, Notice to Employees
Working on Government Contracts, for
posting at a prominent and accessible
place at the worksite before contract
performance begins. The publication
advises employees of the compensation
(wages and fringe benefits) required to
be paid or furnished under the Act and
satisfies the notice requirements in
paragraph (g) of the clause at 52.222–41,
Service Contract Act of 1965, as amended.
(c) Attach any applicable wage determination to Publication WH–1313.
22.1019 Additional classes of service
employees.
(a) If the contracting officer is aware
that contract performance involves
classes of service employees not included in the wage determination, the
contracting officer shall require the
contractor to classify the unlisted
classes so as to provide a reasonable relationship (i.e., appropriate level of
skill comparison) between the unlisted
classifications and the classifications
listed in the determination (see paragraph (c) of the clause at 52.222–41,
Service Contract Act of 1965, as amended). The contractor shall initiate the
conforming procedure before unlisted
classes of employees perform contract
work. The contractor shall submit
Standard Form (SF) 1444, Request For
Authorization of Additional Classification and Rate. The contracting officer
shall review the proposed classification
and rate and promptly submit the completed SF 1444 (which must include information regarding the agreement or
disagreement of the employees’ representative or the employees themselves together with the agency recommendation) and all other pertinent
information to the Wage and Hour Division. Within 30 days of receipt of the
request, the Wage and Hour Division
will (1) approve, modify, or disapprove
the request when the parties are in
agreement or (2) render a final determination in the event of disagreement
among the parties. If the Wage and
Hour Division will require more than 30
days to take action, it will notify the
contracting officer within 30 days of receipt of the request that additional
time is necessary.
(b) Some wage determinations will
list a series of classes within a job classification family, for example, Computer Operators, level I, II, and III, or
Electronic Technicians, level I, II, and
III, or Clerk Typist, level I and II. Generally, level I is the lowest level. It is
the entry level, and establishment of a
lower level through conformance is not
permissible. Further, trainee classifications may not be conformed. Helpers in skilled maintenance trades (for
example, electricians, machinists, and
automobile mechanics) whose duties
constitute, in fact, separate and distinct jobs may also be used if listed on
the wage determination, but may not
be conformed. Conformance may not be
used to artificially split or subdivide
classifications listed in the wage determination. However, conforming procedures may be used if the work which an
employee performs under the contract
is not within the scope of any classification listed on the wage determination, regardless of job title. (See 29
CFR 4.152.)
(c) Subminimum rates for apprentices, student learners, and handicapped workers are permissible in accordance with paragraph (q) of the
clause at 52.222–41, Service Contract
Act of 1965, as amended.
22.1020 Seniority lists.
If a contract is performed at a Federal facility where employees may be
hired/retained by a succeeding contractor, the incumbent prime contractor is required to furnish a certified list of all service employees on
the contractor’s or subcontractor’s
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payroll during the last month of the
contract, together with anniversary
dates of employment, to the contracting officer no later than 10 days
before contract completion. (See paragraph (n) of the clause at 52.222–41,
Service Contract Act of 1965, as amended.) At the commencement of the succeeding contract, the contracting officer shall provide a copy of the list to
the successor contractor for determining employee eligibility for vacation or other fringe benefits which are
based upon length of service, including
service with predecessor contractors if
such benefit is required by an applicable wage determination.
22.1021
Requests for hearing.
(a) A contracting agency or other interested party may request a hearing
on an issue presented in 22.1013(a). To
obtain a hearing for the contracting
agency, the contracting officer shall
submit a written request through appropriate channels (ordinarily the
agency labor advisor) to: Administrator, Wage and Hour Division, Employment Standards Administration,
U.S. Department of Labor, Washington,
DC 20210.
(b) A request for a substantial variance hearing shall include sufficient
data to show that the rates at issue
vary substantially from those prevailing for similar services in the locality. The request shall also include—
(1) The number of the wage determinations at issue;
(2) The name of the contracting agency whose contract is involved;
(3) A brief description of the services
to be performed under the contract;
(4) The status of the procurement and
any estimated procurement dates, such
as bid opening, contract award, and
commencement date of the contract or
its follow-up option period;
(5) A statement of the applicant’s
case, setting forth in detail the reasons
why the applicant believes that a substantial variance exists with respect to
some or all of the wages and/or fringe
benefits;
(6) Names and addresses (to the extent known) of interested parties; and
(7) Any other data required by the
Administrator.
(c) A request for an arm’s length
hearing shall include—
(1) A statement of the applicant’s
case setting forth in detail the reasons
why the applicant believes that the
wages and fringe benefits contained in
the collective bargaining agreement
were not reached as a result of arm’s
length negotiations;
(2) A statement regarding the status
of the procurement and any estimated
procurement dates, such as bid opening, contract award, and commencement date of the contract or its followup option period; and
(3) Names and addresses (to the extent known) of interested parties.
(d) Unless the Administrator determines
that
extraordinary
circumstances exist, the Administrator
will not consider requests for a hearing
unless received as follows:
(1) For sealed bid contracts, more
than 10 days before the award of the
contract; or
(2) For negotiated contracts and for
contracts with provisions exceeding
the initial term by option, before the
commencement date of the contract or
the follow-up option period.
[59 FR 67041, Dec. 28, 1994]
22.1022 Withholding of contract payments.
Any violations of the clause at 52.222–
41, Service Contract Act of 1965, as
amended, renders the responsible contractor liable for the amount of any deductions, rebates, refunds, or underpayments (which includes nonpayment)
of compensation due employees performing the contract. The contracting
officer may withhold—or, upon written
request of the Department of Labor
from a level no lower than that of Assistant Regional Administrator, Wage
and Hour Division, Employment Standards Administration, Department of
Labor, shall withhold—the amount
needed to pay such underpaid employees from accrued payments due the
contractor on the contract, or on any
other prime contract (whether subject
to the Service Contract Act or not)
with the contractor. The agency shall
place the amount withheld in a deposit
fund. Such withheld funds shall be
transferred to the Department of Labor
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22.1023
48 CFR Ch. 1 (10–1–03 Edition)
for disbursement to the underpaid employees on order of the Secretary (or
authorized representatives), an Administrative Law Judge, or the Board of
Service Contract Appeals. In addition,
the Department of Labor has given
blanket approval to forward withheld
funds pending completion of an investigation or other administrative proceeding when disposition of withheld
funds remains the final action necessary to close out a contract.
[54 FR 19816, May 8, 1989, as amended at 61
FR 39198, July 26, 1996]
22.1023
[54 FR 19816, May 8, 1989, as amended at 60
FR 33066, June 26, 1995]
22.1026 Disputes
concerning
labor
standards.
Disputes concerning labor standards
requirements of the contract are handled under paragraph (t) of the contract clause at 52.222–41, Service Contract Act of 1965, as amended, and not
under the clause at 52.233–1, Disputes.
Subpart 22.11—Professional
Employee Compensation
Termination for default.
As provided by the Act, any contractor failure to comply with the requirements of the contract clauses related to the Act may be grounds for
termination for default (see paragraph
(k) of the clause at 52.222–41, Service
Contract Act of 1965, as amended).
22.1024 Cooperation with the Department of Labor.
The contracting officer shall cooperate with Department of Labor representatives in the examination of
records, interviews with service employees, and all other aspects of investigations undertaken by the Department. When asked, agencies shall furnish the Wage and Hour Administrator
or a designee, any available information on contractors, subcontractors,
their contracts, and the nature of the
contract services. The contracting officer shall promptly refer, in writing to
the appropriate regional office of the
Department, apparent violations and
complaints received. Employee complaints shall not be disclosed to the
employer.
22.1025
award to an ineligible contractor applies to both prime and subcontracts.
Ineligibility of violators.
A list of persons or firms found to be
in violation of the Act is contained in
the List of Parties Excluded from Federal Procurement and Nonprocurement
Programs (see 9.404). No Government
contract may be awarded to any violator so listed because of a violation of
the Act, or to any firm, corporation,
partnership, or association in which
the violator has a substantial interest,
without the approval of the Secretary
of Labor. This prohibition against
22.1101 Applicability.
The Service Contract Act of 1965 was
enacted to ensure that Government
contractors compensate their blue-collar service workers and some whitecollar service workers fairly, but it
does not cover bona fide executive, administrative, or professional employees.
[48 FR 42258, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986; 57 FR 60582, Dec. 21,
1992; 65 FR 36014, June 6, 2000]
22.1102 Definition.
Professional employee, as used in this
subpart, means any person meeting the
definition of employee employed in a
bona fide . . . professional capacity given
in 29 CFR part 541. The term embraces
members of those professions having a
recognized status based upon acquiring
professional knowledge through prolonged study. Examples of these professions include accountancy, actuarial
computation, architecture, dentistry,
engineering, law, medicine, nursing,
pharmacy, the sciences (such as biology, chemistry, and physics), and
teaching. To be a professional employee, a person must not only be a
professional but must be involved essentially in discharging professional
duties.
[48 FR 42258, Sept. 19, 1983, as amended at 66
FR 2130, Jan. 10, 2001]
22.1103 Policy, procedures, and solicitation provision.
All professional employees shall be
compensated fairly and properly. Accordingly, the contracting officer shall
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insert the provision at 52.222–46, Evaluation of Compensation for Professional Employees, in solicitations for
negotiated service contracts when the
contract amount is expected to exceed
$500,000 and the service to be provided
will require meaningful numbers of
professional employees. This provision
requires that offerors submit for evaluation a total compensation plan setting forth proposed salaries and fringe
benefits for professional employees
working on the contract. Supporting
information will include data, such as
recognized national and regional compensation surveys and studies of professional, public and private organizations, used in establishing the total
compensation structure. Plans indicating unrealistically low professional
employees compensation may be assessed adversely as one of the factors
considered in making an award.
[57 FR 60582, Dec. 21, 1992]
Subpart 22.12 [Reserved]
Subpart 22.13—Special Disabled
Veterans, Veterans of the
Vietnam Era, and Other Eligible Veterans
SOURCE: 66 FR 53488, Oct. 22, 2001, unless
otherwise noted.
22.1300
Scope of subpart.
This subpart prescribes policies and
procedures for implementing the Vietnam Era Veterans’ Readjustment Assistance Act of 1972 (38 U.S.C. 4211 and
4212) (the Act); Executive Order 11701,
January 24, 1973 (3 CFR 1971–1975
Comp., p. 752); the regulations of the
Secretary of Labor (41 CFR Part 60–250
and Part 61–250); and the Veterans Employment Opportunities Act of 1998,
Public Law 105–339.
22.1301
Definition.
United States, as used in this subpart,
means the States, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, American Samoa,
Guam, the Virgin Islands of the United
States, and Wake Island.
22.1302
Policy.
(a) Contractors and subcontractors,
when entering into contracts or subcontracts subject to the Act, must—
(1) List all employment openings,
with the appropriate local employment
service office except for—
(i) Executive and top management
positions;
(ii) Positions to be filled from within
the contractor’s organization; and
(iii) Positions lasting three days or
less.
(2) Take affirmative action to employ, and advance in employment,
qualified special disabled veterans, veterans of the Vietnam era, and other eligible veterans without discrimination
based on their disability or veteran’s
status.
(b) Except for contracts for commercial items or contracts that do not exceed the simplified acquisition threshold, contracting officers must not obligate or expend funds appropriated for
the agency for a fiscal year to enter
into a contract for the procurement of
personal property and nonpersonal
services (including construction) with
a contractor that has not submitted a
required annual Form VETS–100, Federal Contractor Veterans’ Employment
Report (VETS–100 Report), with respect to the preceding fiscal year if the
contractor was subject to the reporting
requirements of 38 U.S.C. 4212(d) for
that fiscal year.
22.1303
Applicability.
(a) The Act applies to all contracts
and subcontracts for personal property
and nonpersonal services (including
construction) of $25,000 or more except
as waived by the Secretary of Labor.
(b) The requirements of the clause at
52.222–35, Equal Opportunity for Special
Disabled Veterans, Veterans of the
Vietnam Era, and Other Eligible Veterans, in any contract with a State or
local government (or any agency, instrumentality, or subdivision) do not
apply to any agency, instrumentality,
or subdivision of that government that
does not participate in work on or
under the contract.
(c) The Act requires submission of
the VETS–100 Report in all cases where
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22.1304
48 CFR Ch. 1 (10–1–03 Edition)
the contractor or subcontractor has received an award of $25,000 or more, except for awards to State and local governments, and foreign organizations
where the workers are recruited outside of the United States.
22.1304 Procedures.
To verify if a proposed contractor is
current with its submission of the
VETS–100 Report, the contracting officer may—
(a) Query the Department of Labor’s
VETS–100 Database via the Internet at
http://www.vets100.cudenver.edu/
vets100search.htm using the validation
code ‘‘vets’’ to proceed with the search
in the database; or
(b) Contact the VETS–100 Reporting
Systems
via
e-mail
at
[email protected] for confirmation, if
the proposed contractor represents
that it has submitted the VETS–100 Report and is not listed in the database.
22.1305 Waivers.
(a) The Deputy Assistant Secretary
for Federal Contract Compliance Programs, Department of Labor (Deputy
Assistant Secretary of Labor), may
waive any or all of the terms of the
clause at 52.222–35, Equal Opportunity
for Special Disabled Veterans, Veterans of the Vietnam Era, and Other
Eligible Veterans for—
(1) Any contract if a waiver is in the
national interest; or
(2) Groups or categories of contracts
if a waiver is in the national interest
and it is—
(i) Impracticable to act on each request individually; and
(ii) Determined that the waiver will
substantially contribute to convenience in administering the Act.
(b) The head of the agency may waive
any requirement in this subpart when
it is determined that the contract is essential to the national security, and
that its award without complying with
such requirements is necessary to the
national security. Upon making such a
determination, the head of the agency
must notify the Deputy Assistant Secretary of Labor in writing within 30
days.
(c) The contracting officer must submit requests for waivers in accordance
with agency procedures.
(d) The Deputy Assistant Secretary
of Labor may withdraw an approved
waiver for a specific contract or group
of contracts to be awarded, when in the
Deputy’s judgment such action is necessary to achieve the purposes of the
Act. The withdrawal does not apply to
awarded contracts. For procurements
entered into by sealed bidding, such
withdrawal does not apply unless the
withdrawal is made more than 10 calendar days before the date set for the
opening of bids.
22.1306 Department of Labor notices
and reports.
(a) The contracting officer must furnish to the contractor appropriate notices for posting when they are prescribed by the Deputy Assistant Secretary
of
Labor
(see
http://
www2.dol.gov/dol/esa/public/
ofcplorg.htm).
(b) The Act requires contractors and
subcontractors to submit a report at
least annually to the Secretary of
Labor regarding employment of special
disabled veterans, veterans of the Vietnam era, and other eligible veterans
unless all of the terms of the clause at
52.222–35, Equal Opportunity for Special
Disabled Veterans, Veterans of the
Vietnam Era, and Other Eligible Veterans, have been waived (see 22.1305).
The contractor and subcontractor must
use Form VETS–100, Federal Contractor Veterans’’ Employment Report,
to submit the required reports.
22.1307 Collective
ments.
bargaining
If performance under the clause at
52.222–35, Equal Opportunity for Special
Disabled Veterans, Veterans of the
Vietnam Era, and Other Eligible Veterans, may necessitate a revision of a
collective bargaining agreement, the
contracting officer must advise the affected labor unions that the Department of Labor will give them appropriate opportunity to present their
views. However, neither the contracting officer nor any representative
of the contracting officer may discuss
with the contractor or any labor representative any aspect of the collective
bargaining agreement.
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22.1308 Complaint procedures.
Following agency procedures, the
contracting office must forward any
complaints received about the administration of the Act to the Veterans’’
Employment and Training Service of
the Department of Labor, or through
the local Veterans’ Employment Representative or designee, at the local
State employment office. The Deputy
Assistant Secretary of Labor is responsible for investigating complaints.
the clause at 52.222–35, Equal Opportunity for Special Disabled Veterans,
Veterans of the Vietnam Era, and
Other Eligible Veterans.
(c) Insert the provision at 52.222–38,
Compliance with Veterans’ Employment Reporting Requirements, in solicitations when it is anticipated the
contract award will exceed the simplified acquisition threshold and the
contract is not for acquisition of commercial items.
22.1309 Actions because of noncompliance.
The contracting officer must take
necessary action as soon as possible
upon notification by the appropriate
agency official to implement any sanctions imposed on a contractor by the
Department of Labor for violations of
the clause at 52.222–35, Equal Opportunity for Special Disabled Veterans,
Veterans of the Vietnam Era, and
Other Eligible Veterans. These sanctions (see 41 CFR 60–250.66) may include—
(a) Withholding payments;
(b) Termination or suspension of the
contract; or
(c) Debarment of the contractor.
Subpart 22.14—Employment of
Workers with Disabilities
22.1310 Solicitation provision and contract clauses.
(a)(1) Insert the clause at 52.222–35,
Equal Opportunity for Special Disabled
Veterans, Veterans of the Vietnam
Era, and Other Eligible Veterans, in solicitations and contracts if the expected value is $25,000 or more, except
when—
(i) Work is performed outside the
United States by employees recruited
outside the United States; or
(ii) The Deputy Assistant Secretary
of Labor has waived, in accordance
with 22.1305(a) or the head of the agency has waived, in accordance with
22.1305(b) all of the terms of the clause.
(2) If the Deputy Assistant Secretary
of Labor or the head of the agency
waives one or more (but not all) of the
terms of the clause, use the basic
clause with its Alternate I.
(b) Insert the clause at 52.222–37, Employment Reports on Special Disabled
Veterans, Veterans of the Vietnam
Era, and Other Eligible Veterans, in solicitations and contracts containing
22.1400
Scope of subpart.
This subpart prescribes policies and
procedures for implementing Section
503 of the Rehabilitation Act of l973, as
amended (29 U.S.C. 793) (the Act); Executive Order 11758, January 15, 1974; and
the regulations of the Secretary of
Labor (41 CFR part 60–741). In this subpart, the terms contract and contractor
include subcontract and subcontractor.
22.1401
Policy.
Government contractors, when entering into contracts subject to the Act,
are required to take affirmative action
to employ, and advance in employment, qualified individuals with disabilities, without discrimination based
on their physical or mental disability.
[63 FR 34074, June 22, 1998]
22.1402
Applicability.
(a) Section 503 of the Act applies to
all Government contracts in excess of
$10,000 for supplies and services (including construction) except as waived by
the Secretary of Labor. The clause at
52.222–36, Affirmative Action for Workers with Disabilities, implements the
Act.
(b) The requirements of the clause at
52.222–36, Affirmative Action for Workers with Disabilities, in any contract
with a State or local government (or
any agency, instrumentality, or subdivision) shall not apply to any agency,
instrumentality, or subdivision of that
government that does not participate
in work on or under the contract.
[63 FR 34074, June 22, 1998]
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22.1403
48 CFR Ch. 1 (10–1–03 Edition)
Waivers.
(a) The agency head, with the concurrence of the Deputy Assistant Secretary for Federal Contract Compliance of the U.S. Department of Labor
(Deputy Assistant Secretary), may
waive any or all of the terms of the
clause at 52.222–36, Affirmative Action
for Workers with Disabilities, for—
(1) Any contract if a waiver is
deemed to be in the national interest;
or
(2) Groups or categories of contracts
if a waiver is in the national interest
and it is—
(i) Impracticable to act on each request individually; and
(ii) Determined that the waiver will
substantially contribute to convenience in administering the Act.
(b)(1) The head of a civilian agency,
with the concurrence of the Deputy Assistant Secretary, or, (2) the Secretary
of Defense, may waive any requirement
in this subpart when it is determined
that the contract is essential to the national security, and that its award
without complying with such requirements is necessary to the national security. Upon making such a determination, the head of a civilian agency shall
notify the Deputy Assistant Secretary
in writing within 30 days.
(c) The contracting officer shall submit requests for waivers in accordance
with agency procedures.
(d) A waiver granted for a particular
class of contracts may be withdrawn
for any contract within that class
whenever considered necessary by the
Deputy Assistant Secretary to achieve
the purposes of the Act. The withdrawal shall not apply to contracts
awarded before the withdrawal. The
withdrawal shall not apply to solicitations under any means of formal sealed
bidding unless it is made more than 10
days before the date set for bid opening.
[48 FR 42258, Sept. 19, 1983, as amended at 52
FR 19803, May 27, 1987; 63 FR 34074, June 22,
1998]
22.1404
Department of Labor notices.
The contracting officer shall furnish
to the contractor appropriate notices
that state the contractor’s obligations
and the rights of individuals with dis-
abilities. The contracting officer may
obtain these notices from the Office of
Federal Contract Compliance Programs (OFCCP) regional office.
[63 FR 34074, June 22, 1998]
22.1405 Collective
ments.
bargaining
If performance under the clause at
52.222–36, Affirmative Action for Workers with Disabilities, may necessitate a
revision of a collective bargaining
agreement, the contracting officer
shall advise the affected labor unions
that the Department of Labor will give
them
appropriate
opportunity
to
present their views. However, neither
the contracting officer nor any representative of the contracting officer
shall discuss with the contractor or
any labor representative any aspect of
the collective bargaining agreement.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 34074, June 22, 1998]
22.1406
Complaint procedures.
Following agency procedures, the
contracting office shall forward any
complaints received about the administration of the Act to the Deputy Assistant Secretary for Federal Contract
Compliance, 200 Constitution Avenue,
NW., Washington, DC 20210, or to any
OFCCP regional or area office. The
OFCCP shall institute investigation of
each complaint and shall be responsible for developing a complete case
record.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 34074, June 22, 1998]
22.1407 Actions because of noncompliance.
The contracting officer shall take
necessary action, as soon as possible
upon notification by the appropriate
agency official, to implement any sanctions imposed on a contractor by the
Department of Labor for violations of
the clause at 52.222–36, Affirmative Action for Workers with Disabilities.
These sanctions (see 41 CFR 60–741.66)
may include—
(a) Withholding from payments otherwise due;
(b) Termination or suspension of the
contract; or
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22.1503
(c) Debarment of the contractor.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 34074, June 22, 1998]
22.1408 Contract clause.
(a) Insert the clause at 52.222–36, Affirmative Action for Workers with Disabilities, in solicitations and contracts
that exceed or are expected to exceed
$10,000, except when—
(1) Both the performance of the work
and the recruitment of workers will
occur outside the United States, Puerto Rico, the Northern Mariana Islands,
American Samoa, Guam, the U.S. Virgin Islands, and Wake Island; or
(2) The agency head has waived, in
accordance with 22.1403(a) or 22.1403(b)
all the terms of the clause.
(b) If the agency head waives one or
more (but not all) of the terms of the
clause in accordance with 22.1403(a) or
22.1403(b), use the basic clause with its
Alternate I.
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 34074, June 22, 1998; 68 FR 28082, May 22,
2003]
Subpart 22.15—Prohibition of Acquisition of Products Produced
by Forced or Indentured Child
Labor
SOURCE: 66 FR 5347, Jan. 18, 2001, unless
otherwise noted.
22.1500 Scope.
This subpart applies to acquisitions
of supplies that exceed the micro-purchase threshold.
22.1501 Definitions.
As used in this subpart—
Forced or indentured child labor means
all work or service—
(1) Exacted from any person under
the age of 18 under the menace of any
penalty for its nonperformance and for
which the worker does not offer himself voluntarily; or
(2) Performed by any person under
the age of 18 pursuant to a contract the
enforcement of which can be accomplished by process or penalties.
List of Products Requiring Contractor
Certification as to Forced or Indentured
Child Labor means the list published by
the Department of Labor in accordance
with Executive Order 13126 of June 12,
1999, Prohibition of Acquisition of
Products Produced by Forced or Indentured Child Labor. The list identifies
products, by their country of origin,
that the Departments of Labor, Treasury, and State have a reasonable basis
to believe might have been mined, produced, or manufactured by forced or indentured child labor.
22.1502
Policy.
Agencies must take appropriate action to enforce the laws prohibiting the
manufacture or importation of products that have been mined, produced,
or manufactured wholly or in part by
forced or indentured child labor (19
U.S.C. 1307, 29 U.S.C. 201, et seq., and 41
U.S.C. 35, et seq.). Agencies should
make every effort to avoid acquiring
such products.
22.1503 Procedures for acquiring end
products on the List of Products
Requiring Contractor Certification
as to Forced or Indentured Child
Labor.
(a) When issuing a solicitation for
supplies expected to exceed the micropurchase threshold, the contracting officer must check the List of Products
Requiring Contractor Certification as
to Forced or Indentured Child Labor
(the
List)
(www.dol.gov/ilab/)
(see
22.1505(a)). Appearance of a product on
the List is not a bar to purchase of any
such product mined, produced, or manufactured in the identified country, but
rather is an alert that there is a reasonable basis to believe that such product may have been mined, produced, or
manufactured by forced or indentured
child labor.
(b) The requirements of this subpart
that result from the appearance of any
end product on the List do not apply to
a solicitation or contract if the identified country of origin on the List is—
(1) Canada, and the anticipated value
of the acquisition is $25,000 or more
(see 25.405);
(2) Israel, and the anticipated value
of the acquisition is $50,000 or more
(see 25.406);
(3) Mexico, and the anticipated value
of the acquisition is $56,190 or more
(see 25.405); or
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22.1504
48 CFR Ch. 1 (10–1–03 Edition)
(4) Aruba, Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Hong Kong, Iceland, Ireland,
Italy, Japan, Korea, Liechtenstein,
Luxembourg, Netherlands, Norway,
Portugal, Singapore, Spain, Sweden,
Switzerland, or the United Kingdom
and the anticipated value of the acquisition is $169,000 or more (see 25.403(b)).
(c) Except as provided in paragraph
(b) of this section, before the contracting officer may make an award for
an end product (regardless of country
of origin) of a type identified by country of origin on the List the offeror
must certify that—
(1) It will not supply any end product
on the List that was mined, produced,
or manufactured in a country identified on the List for that product, as
specified in the solicitation by the contracting officer in the Certification Regarding Knowledge of Child Labor for
Listed End Products; or
(2)(i) It has made a good faith effort
to determine whether forced or indentured child labor was used to mine,
produce, or manufacture any end product to be furnished under the contract
that is on the List and was mined, produced, or manufactured in a country
identified on the List for that product;
and
(ii) On the basis of those efforts, the
offeror is unaware of any such use of
child labor.
(d) Absent any actual knowledge that
the certification is false, the contracting officer must rely on the
offerors’ certifications in making
award decisions.
(e) Whenever a contracting officer
has reason to believe that forced or indentured child labor was used to mine,
produce, or manufacture an end product furnished pursuant to a contract
awarded subject to the certification required in paragraph (c) of this section,
the contracting officer must refer the
matter for investigation by the agency’s Inspector General, the Attorney
General, or the Secretary of the Treasury, whichever is determined appropriate in accordance with agency procedures, except to the extent that the
end product is from the country listed
in paragraph (b) of this section, under
a contract exceeding the applicable
threshold.
(f) Proper certification will not prevent the head of an agency from imposing remedies in accordance with section 22.1504(a)(4) if it is later discovered
that the contractor has furnished an
end product or component that has in
fact been mined, produced, or manufactured, wholly or in part, using forced
or indentured child labor.
[66 FR 5347, Jan. 18, 2001, as amended at 66
FR 65371, Dec. 18, 2001; 67 FR 56123, 56126,
Aug. 30, 2002]
22.1504
Violations and remedies.
(a) Violations. The Government may
impose remedies set forth in paragraph
(b) of this section for the following violations (note that the violations in
paragraphs (a)(3) and (a)(4) of this section go beyond violations of the requirements relating to certification of
end products) (see 22.1503):
(1) The contractor has submitted a
false certification regarding knowledge
of the use of forced or indentured child
labor.
(2) The contractor has failed to cooperate as required in accordance with
the clause at 52.222–19, Child Labor Cooperation with Authorities and Remedies, with an investigation of the use
of forced or indentured child labor by
an Inspector General, the Attorney
General, or the Secretary of the Treasury.
(3) The contractor uses forced or indentured child labor in its mining, production, or manufacturing processes.
(4) The contractor has furnished an
end product or component mined, produced, or manufactured, wholly or in
part, by forced or indentured child
labor. Remedies in paragraphs (b)(2)
and (b)(3) of this section are inappropriate unless the contractor knew of
the violation.
(b) Remedies. (1) The contracting officer may terminate the contract.
(2) The suspending official may suspend the contractor in accordance with
the procedures in subpart 9.4.
(3) The debarring official may debar
the contractor for a period not to exceed 3 years in accordance with the
procedures in subpart 9.4.
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Federal Acquisition Regulation
Pt. 23
22.1505 Solicitation provision and contract clause.
(a) Except as provided in paragraph
(b) of 22.1503, insert the provision at
52.222–18,
Certification
Regarding
Knowledge of Child Labor for Listed
End Products, in all solicitations that
are expected to exceed the micro-purchase threshold and are for the acquisition of end products (regardless of
country of origin) of a type identified
by country of origin on the List of
Products Requiring Contractor Certification as to Forced or Indentured Child
Labor, except solicitations for commercial items that include the provision at 52.212–3, Offeror Representations and Certifications—Commercial
Items. The contracting officer must
identify in paragraph (b) of the provision at 52.222–18, Certification Regarding Knowledge of Child Labor for Listed End Products, or paragraph (i)(1) of
the provision at 52.212–3, any applicable
end products and countries of origin
from the List. For solicitations estimated to equal or exceed $25,000, the
contracting officer must exclude from
the List in the solicitation end products from any countries identified at
22.1503(b), in accordance with the specified thresholds.
(b) Insert the clause at 52.222–19,
Child Labor—Cooperation with Authorities and Remedies, in all solicitations and contracts for the acquisition
of supplies that are expected to exceed
the micro-purchase threshold.
PART 23— ENVIRONMENT, ENERGY
AND WATER EFFICIENCY, RENEWABLE ENERGY TECHNOLOGIES,
OCCUPATIONAL SAFETY, AND
DRUG-FREE WORKPLACE
Sec.
23.000
23.001
Subpart 23.3—Hazardous Material
Identification and Material Safety Data
23.300
23.301
23.302
23.303
Scope of subpart.
Definition.
Policy.
Contract clause.
Subpart 23.4—Use of Recovered Materials
23.400 Scope of subpart.
23.401 Definition.
23.402 Authorities.
23.403 Policy.
23.404 Agency affirmative procurement programs.
23.405 Procedures.
23.406 Solicitation provision and contract
clause.
Subpart 23.5—Drug-Free Workplace
23.500 Scope of subpart.
23.501 Applicability.
23.502 Authority.
23.503 Definitions.
23.504 Policy.
23.505 Contract clause.
23.506 Suspension of payments, termination
of contract, and debarment and suspension actions.
Subpart 23.6—Notice of Radioactive
Material
23.601
23.602
Requirements.
Contract clause.
Subpart 23.7—Contracting for Environmentally Preferable Products and
Services
23.700 Scope.
23.701 Definition.
23.702 Authorities.
23.703 Policy.
23.704 Application to Government-owned or
-leased facilities.
23.705 Contract clause.
Subpart 23.8—Ozone-Depleting
Substances
23.800
23.801
23.802
23.803
23.804
Scope.
Definition.
Subpart 23.1 [Reserved]
Subpart 23.2—Energy and Water Efficiency
and Renewable Energy
23.200 Scope.
23.201 Authorities.
23.202 Policy.
23.203 Energy-efficient products.
23.204 Energy-savings
performance
tracts.
con-
Scope of subpart.
Authorities.
[Reserved]
Policy.
Contract clauses.
Subpart 23.9—Contractor Compliance With
Toxic Chemical Release Reporting
23.901
23.902
23.903
23.904
23.905
Purpose.
General.
Applicability.
Policy.
Requirements.
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23.000
48 CFR Ch. 1 (10–1–03 Edition)
23.906 Solicitation provision and contract
clause.
Subpart 23.10—Federal Compliance With
Right-To-Know Laws and Pollution Prevention Requirements
23.1000
23.1001
23.1002
23.1003
23.1004
23.1005
Scope.
Authorities.
Applicability.
Definitions.
Requirements.
Contract clause.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42275, Sept. 19, 1983, unless
otherwise noted.
23.000
Scope.
This part prescribes acquisition policies and procedures supporting the
Government’s program for ensuring a
drug-free workplace and for protecting
and improving the quality of the environment by
(a) Controlling pollution;
(b) Managing energy and water use in
Government facilities efficiently;
(c) Using renewable energy and renewable energy technologies;
(d) Acquiring energy- and water-efficient products and services, environmentally preferable products, and products that use recovered materials; and
(e) Requiring contractors to identify
hazardous materials.
Definition.
Toxic chemical, as used in this part,
means a chemical or chemical category
listed in 40 CFR 372.65.
[68 FR 43869, July 24, 2003]
Subpart 23.1 [Reserved]
Subpart 23.2— Energy and Water
Efficiency and Renewable Energy
SOURCE: 66 FR 65352, Dec. 18, 2001, unless
otherwise noted.
23.200
[66 FR 65352, Dec. 18, 2001, as amended at 68
FR 28082, May 22, 2003]
23.201 Authorities.
(a) Energy Policy and Conservation
Act (42 U.S.C.
6361(a)(1)) and Resource Conservation
and Recovery Act of 1976 (42 U.S.C.
6901, et seq.).
(b) National Energy Conservation
Policy Act (42 U.S.C. 8253, 8262g, and
8287).
(c) Executive Order 11912 of April 13,
1976, Delegations of Authority under
the Energy Policy and Conservation
Act.
(d) Executive Order 13123 of June 3,
1999, Greening the Government through
Efficient Energy Management.
(e) Executive Order 13221 of July 31,
2001, Energy-Efficient Standby Power
Devices.
[66 FR 65352, Dec. 18, 2001, as amended at 68
FR 43858, July 24, 2003]
[66 FR 65352, Dec. 18, 2001]
23.001
ucts that use renewable energy technology; and
(2) Using an energy-savings performance contract to obtain energy-efficient technologies at Government facilities without Government capital
expense.
(b) This subpart applies to acquisitions in the United States and its outlying areas. Agencies conducting acquisitions outside of these areas must
use their best efforts to comply with
this subpart.
Scope.
(a) This subpart prescribes policies
and procedures for—
(1) Acquiring energy- and water-efficient products and services, and prod-
23.202 Policy.
The Government’s policy is to acquire supplies and services that promote energy and water efficiency, advance the use of renewable energy
products, and help foster markets for
emerging technologies. This policy extends to all acquisitions, including
those below the simplified acquisition
threshold.
23.203 Energy-efficient products.
(a) If life-cycle cost-effective and
available—
(1) When acquiring energy-using
products—
(i) Agencies shall purchase ENERGY
STAR or other energy-efficient items
listed on the Department of Energy’s
Federal Energy Management Program
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Federal Acquisition Regulation
23.302
(FEMP) Product Energy Efficiency
Recommendations product list; and
(ii) For products that consume power
in a standby mode and are listed on
FEMP’s Standby Power Devices product listing, agencies shall—
(A) Purchase items which meet
FEMP’s standby power wattage recommendation or document the reason
for not purchasing such items; or
(B) If FEMP has listed a product
without a corresponding wattage recommendation, purchase items which
use no more than one watt in their
standby power consuming mode. When
it is impracticable to meet the one
watt requirement, agencies shall purchase items with the lowest standby
wattage practicable; and
(2) When contracting for services
that will include the provision of energy-using products, including contracts for design, construction, renovation, or maintenance of a public building, the specifications shall incorporate the applicable requirements in
paragraph (a)(1) of this section.
(b) The requirements in paragraph (a)
of this section only apply when the relevant product’s utility and performance meet the agency’s need.
(c) Information is available via the
Internet about—
(1) ENERGY STAR at http://
www.energystar.gov/; and
(2)
FEMP
at
http://
www.eere.energy.gov/femp/procurement.
[68 FR 43858, July 24, 2003]
23.204 Energy-savings
performance
contracts.
(a) Section 403 of Executive Order
13123 of June 3, 1999, Greening the Government
through
Efficient
EnergyManagement, requires an agency to make maximum use of the authority provided in the National Energy Conservation Policy Act (42 U.S.C.
8287) to use an energy-savings performance contract (ESPC), when life-cycle
cost-effective, to reduce energy use and
cost in the agency’s facilities and operations.
(b)(1) Under an ESPC, an agency can
contract with an energy service company for a period not to exceed 25 years
to improve energy efficiency in one or
more agency facilities at no direct capital cost to the United States Treas-
ury. The energy service company finances the capital costs of implementing energy conservation measures
and receives, in return, a contractually
determined share of the cost savings
that result.
(2) Except as provided in 10 CFR
436.34, ESPC’s are subject to subpart
17.1.
(c) To solicit and award an ESPC, the
contracting officer—
(1) Must use the procedures, selection
method, and terms and conditions provided in 10 CFR part 436, subpart B; at
http://www.eren.doe.gov/femp/resources/
legislation.html; and
(2) May use the ‘‘Qualified List’’ of
energy service companies established
by the Department of Energy and other
agencies.
Subpart 23.3—Hazardous Material
Identification and Material
Safety Data
23.300
Scope of subpart.
This subpart prescribes policies and
procedures for acquiring deliverable
items, other than ammunition and explosives, that require the furnishing of
data involving hazardous materials.
Agencies may prescribe special procedures for ammunition and explosives.
23.301
Definition.
Hazardous material is defined in the
latest version of Federal Standard No.
313 (Federal Standards are sold to the
public and Federal agencies through:
General Services Administration, Specifications Unit (3FBP–W), 7th & D Sts.,
SW., Washington, DC 20407.
[56 FR 55374, Oct. 25, 1991]
23.302
Policy.
(a) The Occupational Safety and
Health Administration (OSHA) is responsible for issuing and administering
regulations that require Government
activities to apprise their employees
of—
(1) All hazards to which they may be
exposed;
(2) Relative symptoms and appropriate emergency treatment; and
(3) Proper conditions and precautions
for safe use and exposure.
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23.303
48 CFR Ch. 1 (10–1–03 Edition)
(b) To accomplish this objective, it is
necessary to obtain certain information relative to the hazards which may
be introduced into the workplace by
the supplies being acquired. Accordingly, offerors and contractors are required to submit hazardous materials
data whenever the supplies being acquired are identified as hazardous materials. The latest version of Federal
Standard No. 313 (Material Safety Data
Sheet, Preparation and Submission of)
includes criteria for identification of
hazardous materials.
(c) Hazardous material data (Material Safety Data Sheets (MSDS’s)) are
required—
(1) As specified in the latest version
of Federal Standard No. 313 (including
revisions adopted during the term of
the contract);
(2) For any other material designated
by a Government technical representative as potentially hazardous and requiring safety controls.
(d) MSDS’s must be submitted—
(1) By the apparent successful offeror
prior to contract award if hazardous
materials are expected to be used during contract performance.
(2) For agencies other than the Department of Defense, again by the contractor with the supplies at the time of
delivery.
(e) The contracting officer shall provide a copy of all MSDS’s received to
the safety officer or other designated
individual.
[48 FR 42275, Sept. 19, 1983, as amended at 56
FR 55374, Oct. 25, 1991; 62 FR 236, Jan. 2, 1997]
23.303
Contract clause.
(a) The contracting officer shall insert the clause at 52.223–3, Hazardous
Material Identification and Material
Safety Data, in solicitations and contracts if the contract will require the
delivery of hazardous materials as defined in 23.301.
(b) If the contract is awarded by an
agency other than the Department of
Defense, the contracting officer shall
use the clause at 52.223–3 with its Alternate I.
[56 FR 55374, Oct. 25, 1991]
Subpart 23.4—Use of Recovered
Materials
SOURCE: 60 FR 28496, May 31, 1995, unless
otherwise noted.
23.400
Scope of subpart.
This subpart prescribes policies and
procedures for acquiring Environmental Protection Agency (EPA)—designated products through affirmative
procurement programs required by the
Resource Conservation and Recovery
Act of 1976 (RCRA) (42 U.S.C. 6962) and
Executive Order 13101 of September 14,
1998, Greening the Government through
Waste Prevention, Recycling, and Federal Acquisition.
[65 FR 36019, June 6, 2000]
23.401
Definition.
EPA-designated product, as used in
this subpart, means a product—
(1) That is or can be made with recovered material;
(2) That is listed by EPA in a procurement guideline (40 CFR part 247);
and
(3) For which EPA has provided purchasing recommendations in a related
Recovered Materials Advisory Notice
(RMAN).
[65 FR 36019, June 6, 2000]
23.402
Authorities.
(a) The Resource Conservation and
Recovery Act of 1976 (RCRA), 42 U.S.C.
6962, requires agencies responsible for
drafting or reviewing specifications
used in agency acquisitions to—
(1) Eliminate from those specifications any requirement excluding the
use of recovered materials or requiring
products to be manufactured from virgin materials; and
(2) Require, for EPA-designated products, using recovered materials to the
maximum extent practicable without
jeopardizing the intended end use of
the item.
(b) RCRA also requires—
(1) EPA to prepare guidelines on the
availability, sources, and potential
uses of recovered materials and associated products, including solid waste
management services; and
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Federal Acquisition Regulation
23.405
(2) Agencies to develop and implement affirmative procurement programs for EPA-designated products
within 1 year after EPA’s designation.
(c) Executive Order 13101 requires
that the agency head—
(1) Work to increase and expand markets for recovered materials through
greater Government preference and demand for such products consistent with
the demands of efficiency and cost-effectiveness; and
(2) Develop and implement affirmative procurement programs in accordance with direction in RCRA and the
Executive order.
[65 FR 36019, June 6, 2000]
23.403
Policy.
Government policy on the use of recovered materials considers cost, availability of competition, and performance. The objective is to acquire competitively, in a cost-effective manner,
products that meet reasonable performance requirements and that are
composed of the highest percentage of
recovered materials practicable.
[65 FR 36019, June 6, 2000]
23.404 Agency affirmative
ment programs.
procure-
(a) For EPA-designated products, an
agency must establish an affirmative
procurement program, if the agency’s
purchases meet the threshold in
23.405(a). Technical or requirements
personnel and procurement personnel
are responsible for the preparation, implementation, and monitoring of affirmative
procurement
programs.
Agency affirmative procurement programs must include—
(1) A recovered materials preference
program;
(2) An agency promotion program;
(3) A program for requiring reasonable estimates, certification, and
verification of recovered material used
in the performance of contracts; and
(4) Annual review and monitoring of
the effectiveness of the program.
(b) Agency affirmative procurement
programs must require that 100 percent
of purchases of EPA-designated products contain recovered material, unless
the item cannot be acquired—
(1) Competitively within a reasonable
time frame;
(2) Meeting appropriate performance
standards; or
(3) At a reasonable price.
(c) Agency affirmative procurement
programs must provide guidance for
purchases of EPA-designated products
at or below the micro-purchase threshold.
[65 FR 36019, June 6, 2000]
23.405
Procedures.
(a) These procedures apply to all
agency acquisitions of EPA-designated
products, including micro-purchases,
if—
(1) The price of the product exceeds
$10,000; or
(2) The aggregate amount paid for
products, or for functionally equivalent
products, in the preceding fiscal year
was $10,000 or more. RCRA requires
that an agency include micro-purchases in determining if the aggregate
amount paid was $10,000 or more. However, it is not recommended that an
agency track micro-purchases unless it
intends to claim an exemption from
the requirement to establish an affirmative procurement program in the following fiscal year.
(b) Contracting officers should refer
to EPA’s list of EPA-designated products (available via the Internet at
http://www.epa.gov/cpg/) and to their
agencies’ affirmative procurement programs when purchasing supplies that
contain recovered material or services
that could include supplies that contain recovered material.
(c) The contracting officer shall place
in the contract file a written justification if an acquisition of EPA-designated products above the micro-purchase threshold does not meet applicable minimum recovered material content recommended by EPA guidelines.
If the agency has designated an Environmental Executive, the contracting
officer shall give a copy of the written
justification to that official. The contracting officer shall base the justification on the inability to acquire the
product—
(1) Competitively within a reasonable
period of time;
(2) At reasonable prices; or
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23.406
48 CFR Ch. 1 (10–1–03 Edition)
(3) To reasonable performance standards in the specifications, provided a
written determination by technical or
requirements personnel of the performance standard’s reasonableness is included with the justification. The technical and requirements personnel must
base their determination on National
Institute of Standards and Technology
guidelines, if available.
(d) Agencies must establish procedures for consolidating and reporting
contractor estimates required by the
clause at 52.223–9, Estimate of Percentage of Recovered Material Content for
EPA-Designated Products.
[65 FR 36019, June 6, 2000, as ameded at 68 FR
43858, July 24, 2003]
23.406 Solicitation provision and contract clause.
(a) Insert the provision at 52.223–4,
Recovered Material Certification, in
solicitations that are for, or specify the
use of, EPA-designated products containing recovered materials.
(b) Insert the clause at 52.223–9, Estimate of Percentage of Recovered Material Content for EPA-Designated Products, in solicitations and contracts exceeding $100,000 that include the provision at 52.223–4. If technical personnel
advise that estimates can be verified,
use the clause with its Alternate I.
[65 FR 36019, June 6, 2000, as amended at 68
FR 43858, July 24, 2003]
Subpart 23.5—Drug–Free
Workplace
SOURCE: 54 FR 4968, Jan. 31, 1989 (interim)
and 55 FR 21707, May 25, 1990 (final), unless
otherwise noted.
23.500 Scope of subpart.
This subpart implements the Drug
Free Workplace Act of 1988 (Pub. L.
100–690).
23.501 Applicability.
This subpart applies to contracts, including contracts with 8(a) contractors
under FAR subpart 19.8 and modifications that require a justification and
approval (see subpart 6.3), except contracts—
(a) At or below the simplified acquisition threshold; however, the require-
ments of this subpart apply to all contracts of any value awarded to an individual;
(b) For the acquisition of commercial
items (see part 12);
(c) Performed outside the United
States and its outlying areas or any
part of a contract performed outside
the United States and its outlying
areas;
(d) By law enforcement agencies, if
the head of the law enforcement agency or designee involved determines
that application of this subpart would
be inappropriate in connection with
the law enforcement agency’s undercover operations; or
(e) Where application would be inconsistent with the international obligations of the United States or with the
laws and regulations of a foreign country.
[54 FR 4968, Jan. 31, 1989, as amended at 55
FR 21707, May 25, 1990; 60 FR 34758, July 3,
1995; 60 FR 48248, Sept. 18, 1995; 68 FR 28082,
May 22, 2003]
23.502 Authority.
Drug-Free Workplace
(Pub. L. 100–690).
Act
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1988
23.503 Definitions.
As used in this subpart—
Controlled substance means a controlled substance in schedules I
through V of section 202 of the Controlled Substances Act (21 U.S.C. 812),
and as further defined in regulation at
21 CFR 1308.11–1308.15.
Conviction means a finding of guilt
(including a plea of nolo contendere) or
imposition of sentence, or both, by any
judicial body charged with the responsibility to determine violations of the
Federal or State criminal drug statutes.
Criminal drug statute means a Federal
or non-Federal criminal statute involving the manufacture, distribution, dispensing, possession, or use of any controlled substance.
Employee means an employee of a
contractor directly engaged in the performance of work under a Government
contract. Directly engaged is defined to
include all direct cost employees and
any other contract employee who has
other than a minimal impact or involvement in contract performance.
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Federal Acquisition Regulation
23.504
Individual means an offeror/contractor that has no more than one employee including the offeror/contractor.
[54 FR 4968, Jan. 31, 1989, as amended at 55
FR 21707, May 25, 1990; 66 FR 2130, Jan. 10,
2001]
23.504
Policy.
(a) No offeror other than an individual shall be considered a responsible
source (see 9.104–1(g) and 19.602–
1(a)(2)(i)) for a contract that exceeds
the simplified acquisition threshold,
unless it agrees that it will provide a
drug-free workplace by—
(1) Publishing a statement notifying
its employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in the contractor’s
workplace, and specifying the actions
that will be taken against employees
for violations of such prohibition;
(2) Establishing an ongoing drug-free
awareness program to inform its employees about—
(i) The dangers of drug abuse in the
workplace;
(ii) The contractor’s policy of maintaining a drug-free workplace;
(iii) Any available drug counseling,
rehabilitation, and employee assistance programs; and
(iv) The penalties that may be imposed upon employees for drug abuse
violations occurring in the workplace;
(3) Providing all employees engaged
in performance of the contract with a
copy of the statement required by
paragraph (a)(1) of this section;
(4) Notifying all employees in writing
in the statement required by subparagraph (a)(1) of this section, that as a
condition of employment on a covered
contract, the employee will—
(i) Abide by the terms of the statement; and
(ii) Notify the employer in writing of
the employee’s conviction under a
criminal drug statute for a violation
occurring in the workplace no later
than 5 days after such conviction;
(5) Notifying the contracting officer
in writing within 10 days after receiving notice under subdivision (a)(4)(ii) of
this section, from an employee or otherwise receiving actual notice of such
conviction. The notice shall include
the postion title of the employee;
(6) Within 30 days after receiving notice under subparagraph (a)(4) of this
section of a conviction, taking one of
the following actions with respect to
any employee who is convicted of a
drug abuse violation occurring in the
workplace:
(i) Taking appropriate personnel action against such employee, up to and
including termination; or
(ii) Requiring such employee to satisfactorily participate in a drug abuse
assistance or rehabilitation program
approved for such purposes by a Federal, State, or local health, law enforcement, or other appropriate agency.
(7) Making a good faith effort to
maintain
a
drug-free
workplace
through implementation of subparagraphs (a)(1) through (a)(6) of this section.
(b) No individual shall be awarded a
contract of any dollar value unless
that individual agrees not to engage in
the unlawful manufacture, distribution, dispensing, possession, or use of a
controlled substance while performing
the contract.
(c) For a contract of 30 days or more
performance duration, the contractor
shall comply with the provisions of
paragraph (a) of this section within 30
days after contract award, unless the
contracting officer agrees in writing
that circumstances warrant a longer
period of time to comply. Before granting such an extension, the contracting
officer shall consider such factors as
the number of contractor employees at
the worksite, whether the contractor
has or must develop a drug-free workplace program, and the number of contractor worksites. For contracts of less
than 30 days performance duration, the
contractor shall comply with the provisions of paragraph (a) of this section as
soon as possible, but in any case, by a
date prior to when performance is expected to be completed.
[54 FR 4968, Jan. 31, 1989, as amended at 55
FR 21707, May 25, 1990; 55 FR 38517, Sept. 18,
1990; 60 FR 34758, July 3, 1995; 61 FR 69292,
Dec. 31, 1996]
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23.505
23.505
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 23.6—Notice of
Radioactive Material
Contract clause.
Except as provided in 23.501, insert
the clause at 52.223-6, Drug-Free Workplace, in solicitations and contracts.
SOURCE: 56 FR 55374, Oct. 25, 1991, unless
otherwise noted.
[68 FR 28082, May 22, 2003]
23.506 Suspension of payments, termination of contract, and debarment
and suspension actions.
(a) After determining in writing that
adequate evidence to suspect any of the
causes at paragraph (d) of this section
exists, the contracting officer may suspend contract payments in accordance
with the procedures at 32.503–6(a)(1).
(b) After determining in writing that
any of the causes at paragraph (d) of
this section exists, the contracting officer may terminate the contract for
default.
(c) Upon initiating action under paragraph (a) or (b) of this section, the contracting officer shall refer the case to
the agency suspension and debarment
official, in accordance with agency procedures, pursuant to subpart 9.4.
(d) The specific causes for suspension
of contract payments, termination of a
contract for default, or suspension and
debarment are—
(1) The contractor has failed to comply with the requirements of the clause
at 52.223–6, Drug-Free Workplace; or
(2) The number of contractor employees convicted of violations of criminal
drug statutes occurring in the workplace indicates that the contractor has
failed to make a good faith effort to
provide a drug-free workplace.
(e) A determination under this section to suspend contract payments,
terminate a contract for default, or
debar or suspend a contractor may be
waived by the agency head for a particular contract, in accordance with
agency procedures, only if such waiver
is necessary to prevent a severe disruption of the agency operation to the detriment of the Federal Government or
the general public (see subpart 9.4). The
waiver authority of the agency head
cannot be delegated.
[54 FR 4968, Jan. 31, 1989, as amended at 55
FR 21708, May 25, 1990; 61 FR 69292, Dec. 31,
1996]
23.601 Requirements.
(a) The clause at 52.223–7, Notice of
Radioactive Materials, requires the
contractor to notify the contracting officer prior to delivery of radioactive
material.
(b) Upon receipt of the notice, the
contracting officer shall notify receiving activities so that appropriate safeguards can be taken.
(c) The clause permits the contracting officer to waive the notification if the contractor states that the
notification on prior deliveries is still
current. The contracting officer may
waive the notice only after consultation with cognizant technical representatives.
(d) The contracting officer is required to specify in the clause at
52.223–7, the number of days in advance
of delivery that the contractor will
provide notification. The determination of the number of days should be
done in coordination with the installation/facility radiation protection officer (RPO). The RPO is responsible for
insuring the proper license, authorization or permit is obtained prior to receipt of the radioactive material.
[56 FR 55374, Oct. 25, 1991, as amended at 62
FR 236, Jan. 2, 1997]
23.602 Contract clause.
The contracting officer shall insert
the clause at 52.223–7, Notice of Radioactive Materials, in solicitations and
contracts for supplies which are, or
which contain— (a) radioactive material requiring specific licensing under
regulations issued pursuant to the
Atomic Energy Act of 1954; or (b) radioactive material not requiring specific
licensing in which the specific activity
is greater than 0.002 microcuries per
gram or the activity per item equals or
exceeds 0.01 microcuries. Such supplies
include, but are not limited to, aircraft, ammunition, missiles, vehicles,
electronic tubes, instrument panel
gauges, compasses and identification
markers.
456
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Federal Acquisition Regulation
23.705
Subpart 23.7—Contracting for Environmentally Preferable Products and Services
SOURCE: 60 FR 28497, May 31, 1995, unless
otherwise noted.
23.700 Scope.
This subpart prescribes policies for
acquiring environmentally preferable
products and services.
[66 FR 65353, Dec. 18, 2001]
23.701 Definition.
Biobased product, as used in this subpart, means a commercial or industrial
product (other than food or feed) that
utilizes biological products or renewable domestic agricultural (plant, animal, and marine) or forestry materials.
[65 FR 36020, June 6, 2000]
23.702 Authorities.
(a) Resource Conservation and Recovery Act (RCRA) (42 U.S.C. 6901, et seq.).
(b) National Energy Conservation
Policy Act (42 U.S.C. 8262g).
(c) Pollution Prevention Act of 1990
(42 U.S.C. 13101, et seq.).
(d) Executive Order 13148 of April 21,
2000, Greening the Government through
Leadership in Environmental Management.
(e) Executive Order 13101 of September 14, 1998, Greening the Government through Waste Prevention, Recycling, and Federal Acquisition.
(f) Executive Order 13123 of June 3,
1999, Greening the Government through
Efficient Energy Management.
services (based on EPA-issued guidance).
(2) Promote energy-efficiency and
water conservation.
(3) Eliminate or reduce the generation of hazardous waste and the need
for special material processing (including special handling, storage, treatment, and disposal).
(4) Promote the use of nonhazardous
and recovered materials.
(5) Realize life-cycle cost savings.
(6) Promote cost-effective waste reduction when creating plans, drawings,
specifications, standards, and other
product descriptions authorizing material substitutions, extensions of shelflife, and process improvements.
(7) Consider the use of biobased products.
[65 FR 36020, June 6, 2000, as amended at 66
FR 65353, Dec. 18, 2001]
23.704 Application to Governmentowned or -leased facilities.
Executive Order 13101, Section 701,
requires that contracts for contractor
operation of a Government-owned or
-leased facility and contracts for support services at a Government-owned
or -operated facility include provisions
that obligate the contractor to comply
with the requirements of the order.
Compliance includes developing programs to promote and implement costeffective waste reduction and affirmative procurement programs required by
42 U.S.C. 6962 for all products designated in EPA’s Comprehensive Procurement Guideline (40 CFR part 247).
[65 FR 36020, June 6, 2000]
[60 FR 28497, May 31, 1995, as amended at 65
FR 36020, June 6, 2000; 66 FR 65353, Dec. 18,
2001; 68 FR 43869, July 24, 2003]
23.705
23.703 Policy.
Agencies must—
(a) Implement cost-effective contracting preference programs promoting energy-efficiency, water conservation, and the acquisition of environmentally preferable products and
services; and
(b) Employ acquisition strategies
that affirmatively implement the following environmental objectives:
(1) Maximize the utilization of environmentally preferable products and
[65 FR 36020, June 6, 2000]
Contract clause.
Insert the clause at 52.223–10, Waste
Reduction Program, in all solicitations
and contracts for contractor operation
of Government-owned or -leased facilities and all solicitations and contracts
for support services at Governmentowned or -operated facilities.
Subpart 23.8—Ozone-Depleting
Substances
SOURCE: 60 FR 28500, May 31, 1995, unless
otherwise noted.
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23.800
23.800
48 CFR Ch. 1 (10–1–03 Edition)
Scope of subpart.
23.804
This subpart sets forth policies and
procedures for the acquisition of items
which contain, use, or are manufactured with ozone-depleting substances.
[60 FR 28500, May 31, 1995, as amended at 61
FR 31645, June 20, 1996]
23.801
Authorities.
(a) Title VI of the Clean Air Act (42
U.S.C. 7671, et seq.).
(b) Executive Order 13148 of April 21,
2000, Greening the Government through
Leadership in Environmental Management.
(c) Environmental Protection Agency
(EPA) regulations, Protection of Stratospheric Ozone (40 CFR part 82).
[60 FR 28500, May 31, 1995, as amended at 68
FR 43869, July 24, 2003]
23.802
[Reserved]
23.803
Policy.
(a) It is the policy of the Federal
Government that Federal agencies:
(1) Implement cost-effective programs to minimize the procurement of
materials and substances that contribute to the depletion of stratospheric ozone; and
(2) Give preference to the procurement of alternative chemicals, products, and manufacturing processes that
reduce overall risks to human health
and the environment by lessening the
depletion of ozone in the upper atmosphere.
(b) In preparing specifications and
purchase descriptions, and in the acquisition of supplies and services, agencies shall:
(1) Comply with the requirements of
Title VI of the Clean Air Act, Executive Order 13148, and 40 CFR 82.84(a) (2),
(3), (4), and (5); and
(2) Substitute safe alternatives to
ozone-depleting substances, as identified under 42 U.S.C. 7671k, to the maximum extent practicable, as provided
in 40 CFR 82.84(a)(1), except in the case
of Class I substances being used for
specified essential uses, as identified
under 40 CFR 82.4(r).
[60 FR 28500, May 31, 1995, as amended at 61
FR 31645, June 20, 1996; 68 FR 43869, July 24,
2003]
Contract clauses.
Except for contracts that will be performed outside the United States and
its outlying areas, insert the clause at:
(a) 52.223–11, Ozone-Depleting Substances, in solicitations and contracts
for ozone-depleting substances or for
supplies that may contain or be manufactured with ozone-depleting substances.
(b) 52.223–12, Refrigeration Equipment and Air Conditioners, in solicitations and contracts for services when
the contract includes the maintenance,
repair, or disposal of any equipment or
appliance using ozone-depleting substances as a refrigerant, such as air
conditioners, including motor vehicles,
refrigerators, chillers, or freezers.
[61 FR 31645, June 20, 1996, as amended at 68
FR 28083, May 22, 2003]
Subpart 23.9—Contractor Compliance With Toxic Chemical Release Reporting
SOURCE: 60 FR 55307, Oct. 30, 1995, unless
otherwise noted.
23.901
Purpose.
This subpart implements the requirements of Executive Order (E.O.) 13148 of
April 21, 2000, Greening the Government through Leadership in Environmental Management.
[68 FR 43869, July 24, 2003]
23.902
General.
(a) The Emergency Planning and
Community Right-to-Know Act of 1986
(EPCRA) and the Pollution Prevention
Act of 1990 (PPA) established programs
to protect public health and the environment by providing the public with
important information on the toxic
chemicals being released by manufacturing facilities into the air, land, and
water in its communities.
(b) Under EPCRA section 313 (42
U.S.C. 11023), and PPA section 6607 (42
U.S.C. 13106), the owner or operator of
certain manufacturing facilities is required to submit annual reports on
toxic chemical releases and waste management activities to the Environmental Protection Agency (EPA) and
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Federal Acquisition Regulation
23.905
the States. See EPA’s Web site at http:/
/www.epa.gov/tri for guidance.
[60 FR 55307, Oct. 30, 1995, as amended at 61
FR 41474, Aug. 8, 1996; 68 FR 43869, July 24,
2003]
23.903
Applicability.
(a) This subpart applies to all competitive contracts expected to exceed
$100,000 and competitive 8(a) contracts.
(b) This subpart does not apply to—
(1) Acquisitions of commercial items
as defined in part 2; or
(2) Contractor facilities located outside the United States and its outlying
areas.
[60 FR 55307, Oct. 30, 1995, as amended at 61
FR 41474, Aug. 8, 1996; 68 FR 28083, May 22,
2003; 68 FR 43869, July 24, 2003]
23.904
Policy.
(a) It is the policy of the Government
to purchase supplies and services that
have been produced with a minimum
adverse impact on community health
and the environment.
(b) Federal agencies, to the greatest
extent practicable, shall contract with
companies that report in a public manner on toxic chemicals released to the
environment.
[60 FR 55307, Oct. 30, 1995. Redesignated at 68
FR 43869, July 24, 2003]
23.905
Requirements.
(a) E.O. 13148 requires that solicitations for competitive contracts expected to exceed $100,000 include, to the
maximum extent practicable, as an
award eligibility criterion, a certification by an offeror that, if awarded a
contract, either—
(1) As the owner or operator of facilities to be used in the performance of
the contract that are subject to Form
R filing and reporting requirements,
the offeror will file, and will continue
to file throughout the life of the contract, for such facilities, the Toxic
Chemical Release Inventory Form
(Form R) as described in EPCRA sections 313 (a) and (g) and PPA section
6607; or––
(2) Facilities to be used in the performance of the contract are exempt
from Form R filing and reporting requirements because the facilities—
(i) Do not manufacture, process, or
otherwise use any toxic chemicals listed under section 313(c) of EPCRA, 42
U.S.C. 11023(c);–––
(ii) Do not have 10 or more full-time
employees as specified in section
313(b)(1)(A) of EPCRA, 42 U.S.C.
11023(b)(1)(A);–––
(iii) Do not meet the reporting
thresholds of toxic chemicals established under section 313(f) of EPCRA, 42
U.S.C. 11023(f) (including the alternate
thresholds at 40 CFR 372.27, provided an
appropriate certification form has been
filed with EPA);–––
(iv) Do not fall within the following
Standard
Industrial
Classification
(SIC) codes or their corresponding
North American Industry Classification System sectors:
(A) Major group code 10 (except 1011,
1081, and 1094.
(B) Major group code 12 (except 1241).
(C) Major group codes 20 through 39.
(D) Industry code 4911, 4931, or 4939
(limited to facilities that combust coal
and/or oil for the purpose of generating
power for distribution in commerce).
(E) Industry code 4953 (limited to facilities regulated under the Resource
Conservation and Recovery Act, Subtitle C (42 U.S.C. 6921, et seq.), or 5169,
or 5171, or 7389 (limited to facilities primarily engaged in solvent recovery
services on a contract or fee basis); or
(v) Are not located in the United
States and its outlying areas.
(b) A determination that it is not
practicable to include the solicitation
provision at 52.223–13, Certification of
Toxic Chemical Release Reporting, in a
solicitation or class of solicitations
shall be approved by a procurement official at a level no lower than the head
of the contracting activity. Prior to
making such a determination for a solicitation or class of solicitations with
an estimated value in excess of $500,000
(including all options), the agency
shall consult with the Environmental
Protection Agency, Director, Environmental Assistance Division, Office of
Pollution Prevention and Toxic Substances (Mail Code 7408), Washington,
DC 20460.–
(c) Award shall not be made to
offerors who do not certify in accordance with paragraph (a) of this section
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23.906
48 CFR Ch. 1 (10–1–03 Edition)
when the provision at 52.223–13, Certification of Toxic Chemical Release Reporting, is included in the solicitation.
If facilities to be used by the offeror in
the performance of the contract are
not subject to Form R filing and reporting requirements and the offeror
fails to check the appropriate box(es)
in 52.223–13, Certification of Toxic
Chemical Release Reporting, such failure shall be considered a minor informality or irregularity.
(d) The contracting officer shall cooperate with EPA representatives and
provide such advice and assistance as
may be required to aid EPA in the performance of its responsibilities under
E.O. 13148.
(e) EPA, upon determining that a
contractor is not filing the necessary
forms or is filing incomplete information, may recommend to the head of
the contracting activity that the contract be terminated for convenience.
The head of the contracting activity
shall consider the EPA recommendation and determine if termination or
some other action is appropriate.
[60 FR 55307, Oct. 30, 1995, as amended at 61
FR 41474, Aug. 8, 1996; 65 FR 46058, July 26,
2000; 68 FR 28083, May 22, 2003. Redesignated
and amended at 68 FR 43869, July 24, 2003]
23.906 Solicitation provision and contract clause.
Except for acquisitions of commercial items as defined in part 2, the contracting officer shall—
(a) Insert the provision at 52.223–13,
Certification of Toxic Chemical Release Reporting, in all solicitations for
competitive contracts expected to exceed $100,000 and competitive 8(a) contracts, unless it has been determined in
accordance with 23.905(b) that to do so
is not practicable; and
(b) When the solicitation contains
the provision at 52.223–13, Certification
of Toxic Chemical Release Reporting,
insert the clause at 52.223–14, Toxic
Chemical Release Reporting, in the resulting contract, if the contract is expected to exceed $100,000.
[60 FR 55307, Oct. 30, 1995, as amended at 61
FR 41474, Aug. 8, 1996. Redesignated and
amended at 68 FR 43869, July 24, 2003]
Subpart 23.10—Federal Compliance
With
Right-To-Know
Laws and Pollution Prevention
Requirements
SOURCE: 68 FR 43869, July 24, 2003, unless
otherwise noted.
23.1000 Scope.
This subpart prescribes policies and
procedures for obtaining information
needed for Government—
(a) Compliance with right-to-know
laws and pollution prevention requirements;
(b) Implementation of an environmental management system (EMS) at
a Federal facility; and
(c) Completion of facility compliance
audits (FCAs) at a Federal facility.
23.1001 Authorities.
(a) Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. 11001–11050 (EPCRA).
(b) Pollution Prevention Act of 1990,
42 U.S.C. 13101–13109 (PPA).
(c) Executive Order 13148 of April 21,
2000, Greening the Government through
Leadership in Environmental Management.
23.1002 Applicability.
The requirements of this subpart
apply to facilities owned or operated by
an agency in the customs territory of
the United States.
23.1003 Definitions.
As used in this subpart—
Federal agency means an executive
agency (see 2.101).
Priority chemical means a chemical
identified by the Interagency Environmental Leadership Workgroup or, alternatively, by an agency pursuant to
section 503 of Executive Order 13148 of
April 21, 2000, Greening the Government through Leadership in Environmental Management.
23.1004 Requirements.
(a) E.O. 13148 requires Federal facilities to comply with the provisions of
EPCRA and PPA.
(b) Pursuant to E.O. 13148, and any
agency
implementing
procedures,
every new contract that provides for
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Federal Acquisition Regulation
24.101
performance on a Federal facility shall
require the contractor to provide information necessary for the Federal agency to comply with the—
(1) Emergency planning and toxic release
reporting
requirements
in
EPCRA, PPA, and E.O. 13148;
(2) Toxic chemical, priority chemical,
and hazardous substance release and
use reduction goals of sections 502 and
503 of Executive Order 13148; and
(3) Requirements for EMSs and FCAs
if the place of performance is at a Federal facility designated by the agency.
23.1005
Contract clause.
(a) Insert the clause at 52.223–5, Pollution Prevention and Right-to-Know
Information, in solicitations and contracts that provide for performance, in
whole or in part, on a Federal facility.
(b) Use the clause with its Alternate
I if the contract provides for contractor—
(1) Operation or maintenance of a
Federal facility at which the agency
has implemented or plans to implement an EMS; or
(2) Activities and operations—
(i) To be performed at a Governmentoperated Federal facility that has implemented or plans to implement an
EMS; and
(ii) That the agency has determined
are covered within the EMS.
(c) Use the clause with its Alternate
II if—
(1) The contract provides for contractor activities on a Federal facility;
and
(2) The agency has determined that
the contractor activities should be included within the FCA or an environmental management system audit.
PART 24—PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION
Sec.
24.000
Scope of part.
Subpart 24.1—Protection of Individual
Privacy
24.101
24.102
24.103
24.104
Definitions.
General.
Procedures.
Contract clauses.
Subpart 24.2—Freedom of Information Act
24.201
24.202
24.203
Authority.
Prohibitions.
Policy.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42277, Sept. 19, 1983, unless
otherwise noted.
24.000
Scope of part.
This part prescribes policies and procedures that apply requirements of the
Privacy Act of 1974 (5 U.S.C. 552a) (the
Act) and OMB Circular No. A-130, December 12, 1985, to Government contracts and cites the Freedom of Information Act (5 U.S.C. 552, as amended.)
[48 FR 42277, Sept. 19, 1983, as amended at 55
FR 38517, Sept. 18, 1990]
Subpart 24.1—Protection of
Individual Privacy
24.101
Definitions.
As used in this subpart—
Agency means any executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch of the
Government (including the Executive
Office of the President), or any independent regulatory agency.
Individual means a citizen of the
United States or an alien lawfully admitted for permanent residence.
Maintain means maintain, collect,
use, or disseminate.
Operation of a system of records means
performance of any of the activities associated with maintaining the system
of records, including the collection,
use, and dissemination of records.
Record means any item, collection, or
grouping of information about an individual that is maintained by an agency, including, but not limited to, education, financial transactions, medical
history, and criminal or employment
history, and that contains the individual’s name, or the identifying number,
symbol, or other identifying particular
assigned to the individual, such as a
fingerprint or voiceprint or a photograph.
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24.102
48 CFR Ch. 1 (10–1–03 Edition)
System of records on individuals means
a group of any records under the control of any agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual.
[48 FR 42277, Sept. 19, 1983, as amended at 66
FR 2130, Jan. 10, 2001]
24.102 General.
(a) The Act requires that when an
agency contracts for the design, development, or operation of a system of
records on individuals on behalf of the
agency to accomplish an agency function the agency must apply the requirements of the Act to the contractor and its employees working on
the contract.
(b) An agency officer or employee
may be criminally liable for violations
of the Act. When the contract provides
for operation of a system of records on
individuals, contractors and their employees are considered employees of
the agency for purposes of the criminal
penalties of the Act.
(c) If a contract specifically provides
for the design, development, or operation of a system of records on individuals on behalf of an agency to accomplish an agency function, the agency
must apply the requirements of the Act
to the contractor and its employees
working on the contract. The system of
records operated under the contract is
deemed to be maintained by the agency
and is subject to the Act.
(d) Agencies, which within the limits
of their authorities, fail to require that
systems of records on individuals operated on their behalf under contracts be
operated in conformance with the Act
may be civilly liable to individuals injured as a consequence of any subsequent failure to maintain records in
conformance with the Act.
24.103 Procedures.
(a) The contracting officer shall review requirements to determine whether the contract will involve the design,
development, or operation of a system
of records on individuals to accomplish
an agency function.
(b) If one or more of those tasks will
be required, the contracting officer
shall—
(1) Ensure that the contract work
statement specifically identifies the
system of records on individuals and
the design, development, or operation
work to be performed; and
(2) Make available, in accordance
with agency procedures, agency rules
and regulation implementing the Act.
24.104 Contract clauses.
When the design, development, or operation of a system of records on individuals is required to accomplish an
agency function, the contracting officer shall insert the following clauses in
solicitations and contracts:
(a) The clause at 52.224–1, Privacy
Act Notification.
(b) The clause at 52.224–2, Privacy
Act.
Subpart 24.2—Freedom of
Information Act
24.201 Authority.
The Freedom of Information Act (5
U.S.C. 552, as amended) provides that
information is to be made available to
the public either by (a) publication in
the FEDERAL REGISTER; (b) providing
an opportunity to read and copy
records at convenient locations; or (c)
upon request, providing a copy of a reasonably described record.
24.202 Prohibitions.
(a) A proposal in the possession or
control of the Government, submitted
in response to a competitive solicitation, shall not be made available to
any person under the Freedom of Information Act. This prohibition does not
apply to a proposal, or any part of a
proposal, that is set forth or incorporated by reference in a contract between the Government and the contractor that submitted the proposal.
(See 10 U.S.C. 2305(g) and 41 U.S.C.
253b(m).)
(b) No agency shall disclose any information obtained pursuant to 15.403–
3(b) that is exempt from disclosure
under the Freedom of Information Act.
(See 10 U.S.C. 2306a(d)(2)(C) and 41
U.S.C. 254b(d)(2)(C).)
(c) A dispute resolution communication that is between a neutral person
and a party to alternative dispute resolution proceedings, and that may not
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Federal Acquisition Regulation
Pt. 25
be disclosed under 5 U.S.C. 574, is exempt from disclosure under the Freedom of Information Act (5 U.S.C.
552(b)(3)).
25.101
25.102
25.103
25.104
25.105
[62 FR 257, Jan. 2, 1997, as amended at 62 FR
51270, Sept. 30, 1997; 63 FR 58594, Oct. 30, 1998;
68 FR 56689, Oct. 1, 2003]
General.
Policy.
Exceptions.
Nonavailable articles.
Determining reasonableness of cost.
Subpart 25.2—Buy American Act—
Construction Materials
24.203 Policy.
(a) The Act specifies, among other
things, how agencies shall make their
records available upon public request,
imposes strict time standards for agency responses, and exempts certain
records from public disclosure. Each
agency’s implementation of these requirements is located in its respective
title of the Code of Federal Regulations and referenced in subpart 24.2 of
its implementing acquisition regulations.
(b) Contracting officers may receive
requests for records that may be exempted from mandatory public disclosure. The exemptions most often applicable are those relating to classified
information, to trade secrets and confidential commercial or financial information, to interagency or intra-agency
memoranda, or to personal and medical
information pertaining to an individual. Since these requests often involve complex issues requiring an indepth knowledge of a large and increasing body of court rulings and policy
guidance, contracting officers are cautioned to comply with the implementing regulations of their agency
and to obtain necessary guidance from
the agency officials having Freedom of
Information Act responsibility. If additional assistance is needed, authorized
agency officials may contact the Department of Justice, Office of Information and Privacy.
25.200 Scope of subpart.
25.201 Policy.
25.202 Exceptions.
25.203 Preaward determinations.
25.204 Evaluating offers of foreign construction material.
25.205 Postaward determinations.
25.206 Noncompliance.
[48 FR 42277, Sept. 19, 1983, as amended at 51
FR 31426, Sept. 3, 1986. Redesignated at 62 FR
257, Jan. 2, 1997]
Subpart 25.7—Prohibited Sources
Subpart 25.3 [Reserved]
Subpart 25.4—Trade Agreements
25.400 Scope of subpart.
25.401 Exceptions.
25.402 General.
25.403 Trade Agreements Act.
25.404 Caribbean Basin Trade Initiative.
25.405 North American Free Trade Agreement (NAFTA).
25.406 Israeli Trade Act.
25.407 Agreement on Trade in Civil Aircraft.
25.408 Procedures.
Subpart 25.5—Evaluating Foreign Offers—
Supply Contracts
25.501 General.
25.502 Application.
25.503 Group offers.
25.504 Evaluation examples.
25.504–1 Buy American Act.
25.504–2 Trade Agreements Act/Caribbean
Basin Trade Initiative/NAFTA.
25.504–3 NAFTA/Israeli Trade Act.
25.504–4 Group award basis.
Subpart 25.6—Trade Sanctions
25.600
25.601
25.602
25.701
25.702
PART 25—FOREIGN ACQUISITION
Sec.
25.000
25.001
25.002
25.003
Restrictions.
Source of further information.
Subpart 25.8—Other International
Agreements and Coordination
25.801
25.802
Scope of part.
General.
Applicability of subparts.
Definitions.
General.
Procedures.
Subpart 25.9—Customs and Duties
Subpart 25.1—Buy American Act—Supplies
25.100
Scope of subpart.
Policy.
Exceptions.
Scope of subpart.
25.900
25.901
25.902
Scope of subpart.
Policy.
Procedures.
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25.000
25.903
48 CFR Ch. 1 (10–1–03 Edition)
Exempted supplies.
Subpart 25.10—Additional Foreign
Acquisition Regulations
25.1001 Waiver of right to examination of
records.
25.1002 Use of foreign currency.
Subpart 25.11—Solicitation Provisions and
Contract Clauses
25.1101
25.1102
25.1103
Acquisition of supplies.
Acquisition of construction.
Other provisions and clauses.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct.
1, 2003, the authority citation for Part 25 was
revised, effective Oct. 31, 2003. For the convenience of the user, the revised text is set
forth below:
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 64 FR 72419, Dec. 27, 1999, unless
otherwise noted.
25.000
Scope of part.
This part provides policies and procedures for acquiring foreign supplies,
services, and construction materials. It
implements the Buy American Act,
trade agreements, and other laws and
regulations.
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21534, Apr. 30, 2002]
25.001
General.
(a) The Buy American Act—
(1) Restricts the purchase of supplies,
that are not domestic end products, for
use within the United States. A foreign
end product may be purchased if the
contracting officer determines that the
price of the lowest domestic offer is unreasonable or if another exception applies (see Subpart 25.1); and
(2) Requires, with some exceptions,
the use of only domestic construction
materials in contracts for construction
in the United States (see Subpart 25.2).
(b) The restrictions in the Buy American Act are not applicable in acquisitions subject to certain trade agreements (see Subpart 25.4). In these acquisitions, end products and construction materials from certain countries
receive nondiscriminatory treatment
in evaluation with domestic offers.
Generally, the dollar value of the acquisition determines which of the trade
agreements applies. Exceptions to the
applicability of the trade agreements
are described in Subpart 25.4.
(c) The test to determine the country
of origin for an end product under the
trade agreements is different from the
test to determine the country of origin
for an end product under the Buy
American Act (see the various country
‘‘end product’’ definitions in 25.003).
The Buy American Act uses a two-part
test to define a ‘‘domestic end product’’
(manufacture in the United States and
a formula based on cost of domestic
components). Under the trade agreements, the test to determine country
of
origin
is
‘‘substantial
transformation’’ (i.e., transforming an article into a new and different article of
commerce, with a name, character, or
use distinct from the original article).
(d) On April 22, 1992, the President
made a determination under section 305
of the Trade Agreements Act to impose
sanctions against some European
Union countries for discriminating
against U.S. products and services (see
Subpart 25.6).
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21535, Apr. 30, 2002]
25.002 Applicability of subparts.
The following table shows the applicability of the subparts. Subpart 25.5
provides comprehensive procedures for
offer evaluation and examples.
Supplies for use
Subpart
25.1
25.2
25.3
25.4
25.5
25.6
.....
.....
.....
.....
.....
.....
Buy American Act—Supplies .............................................
Buy American Act—Construction Materials ......................
[Reserved] ..........................................................................
Trade Agreements .............................................................
Evaluating Foreign Offers—Supply Contracts ...................
Trade Sanctions .................................................................
Construction
Services
performed
Inside
U.S.
Outside
U.S.
Inside
U.S.
Outside
U.S.
Inside
U.S.
Outside
U.S.
X
............
............
X
X
X
............
............
—
X
X
X
............
X
............
X
............
X
............
............
—
X
............
X
............
............
............
X
............
X
............
............
............
X
............
X
464
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Federal Acquisition Regulation
25.003
Supplies for use
Subpart
25.7
25.8
25.9
25.10
25.11
.....
.....
.....
.....
.....
Inside
U.S.
Prohibited Sources ............................................................
Other International Agreements and Coordination ............
Customs and Duties ..........................................................
Additional Foreign Acquisition Regulations .......................
Solicitation Provisions and Contract Clauses ....................
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21535, Apr. 30, 2002]
25.003
Definitions.
As used in this part—
Canadian end product means an article that—
(1) Is wholly the growth, product, or
manufacture of Canada; or
(2) In the case of an article that consists in whole or in part of materials
from another country, has been substantially transformed in Canada into
a new and different article of commerce with a name, character, or use
distinct from that of the article or articles from which it was transformed.
The term refers to a product offered for
purchase under a supply contract, but
for purposes of calculating the value of
the end product includes services (except transportation services) incidental to the article, provided that the
value of those incidental services does
not exceed that of the article itself.
Caribbean Basin country means any of
the following countries: Antigua and
Barbuda, Aruba, Bahamas, Barbados,
Belize, British Virgin Islands, Costa
Rica, Dominica, El Salvador, Grenada,
Guatemala, Guyana, Haiti, Honduras,
Jamaica, Montserrat, Netherlands Antilles, Nicaragua, St. Kitts and Nevis,
St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago.
Caribbean Basin country end product—
(1) Means an article that—
(i)(A) Is wholly the growth, product,
or manufacture of a Caribbean Basin
country; or
(B) In the case of an article that consists in whole or in part of materials
from another country, has been substantially transformed in a Caribbean
Basin country into a new and different
article of commerce with a name, character, or use distinct from that of the
X
X
X
X
X
Outside
U.S.
X
X
............
X
X
Construction
Services
performed
Inside
U.S.
Outside
U.S.
Inside
U.S.
Outside
U.S.
X
............
............
X
X
X
X
............
X
X
X
............
............
X
X
X
X
............
X
X
article or articles from which it was
transformed; and
(ii) Is not excluded from duty-free
treatment for Caribbean countries
under 19 U.S.C. 2703(b).
(A) For this reason, the following articles are not Caribbean Basin country
end products:
(1) Tuna, prepared or preserved in
any manner in airtight containers.
(2) Petroleum, or any product derived
from petroleum.
(3) Watches and watch parts (including cases, bracelets, and straps) of
whatever type including, but not limited to, mechanical, quartz digital, or
quartz analog, if such watches or watch
parts contain any material that is the
product of any country to which the
Harmonized Tariff Schedule of the
United States (HTSUS) column 2 rates
of duty apply (i.e., Afghanistan, Cuba,
Laos, North Korea, and Vietnam).
(4) Certain of the following: textiles
and apparel articles; footwear, handbags, luggage, flat goods, work gloves,
and leather wearing apparel; or
handloomed, handmade, and folklore
articles.
(B) Access to the HTSUS to determine duty-free status of articles of the
types listed in paragraph (1)(ii)(A)(4) of
this definition is available via the
Internet
at
http://
www.customs.ustreas.gov/impoexpo/
impoexpo.htm. In particular, see the
following:
(1) General Note 3(c), Products Eligible for Special Tariff treatment.
(2) General Note 17, Products of
Countries Designated as Beneficiary
Countries under the United States—
Caribbean Basin Trade Partnership Act
of 2000.
(3) Section XXII, Chapter 98, Subchapter II, Articles Exported and Returned, Advanced or Improved Abroad,
U.S. Note 7(b).
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25.003
48 CFR Ch. 1 (10–1–03 Edition)
(4) Section XXII, Chapter 98, Subchapter XX, Goods Eligible for Special
Tariff Benefits under the United
States-Caribbean Basin Trade Partnership Act; and
(2) Refers to a product offered for
purchase under a supply contract, but
for purposes of calculating the value of
the acquisition, includes services (except transportation services) incidental to the article, provided that the
value of those incidental services does
not exceed that of the article itself.
Civil aircraft and related articles
means—
(1) All aircraft other than aircraft to
be purchased for use by the Department of Defense or the U.S. Coast
Guard;
(2) The engines (and parts and components for incorporation into the engines) of these aircraft;
(3) Any other parts, components, and
subassemblies for incorporation into
the aircraft; and
(4) Any ground flight simulators, and
parts and components of these simulators, for use with respect to the aircraft, whether to be used as original or
replacement equipment in the manufacture, repair, maintenance, rebuilding, modification, or conversion of the
aircraft and without regard to whether
the aircraft or articles receive dutyfree treatment under section 601(a)(2)
of the Trade Agreements Act.
Component means an article, material, or supply incorporated directly
into an end product or construction
material.
Construction material means an article, material, or supply brought to the
construction site by a contractor or
subcontractor for incorporation into
the building or work. The term also includes an item brought to the site
preassembled from articles, materials,
or supplies. However, emergency life
safety systems, such as emergency
lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as
complete systems, are evaluated as a
single and distinct construction material regardless of when or how the individual parts or components of those
systems are delivered to the construction site. Materials purchased directly
by the Government are supplies, not
construction material.
Cost of components means—
(1) For components purchased by the
contractor, the acquisition cost, including transportation costs to the
place of incorporation into the end
product or construction material
(whether or not such costs are paid to
a domestic firm), and any applicable
duty (whether or not a duty-free entry
certificate is issued); or
(2) For components manufactured by
the contractor, all costs associated
with the manufacture of the component, including transportation costs as
described in paragraph (1) of this definition, plus allocable overhead costs,
but excluding profit. Cost of components does not include any costs associated with the manufacture of the end
product.
Designated country means any of the
following countries:
Aruba, Austria, Bangladesh, Belgium,
Benin,
Bhutan,
Botswana,
Burkina Faso, Burundi, Canada, Cape
Verde, Central African Republic, Chad,
Comoros, Denmark, Djibouti, Equatorial Guinea, Finland, France, Gambia, Germany, Greece, Guinea, GuineaBissau, Haiti, Hong Kong, Iceland, Ireland, Israel, Italy, Japan, Kiribati,
Korea, Republic of Lesotho, Liechtenstein,
Luxembourg,
Malawi,
Maldives, Mali, Mozambique, Nepal,
Netherlands, Niger, Norway, Portugal,
Rwanda, Sao Tome and Principe, Sierra Leone, Singapore, Somalia, Spain,
Sweden, Switzerland, Tanzania U.R.,
Togo, Tuvalu, Uganda, United Kingdom, Vanuatu, Western Samoa, Yemen
Designated country end product means
an article that—
(1) Is wholly the growth, product, or
manufacture of a designated country;
or
(2) In the case of an article that consists in whole or in part of materials
from another country, has been substantially transformed in a designated
country into a new and different article of commerce with a name, character, or use distinct from that of the
article or articles from which it was
transformed. The term refers to a product offered for purchase under a supply
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Federal Acquisition Regulation
25.003
contract, but for purposes of calculating the value of the end product includes services (except transportation
services) incidental to the article, provided that the value of those incidental
services does not exceed that of the article itself.
Domestic construction material means—
(1) An unmanufactured construction
material mined or produced in the
United States; or
(2) A construction material manufactured in the United States, if the cost
of its components mined, produced, or
manufactured in the United States exceeds 50 percent of the cost of all its
components. Components of foreign origin of the same class or kind for which
nonavailability determinations have
been made are treated as domestic.
Domestic end product means—
(1) An unmanufactured end product
mined or produced in the United
States; or
(2) An end product manufactured in
the United States, if the cost of its
components mined, produced, or manufactured in the United States exceeds
50 percent of the cost of all its components. Components of foreign origin of
the same class or kind as those that
the agency determines are not mined,
produced, or manufactured in sufficient and reasonably available commercial quantities of a satisfactory
quality are treated as domestic. Scrap
generated, collected, and prepared for
processing in the United States is considered domestic.
Domestic offer means an offer of a domestic end product. When the solicitation specifies that award will be made
on a group of line items, a domestic
offer means an offer where the proposed price of the domestic end products exceeds 50 percent of the total proposed price of the group.
Eligible offer means an offer of an eligible product. When the solicitation
specifies that award will be made on a
group of line items, an eligible offer
means a foreign offer where the combined proposed price of the eligible
products and the domestic end products exceeds 50 percent of the total proposed price of the group.
Eligible product means a foreign end
product that is not subject to discriminatory treatment under the Buy Amer-
ican Act due to applicability of a trade
agreement to a particular acquisition.
End product means those articles,
materials, and supplies to be acquired
for public use.
Foreign construction material means a
construction material other than a domestic construction material.
Foreign contractor means a contractor
or subcontractor organized or existing
under the laws of a country other than
the United States.
Foreign end product means an end
product other than a domestic end
product.
Foreign offer means any offer other
than a domestic offer.
Israeli end product means an article
that—
(1) Is wholly the growth, product, or
manufacture of Israel; or
(2) In the case of an article that consists in whole or in part of materials
from another country, has been substantially transformed in Israel into a
new and different article of commerce
with a name, character, or use distinct
from that of the article or articles
from which it was transformed.
Mexican end product means an article
that—
(1) Is wholly the growth, product, or
manufacture of Mexico; or
(2) In the case of an article that consists in whole or in part of materials
from another country, has been substantially transformed in Mexico into a
new and different article of commerce
with a name, character, or use distinct
from that of the article or articles
from which it was transformed. The
term refers to a product offered for
purchase under a supply contract, but
for purposes of calculating the value of
the end product includes services (except transportation services) incidental to the article, provided that the
value of those incidental services does
not exceed that of the article itself.
Noneligible offer means an offer of a
noneligible product.
Noneligible product means a foreign
end product that is not an eligible
product.
North American Free Trade Agreement
country means Canada or Mexico.
North American Free Trade Agreement
country end product means an article
that—
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25.100
48 CFR Ch. 1 (10–1–03 Edition)
(1) Is wholly the growth, product, or
manufacture of a North American Free
Trade Agreement (NAFTA) country; or
(2) In the case of an article that consists in whole or in part of materials
from another country, has been substantially transformed in a NAFTA
country into a new and different article of commerce with a name, character, or use distinct from that of the
article or articles from which it was
transformed. The term refers to a product offered for purchase under a supply
contract, but for purposes of calculating the value of the end product includes services (except transportation
services) incidental to the article, provided that the value of those incidental
services does not exceed that of the article itself.
Sanctioned European Union country
construction means construction to be
performed in a sanctioned European
Union member state.
Sanctioned European Union country
end product means an article that—
(1) Is wholly the growth, product, or
manufacture of a sanctioned European
Union (EU) member state; or
(2) In the case of an article that consists in whole or in part of materials
from another country, has been substantially transformed in a sanctioned
EU member state into a new and different article of commerce with a
name, character, or use distinct from
that of the article or articles from
which it was transformed. The term refers to a product offered for purchase
under a supply contract, but for purposes of calculating the value of the
end product includes services (except
transportation services) incidental to
the article, provided that the value of
these incidental services does not exceed that of the article itself.
Sanctioned European Union country
services means services to be performed
in a sanctioned European Union member state.
Sanctioned European Union member
state means Austria, Belgium, Denmark, Finland, France, Ireland, Italy,
Luxembourg, the Netherlands, Sweden,
or the United Kingdom.
United States means the 50 States, the
District of Columbia, and outlying
areas.
U.S.-made end product means an article that is mined, produced, or manufactured in the United States or that is
substantially
transformed
in
the
United States into a new and different
article of commerce with a name, character, or use distinct from that of the
article or articles from which it was
transformed.
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 24322, Apr. 25, 2000; 66 FR 65371, Dec. 18,
2001; 66 FR 65350, 65371, Dec. 18, 2001; 67 FR
6117, Feb. 8, 2002; 67 FR 21535, Apr. 30, 2002; 67
FR 70520, Nov. 22, 2002; 68 FR 28083, May 22,
2003]
EFFECTIVE DATE NOTE: At 68 FR 56685, Oct.
1, 2003, § 25.003 was amended by adding the
words ‘‘Dominican Republic’’ after the word
‘‘Dominica’’ in the definition for ‘‘Caribbean
Basin country’’, effective Oct. 31, 2003.
Subpart 25.1—Buy American
Act—Supplies
25.100
Scope of subpart.
This subpart implements the Buy
American Act (41 U.S.C. 10a–10d) and
Executive Order 10582, December 17,
1954. It applies to supplies acquired for
use in the United States, including supplies acquired under contracts set aside
for small business concerns, if—
(a) The supply contract exceeds the
micro-purchase threshold; or
(b) The supply portion of a contract
for services that involves the furnishing of supplies (e.g., lease) exceeds
the micro-purchase threshold.
[64 FR 72419, Dec. 27, 1999; 65 FR 4633, Jan. 31,
2000]
25.101
General.
(a) The Buy American Act restricts
the purchase of supplies that are not
domestic end products. For manufactured end products, the Buy American
Act uses a two-part test to define a domestic end product.
(1) The article must be manufactured
in the United States; and
(2) The cost of domestic components
must exceed 50 percent of the cost of
all the components.
(b) The Buy American Act applies to
small business set-asides. A manufactured product of a small business concern is a U.S.-made end product, but is
not a domestic end product unless it
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Federal Acquisition Regulation
25.104
meets the component test in paragraph
(a)(2) of this section.
(c) Exceptions that allow the purchase of a foreign end product are listed at 25.103. The unreasonable cost exception is implemented through the
use of an evaluation factor applied to
low foreign offers that are not eligible
offers. The evaluation factor is not
used to provide a preference for one
foreign offer over another. Evaluation
procedures and examples are provided
in Subpart 25.5.
25.102
Policy.
Except as provided in 25.103, acquire
only domestic end products for public
use inside the United States.
25.103
Exceptions.
When one of the following exceptions
applies, the contracting officer may acquire a foreign end product without regard to the restrictions of the Buy
American Act:
(a) Public interest. The head of the
agency may make a determination
that domestic preference would be inconsistent with the public interest.
This exception applies when an agency
has an agreement with a foreign government that provides a blanket exception to the Buy American Act.
(b) Nonavailability. (1) A nonavailability determination has been made
for the articles listed in 25.104.
(2)(i) The head of the contracting activity may make a determination that
an article, material, or supply is not
mined, produced, or manufactured in
the United States in sufficient and reasonably available commercial quantities of a satisfactory quality.
(ii) If the contracting officer considers that the nonavailability of an
article is likely to affect future acquisitions, the contracting officer may
submit a copy of the determination and
supporting documentation to the appropriate council identified in 1.201–1 in
accordance with agency procedures, for
possible addition to the list in 25.104.
(3) A written determination is not required if all of the following conditions
are present:
(i) The acquisition was conducted
through use of full and open competition.
(ii) The acquisition was synopsized in
accordance with 5.201.
(iii) No offer for a domestic end product was received.
(c) Unreasonable cost. The contracting
officer may determine that the cost of
a domestic end product would be unreasonable, in accordance with 25.105 and
Subpart 25.5.
(d) Resale. The contracting officer
may purchase foreign end products specifically for commissary resale.
25.104 Nonavailable articles.
(a) The following articles have been
determined to be nonavailable in accordance with 25.103(b):
Acetylene, black.
Agar, bulk.
Anise.
Antimony, as metal or oxide.
Asbestos, amosite, chrysotile, and crocidolite.
Bananas.
Bauxite.
Beef, corned, canned.
Beef extract.
Bephenium hydroxynapthoate.
Bismuth.
Books, trade, text, technical, or scientific;
newspapers; pamphlets; magazines; periodicals; printed briefs and films; not printed in the United States and for which domestic editions are not available.
Brazil nuts, unroasted.
Cadmium, ores and flue dust.
Calcium cyanamide.
Capers.
Cashew nuts.
Castor beans and castor oil.
Chalk, English.
Chestnuts.
Chicle.
Chrome ore or chromite.
Cinchona bark.
Cobalt, in cathodes, rondelles, or other primary ore and metal forms.
Cocoa beans.
Coconut and coconut meat, unsweetened, in
shredded, desiccated, or similarly prepared
form.
Coffee, raw or green bean.
Colchicine alkaloid, raw.
Copra.
Cork, wood or bark and waste.
Cover glass, microscope slide.
Crane rail (85-pound per foot).
Cryolite, natural.
Dammar gum.
Diamonds, industrial, stones and abrasives.
Emetine, bulk.
Ergot, crude.
Erythrityl tetranitrate.
Fair linen, altar.
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25.105
48 CFR Ch. 1 (10–1–03 Edition)
Fibers of the following types: abaca, abace,
agave, coir, flax, jute, jute burlaps, palmyra, and sisal.
Goat and kidskins.
Graphite, natural, crystalline, crucible
grade.
Hand file sets (Swiss pattern).
Handsewing needles.
Hemp yarn.
Hog bristles for brushes.
Hyoscine, bulk.
Ipecac, root.
Iodine, crude.
Kaurigum.
Lac.
Leather, sheepskin, hair type.
Lavender oil.
Manganese.
Menthol, natural bulk.
Mica.
Microprocessor chips (brought onto a Government construction site as separate
units for incorporation into building systems during construction or repair and alteration of real property).
Nickel, primary, in ingots, pigs, shots, cathodes, or similar forms; nickel oxide and
nickel salts.
Nitroguanidine (also known as picrite).
Nux vomica, crude.
Oiticica oil.
Olive oil.
Olives (green), pitted or unpitted, or stuffed,
in bulk.
Opium, crude.
Oranges, mandarin, canned.
Petroleum, crude oil, unfinished oils, and
finished products.
Pine needle oil.
Platinum and related group metals, refined,
as sponge, powder, ingots, or cast bars.
Pyrethrum flowers.
Quartz crystals.
Quebracho.
Quinidine.
Quinine.
Rabbit fur felt.
Radium salts, source and special nuclear materials.
Rosettes.
Rubber, crude and latex.
Rutile.
Santonin, crude.
Secretin.
Shellac.
Silk, raw and unmanufactured.
Spare and replacement parts for equipment
of foreign manufacture, and for which domestic parts are not available.
Spices and herbs, in bulk.
Sugars, raw.
Swords and scabbards.
Talc, block, steatite.
Tantalum.
Tapioca flour and cassava.
Tartar, crude; tartaric acid and cream of tartar in bulk.
Tea in bulk.
Thread, metallic (gold).
Thyme oil.
Tin in bars, blocks, and pigs.
Triprolidine hydrochloride.
Tungsten.
Vanilla beans.
Venom, cobra.
Wax, carnauba.
Wire glass.
Woods; logs, veneer, and lumber of the following species: Alaskan yellow cedar,
angelique, balsa, ekki, greenheart, lignum
vitae, mahogany, and teak.
Yarn, 50 Denier rayon.
(b) The determination in paragraph
(a) of this section does not apply if the
contracting officer learns before the
time designated for receipt of bids in
sealed bidding or final offers in negotiation that an article on the list is
available domestically in sufficient and
reasonably available quantities of a
satisfactory quality. The contracting
officer must amend the solicitation if
purchasing the article, or if purchasing
an end product that could contain such
an article as a component, and must
specify in all new solicitations that the
article is available domestically and
that offerors and contractors may not
treat foreign components of the same
class or kind as domestic components.
In addition, the contracting officer
must submit a copy of supporting documentation to the appropriate council
identified in 1.201–1 in accordance with
agency procedures, for possible removal of the article from the list.
25.105 Determining reasonableness of
cost.
(a) The contracting officer—
(1) Must use the evaluation factors in
paragraph (b) of this section unless the
head of the agency makes a written determination that the use of higher factors is more appropriate. If the determination applies to all agency acquisitions, the agency evaluation factors
must be published in agency regulations; and
(2) Must not apply evaluation factors
to offers of eligible products if the acquisition is subject to a trade agreement under Subpart 25.4.
(b) If there is a domestic offer that is
not the low offer, and the restrictions
of the Buy American Act apply to the
low offer, the contracting officer must
determine the reasonableness of the
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cost of the domestic offer by adding to
the price of the low offer, inclusive of
duty—
(1) 6 percent, if the lowest domestic
offer is from a large business concern;
or
(2) 12 percent, if the lowest domestic
offer is from a small business concern.
The contracting officer must use this
factor, or another factor established in
agency regulations, in small business
set-asides if the low offer is from a
small business concern offering the
product of a small business concern
that is not a domestic end product (see
Subpart 19.5).
(c) The price of the domestic offer is
reasonable if it does not exceed the
evaluated price of the low offer after
addition of the appropriate evaluation
factor in accordance with paragraph (a)
or (b) of this section. (See evaluation
procedures at Subpart 25.5.)
Subpart 25.2—Buy American
Act—Construction Materials
25.200
Scope of subpart.
This subpart implements the Buy
American Act (41 U.S.C. 10a–10d) and
Executive Order 10582, December 17,
1954. It applies to contracts for the construction, alteration, or repair of any
public building or public work in the
United States.
25.201
Policy.
Except as provided in 25.202, use only
domestic construction materials in
construction contracts performed in
the United States.
25.202
Exceptions.
(a) When one of the following exceptions applies, the contracting officer
may acquire foreign construction materials without regard to the restrictions of the Buy American Act:
(1) Impracticable or inconsistent with
public interest. The head of the agency
may determine that application of the
restrictions of the Buy American Act
to a particular construction material
would be impracticable or would be inconsistent with the public interest.
The public interest exception applies
when an agency has an agreement with
a foreign government that provides a
blanket exception to the Buy American
Act.
(2) Nonavailability. The head of the
contracting activity may determine
that a particular construction material
is not mined, produced, or manufactured in the United States in sufficient
and reasonably available commercial
quantities of a satisfactory quality.
The determinations of nonavailability
of the articles listed at 25.104(a) and
the procedures at 25.104(b) also apply if
any of those articles are acquired as
construction materials.
(3) Unreasonable cost. The contracting
officer concludes that the cost of domestic construction material is unreasonable in accordance with 25.204.
(b) Determination and findings. When a
determination is made for any of the
reasons stated in this section that certain foreign construction materials
may be used, the contracting officer
must list the excepted materials in the
contract. The agency must make the
findings justifying the exception available for public inspection.
(c) Acquisitions under trade agreements.
For construction contracts with an estimated acquisition value of $6,481,000
or more, see 25.403. If the acquisition
value is $7,304,733 or more, also see
25.405.
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, June 6, 2000; 67 FR 56123, Aug. 30,
2002]
25.203
Preaward determinations.
(a) For any acquisition, an offeror
may request from the contracting officer a determination concerning the inapplicability of the Buy American Act
for specifically identified construction
materials. The time for submitting the
request is specified in the solicitation
in paragraph (b) of either 52.225–10 or
52.225–12, whichever applies. The information and supporting data that must
be included in the request are also
specified in the solicitation in paragraphs (c) and (d) of either 52.225–9 or
52.225–11, whichever applies.
(b) Before award, the contracting officer must evaluate all requests based
on the information provided and may
supplement this information with
other readily available information.
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25.204
48 CFR Ch. 1 (10–1–03 Edition)
25.204 Evaluating offers of foreign
construction material.
(a) Offerors proposing to use foreign
construction material other than that
listed by the Government in the applicable clause at 52.225–9, paragraph
(b)(2), or 52.225–11, paragraph (b)(3), or
excepted under the Trade Agreements
Act or NAFTA (paragraph (b)(2) of
52.225–11), must provide the information required by paragraphs (c) and (d)
of the respective clauses.
(b) Unless the head of the agency
specifies a higher percentage, the contracting officer must add to the offered
price 6 percent of the cost of any foreign construction material proposed
for exception from the requirements of
the Buy American Act based on the unreasonable cost of domestic construction materials. In the case of a tie, the
contracting officer must give preference to an offer that does not include
foreign construction material excepted
at the request of the offeror on the
basis of unreasonable cost.
(c) Offerors also may submit alternate offers based on use of equivalent
domestic construction material to
avoid possible rejection of the entire
offer if the Government determines
that an exception permitting use of a
particular foreign construction material does not apply.
(d) If the contracting officer awards a
contract to an offeror that proposed
foreign construction material not listed in the applicable clause in the solicitation (paragraph (b)(2) of 52.225–9, or
paragraph (b)(3) of 52.225–11), the contracting officer must add the excepted
materials to the list in the contract
clause.
25.205 Postaward determinations.
(a) If a contractor requests a determination regarding the inapplicability
of the Buy American Act after contract
award, the contractor must explain
why it could not request the determination before contract award or why
the need for such determination otherwise was not reasonably foreseeable. If
the contracting officer concludes that
the contractor should have made the
request before contract award, the contracting officer may deny the request.
(b) The contracting officer must base
evaluation of any request for a deter-
mination regarding the inapplicability
of the Buy American Act made after
contract award on information required by paragraphs (c) and (d) of the
applicable clause at 52.225–9 or 52.225–11
and/or other readily available information.
(c) If a determination, under 25.202(a),
is made after contract award that an
exception to the Buy American Act applies, the contracting officer must negotiate adequate consideration and
modify the contract to allow use of the
foreign construction material. When
the basis for the exception is the unreasonable price of a domestic construction material, adequate consideration is at least the differential established in 25.202(a) or in accordance with
agency procedures.
25.206 Noncompliance.
The contracting officer must—
(a) Review allegations of Buy American Act violations;
(b) Unless fraud is suspected, notify
the contractor of the apparent unauthorized use of foreign construction
material and request a reply, to include proposed corrective action; and
(c) If the review reveals that a contractor or subcontractor has used foreign construction material without authorization, take appropriate action,
including one or more of the following:
(1) Process a determination concerning the inapplicability of the Buy
American Act in accordance with
25.205.
(2) Consider requiring the removal
and replacement of the unauthorized
foreign construction material.
(3) If removal and replacement of foreign construction material incorporated in a building or work would be
impracticable, cause undue delay, or
otherwise be detrimental to the interests of the Government, the contracting officer may determine in writing that the foreign construction material need not be removed and replaced.
A determination to retain foreign construction material does not constitute
a determination that an exception to
the Buy American Act applies, and this
should be stated in the determination.
Further, a determination to retain foreign construction material does not affect the Government’s right to suspend
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25.401
or debar a contractor, subcontractor,
or supplier for violation of the Buy
American Act, or to exercise other contractual rights and remedies, such as
reducing the contract price or terminating the contract for default.
(4) If the noncompliance is sufficiently serious, consider exercising appropriate contractual remedies, such as
terminating the contract for default.
Also consider preparing and forwarding
a report to the agency suspending or
debarring official in accordance with
Subpart 9.4. If the noncompliance appears to be fraudulent, refer the matter
to other appropriate agency officials,
such as the officer responsible for
criminal investigation.
Subpart 25.3 [Reserved]
Subpart 25.4—Trade Agreements
25.400 Scope of subpart.
(a) This subpart provides policies and
procedures applicable to acquisitions
that are subject to—
(1) The Trade Agreements Act (the
Agreement on Government Procurement, as approved by Congress in the
Trade Agreements Act of 1979 (19 U.S.C.
2501, et seq.), and as amended by the
Uruguay Round Agreements Act (Pub.
L. 103-465));
(2) The Caribbean Basin Trade Initiative (the determination of the U.S.
Trade Representative that end products granted duty-free entry from
countries designated by the President
as beneficiaries under the Caribbean
Basin Economic Recovery Act (19
U.S.C. 2701, et seq.), with the exception
of the Dominican Republic and Panama
must be treated as eligible products
under the Trade Agreements Act);
(3) NAFTA (the North American Free
Trade Agreement, as approved by Congress in the North American Free
Trade Agreement Implementation Act
of 1993 (19 U.S.C. 3301 note));
(4) The Israeli Trade Act (the U.S.Israel Free Trade Area Agreement, as
approved by Congress in the United
States-Israel Free Trade Area Implementation Act of 1985 (19 U.S.C. 2112
note)); or
(5) The Agreement on Trade in Civil
Aircraft (U.S. Trade Representative
waiver of the Buy American Act for
signatories of the Agreement on Trade
in Civil Aircraft, as implemented in
the Trade Agreements Act of 1979 (19
U.S.C. 2513)).
(b) For application of the trade
agreements that are unique to individual agencies, see agency regulations.
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 24322, Apr. 25, 2000; 67 FR 6118, Feb. 8,
2002; 67 FR 70520, Nov. 22, 2002]
EFFECTIVE DATE NOTE: At 68 FR 56685, Oct.
1, 2003, § 25.400 was amended by removing the
words ‘‘the Dominican Republic and’’ in
paragraph (a)(2), effective Oct. 31, 2003.
25.401
Exceptions.
(a) This subpart does not apply to—
(1) Acquisitions set aside for small
businesses;
(2) Acquisitions of arms, ammunition, or war materials, or purchases indispensable for national security or for
national defense purposes, including all
services purchased in support of military forces located overseas;
(3) Acquisitions of end products for
resale;
(4) Acquisitions under Subpart 8.6,
Acquisition from Federal Prison Industries, Inc., and Subpart 8.7, Acquisition
from Nonprofit Agencies Employing
People Who Are Blind or Severely Disabled;
(5) Other acquisitions not using full
and open competition, if authorized by
Subpart 6.2 or 6.3, when the limitation
of competition would preclude use of
the procedures of this subpart (but see
6.303–1(d)); or sole source acquisitions
justified in accordance with 13.501(a);
and
(6) Acquisitions of the following excluded services:
(i) Automatic data processing (ADP)
telecommunications and transmission
services, except enhanced (i.e., valueadded) telecommunications services.
(ii) Research and development.
(iii) Transportation services (including launching services, but not including travel agent services).
(iv) Utility services.
(b)(1) Other services not covered by
the Trade Agreements Act are—
(i) Dredging; and
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25.402
48 CFR Ch. 1 (10–1–03 Edition)
(ii) Management and operation contracts to certain Government or privately owned facilities used for Government purposes, including Federally
Funded Research and Development
Centers (FFRDCs).
(2) Other services not covered by
NAFTA are—
(i)
ADP
teleprocessing
and
timesharing services (D305), telecommunications network management
services (D316), automated news services, data services or other information
services (D317), and other ADP and
telecommunications services (D399)
(Federal Service Code from the Federal
Procurement Data System Product/
Service Code Manual indicated in parentheses);
(ii) Operation of all facilities by the
Department of Defense, Department of
Energy, or the National Aeronautics
and Space Administration; and all Government-owned research and development facilities or Government-owned
environmental laboratories;
(iii) Maintenance, repair, modification, rebuilding and installation of
equipment related to ships; and
(iv) Nonnuclear ship repair.
25.402 General.
The trade agreements waive the applicability of the Buy American Act for
some foreign supplies and construction
materials from certain countries. The
Trade Agreements Act and NAFTA
specify procurement procedures designed to ensure fairness. The value of
the acquisition is a determining factor
in the applicability of the trade agreements. When the restrictions of the
Buy American Act are waived for eligible products, offers of those products
(eligible offers) receive equal consideration with domestic offers. Under the
Trade Agreements Act, only U.S.-made
end products or eligible products may
be acquired (also see 25.403(c)). See
Subpart 25.5 for evaluation procedures
for supply contracts subject to trade
agreements.
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21535, Apr. 30, 2002]
25.403 Trade Agreements Act.
(a) General. The Agreement on Government Procurement of the Trade
Agreements Act—
(1) Waives application of the Buy
American Act to the end products and
construction materials of designated
countries;
(2) Prohibits discriminatory practices based on foreign ownership;
(3) Restricts purchases to end products identified in 25.403(c);
(4) Requires certain procurement procedures designed to ensure fairness (see
25.408).
(b) Thresholds. (1) Except as provided
in 25.401, the Trade Agreements Act applies to an acquisition for supplies or
services if the estimated value of the
acquisition is $169,000 or more; the
Trade Agreements Act applies to an acquisition for construction if the estimated value of the acquisition is
$6,481,000 or more. These dollar thresholds are subject to revision by the U.S.
Trade Representative approximately
every 2 years (see Executive Order
12260).
(2) To determine whether the Trade
Agreements Act applies to the acquisition of products by lease, rental, or
lease-purchase
contract
(including
lease-to-ownership, or lease-with-option-to purchase), calculate the estimated acquisition value as follows:
(i) If a fixed-term contract of 12
months or less is contemplated, use the
total estimated value of the acquisition.
(ii) If a fixed-term contract of more
than 12 months is contemplated, use
the total estimated value of the acquisition plus the estimated residual value
of the leased equipment at the conclusion of the contemplated term of the
contract.
(iii) If an indefinite-term contract is
contemplated,
use
the
estimated
monthly payment multiplied by the
total number of months that ordering
would be possible under the proposed
contract, i.e., the initial ordering period plus any optional ordering periods.
(iv) If there is any doubt as to the
contemplated term of the contract, use
the estimated monthly payment multiplied by 48.
(3) The estimated value includes the
value of all options.
(4) If, in any 12-month period, recurring or multiple awards for the same
type of product or products are anticipated, use the total estimated value of
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these projected awards to determine
whether the Trade Agreements Act applies. Do not divide any acquisition
with the intent of reducing the estimated value of the acquisition below
the dollar threshold of the Trade
Agreements Act.
(c) Purchase restriction. (1) In acquisitions subject to the Trade Agreements
Act, acquire only U.S.-made end products or eligible products (designated,
Caribbean Basin, or NAFTA country
end products) unless offers for such end
products are either not received or are
insufficient to fulfill the requirements.
(2) This restriction does not apply to
purchases by the Department of Defense from a country with which it has
entered into a reciprocal agreement, as
provided in departmental regulations.
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, June 6, 2000; 67 FR 21535, Apr. 30,
2002; 67 FR 56123, Aug. 30, 2002]
25.404 Caribbean Basin Trade Initiative.
Under the Caribbean Basin Trade Initiative, the United States Trade Representative has determined that, for
acquisitions subject to the Trade
Agreements Act, Caribbean Basin
country end products must be treated
as eligible products.
[65 FR 24322, Apr. 25, 2000, as amended at 67
FR 6118, Feb. 8, 2002]
25.405 North American
Agreement (NAFTA).
Free
Trade
(a) An acquisition of supplies is not
subject to NAFTA if the estimated
value of the acquisition is less than
$25,000. For acquisitions subject to
NAFTA, evaluate offers of NAFTA
country end products without regard to
the restrictions of the Buy American
Act, except that for acquisitions with
an estimated value of less than $56,190,
only Canadian end products are eligible
products.
Eligible
products
from
NAFTA countries are entitled to the
nondiscriminatory treatment of the
Trade Agreements Act. NAFTA does
not prohibit the purchase of other foreign end products.
(b) NAFTA applies to construction
materials if the estimated value of the
construction contract is $7,304,733 or
more.
(c) The procedures in 25.408 apply to
the acquisition of NAFTA country
services, other than services identified
in 25.401. NAFTA country services are
services provided by a firm established
in a NAFTA country under service contracts with an estimated acquisition
value of $56,190 or more ($7,304,733 or
more for construction).
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, June 6, 2000; 67 FR 21535, Apr. 30,
2002; 67 FR 56124, Aug. 30, 2002]
25.406
Israeli Trade Act.
Acquisitions of supplies by most
agencies are subject to the Israeli
Trade Act, if the estimated value of the
acquisition is $50,000 or more but does
not exceed the Trade Agreements Act
threshold for supplies (see 25.403(b)(1)).
Agencies other than the Department of
Defense, the Department of Energy,
the Department of Transportation, the
Bureau of Reclamation of the Department of the Interior, the Federal Housing Finance Board, and the Office of
Thrift Supervision must evaluate offers
of Israeli end products without regard
to the restrictions of the Buy American Act. The Israeli Trade Act does
not prohibit the purchase of other foreign end products.
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21535, Apr. 30, 2002]
25.407 Agreement on Trade in Civil
Aircraft.
Under the authority of Section 303 of
the Trade Agreements Act, the U.S.
Trade Representative has waived the
Buy American Act for civil aircraft and
related articles, that meet the substantial transformation test of the Trade
Agreements Act, from countries that
are parties to the Agreement on Trade
in Civil Aircraft. Those countries are
Austria, Belgium, Bulgaria, Canada,
Denmark, Egypt, Finland, France, Germany, Greece, Ireland, Italy, Japan,
Luxembourg, Macao, the Netherlands,
Norway, Portugal, Romania, Spain,
Sweden, Switzerland, and the United
Kingdom.
25.408
Procedures.
(a) If the Trade Agreements Act or
NAFTA applies (see 25.401), the contracting officer must—
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25.501
48 CFR Ch. 1 (10–1–03 Edition)
(1) Comply with the requirements of
5.203, Publicizing and response time;
(2) Comply with the requirements of
5.207, Preparation and Transmittal of
Synopses, including the appropriate
‘‘Numbered Note’’ (5.207(e)) for contracts that are subject to the Trade
Agreements Act;
(3) Not include technical requirements in solicitations solely to preclude the acquisition of eligible products;
(4) Specify in solicitations that
offerors must submit offers in the
English language and in U.S. dollars
(see 52.214–34, Submission of Offers in
the English Language, and 52.214–35,
Submission of Offers in U.S. Currency,
or paragraph (c)(5) of 52.215–1, Instruction to Offerors—Competitive Acquisitions); and
(5) Provide unsuccessful offerors from
designated or NAFTA countries notice
in accordance with 14.409–1 or 15.503.
(b) See Subpart 25.5 for evaluation
procedures and examples.
[64 FR 72419, Dec. 27, 1999, as amended at 68
FR 56679, Oct. 1, 2003]
Subpart 25.5—Evaluating Foreign
Offers—Supply Contracts
25.501 General.
The contracting officer—
(a) Must apply the evaluation procedures of this subpart to each line item
of an offer unless either the offer or the
solicitation specifies evaluation on a
group basis (see 25.503);
(b) May rely on the offeror’s certification of end product origin when evaluating a foreign offer;
(c) Must identify and reject offers of
end products that are prohibited or
sanctioned in accordance with Subparts 25.6 and 25.7; and
(d) Must not use the Buy American
Act evaluation factors prescribed in
this subpart to provide a preference for
one foreign offer over another foreign
offer.
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21535, Apr. 30, 2002]
25.502 Application.
(a) Unless otherwise specified in
agency regulations, perform the following steps in the order presented:
(1) Eliminate all offers or offerors
that are unacceptable for reasons other
than
price;
e.g.,
nonresponsive,
debarred or suspended, sanctioned (see
Subpart 25.6), or a prohibited source
(see Subpart 25.7).
(2) Rank the remaining offers by
price.
(3) If the solicitation specifies award
on the basis of factors in addition to
cost or price, apply the evaluation factors as specified in this section and use
the evaluated cost or price in determining the offer that represents the
best value to the Government.
(b) For acquisitions subject to the
Trade Agreements Act (see 25.401 and
25.403(b))—
(1) Consider only offers of U.S.-made,
designated country, Caribbean Basin
country, or NAFTA country end products, unless no offers of such end products were received;
(2) If the agency gives the same consideration given eligible offers to offers
of U.S.-made end products that are not
domestic end products, award on the
low offer. Otherwise, evaluate in accordance with agency procedures; and
(3) If there were no offers of U.S.made, designated country, Caribbean
Basin country, or NAFTA country end
products, make a nonavailability determination (see 25.103(b)(2)) and award
on the low offer (see 25.403(c)).
(c) For acquisitions not subject to
the Trade Agreements Act, but subject
to the Buy American Act (NAFTA or
the Israeli Trade Act also may apply),
the following applies:
(1) If the low offer is a domestic offer
or an eligible offer under NAFTA or
the Israeli Trade Act, award on that
offer.
(2) If the low offer is a noneligible
offer and there were no domestic offers
(see 25.103(b)(3)), award on the low
offer.
(3) If the low offer is a noneligible
offer and there is an eligible offer that
is lower than the lowest domestic offer,
award on the low offer. The Buy American Act provides an evaluation preference only for domestic offers.
(4) Otherwise, apply the appropriate
evaluation factor provided in 25.105 to
the low offer.
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(i) If the evaluated price of the low
offer remains less than the lowest domestic offer, award on the low offer.
(ii) If the price of the lowest domestic offer is less than the evaluated
price of the low offer, award on the
lowest domestic offer.
(d) Ties. (1) If application of an evaluation factor results in a tie between a
domestic offer and a foreign offer,
award on the domestic offer.
(2) If no evaluation preference was
applied (i.e., offers afforded nondiscriminatory treatment under the Buy
American Act), resolve ties between
domestic and foreign offers by a witnessed drawing of lots by an impartial
individual.
(3) Resolve ties between foreign offers from small business concerns
(under the Buy American Act, a small
business offering a manufactured article that does not meet the definition of
‘‘domestic end product’’ is a foreign
offer) or foreign offers from a small
business concern and a large business
concern in accordance with 14.408–6(a).
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21535, Apr. 30, 2002]
25.503
Group offers.
(a) If the solicitation or an offer
specifies that award can be made only
on a group of line items or on all line
items contained in the solicitation or
offer, reject the offer—
(1) If any part of the award would
consist of sanctioned or prohibited end
products (see Subparts 25.6 and 25.7); or
(2) If the Trade Agreements Act applies and any part of the offer consists
of items restricted in accordance with
25.403(c).
(b) If an offer restricts award to a
group of line items or to all line items
contained in the offer, determine for
each line item whether to apply an
evaluation factor (see 25.504–4, Example
1).
(1) First, evaluate offers that do not
specify an award restriction on a line
item basis in accordance with 25.502,
determining a tentative award pattern
by selecting for each line item the offer
with the lowest evaluated price.
(2) Evaluate an offer that specifies an
award restriction against the offered
prices of the tentative award pattern,
applying the appropriate evaluation
factor on a line item basis.
(3) Compute the total evaluated price
for the tentative award pattern and the
offer that specified an award restriction.
(4) Unless the total evaluated price of
the offer that specified an award restriction is less than the total evaluated price of the tentative award pattern, award based on the tentative
award pattern.
(c) If the solicitation specifies that
award will be made only on a group of
line items or all line items contained
in the solicitation, determine the category of end products on the basis of
each line item, but determine whether
to apply an evaluation factor on the
basis of the group of items (see 25.504–
4, Example 2).
(1) If the proposed price of domestic
end products exceeds 50 percent of the
total proposed price of the group,
evaluate the entire group as a domestic
offer. Evaluate all other groups as foreign offers.
(2) For foreign offers, if the proposed
price of domestic end products and eligible products exceeds 50 percent of the
total proposed price of the group,
evaluate the entire group as an eligible
offer.
(3) Apply the evaluation factor to the
entire group in accordance with 25.502.
25.504 Evaluation Examples.
The following examples illustrate the
application of the evaluation procedures in 25.502 and 25.503. The examples
assume that the contracting officer has
eliminated all offers that are unacceptable for reasons other than price or a
trade agreement (see 25.502(a)(1)). The
evaluation factor may change as provided in agency regulations.
[67 FR 21535, Apr. 30, 2002]
25.504–1 Buy American Act.
(a)(1) Example 1.
Offer A .....
$12,000
Offer B .....
11,700
Offer C .....
10,000
Domestic end product, small business.
Domestic end product, small business.
U.S.-made end product (not domestic),
small business.
(2) Analysis: This acquisition is for
end products for use in the United
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25.504–2
48 CFR Ch. 1 (10–1–03 Edition)
States and is set aside for small business concerns. The Buy American Act
applies. Since the acquisition value is
less than $25,000 and the acquisition is
set aside, none of the trade agreements
apply. Perform the steps in 25.502(a).
Offer C is evaluated as a foreign end
product because it is the product of a
small business, but is not a domestic
end product (see 25.502(c)(4)). Since
Offer B is a domestic offer, apply the 12
percent factor to Offer C (see
25.105(b)(2)). The resulting evaluated
price of $11,200 remains lower than
Offer B. The cost of Offer B is therefore
unreasonable (see 25.105(c)). Award on
Offer C at $10,000 (see 25.502(c)(4)(i)).
(b)(1) Example 2.
Offer A ..........................................
$11,000
Offer B ..........................................
$10,700
Offer C ..........................................
$10,200
Domestic end product, small business
Domestic end product, small business
U.S.-made end product (not domestic), small business
(2) Analysis: This acquisition is for
end products for use in the United
States and is set aside for small business concerns. The Buy American Act
applies. Perform the steps in 25.502(a).
Offer C is evaluated as a foreign end
product because it is the product of a
small business but is not a domestic
end product (see 25.502(c)(4)). After applying the 12 percent factor, the evaluated price of Offer C is $11,424. Award
on Offer B at $10,700 (see 25.502(c)(4)(ii)).
the low remaining offer, Offer C (see
25.502(b)(2)).
[64 FR 72419, Dec. 27, 1999, as amended at 67
FR 21535, Apr. 30, 2002]
Offer A .....
Offer B .....
25.504–2 Trade Agreements Act/Caribbean Basin Trade Initiative/NAFTA.
Example 1.
Offer A .....
$204,000
Offer B .....
203,000
Offer C .....
Offer D .....
200,000
195,000
U.S.-made end product (not domestic).
U.S.-made end product (domestic),
small business.
Eligible product.
Noneligible product
(not U.S.-made).
Analysis: Eliminate Offer D because
the Trade Agreements Act applies and
there is an offer of a U.S.-made or an
eligible product (see 25.502(b)(1)). If the
agency gives the same consideration
given eligible offers to offers of U.S.made end products that are not domestic offers, it is unnecessary to determine if U.S.-made end products are domestic (large or small business). No
further analysis is necessary. Award on
25.504–3 NAFTA/Israeli Trade Act.
(a) Example 1.
Offer A .....
$105,000
Offer B .....
100,000
Domestic end product, small business.
Eligible product.
Analysis: Since the low offer is an eligible offer, award on the low offer (see
25.502(c)(1)).
(b) Example 2.
$105,000
103,000
Eligible product.
Noneligible product.
Analysis: Since the acquisition is not
subject to the Trade Agreements Act,
the contracting officer can consider the
noneligible offer. Since no domestic
offer was received, make a nonavailability determination and award on
Offer B (see 25.502(c)(2)).
(c) Example 3.
Offer A .....
$105,000
Offer B .....
Offer C .....
103,000
100,000
Domestic end product, large business.
Eligible product.
Noneligible product.
Analysis: Since the acquisition is not
subject to the Trade Agreements Act,
the contracting officer can consider the
noneligible offer. Because the eligible
offer (Offer B) is lower than the domestic offer (Offer A), no evaluation factor
applies to the low offer (Offer C).
Award on the low offer (see 25.502(c)(3)).
25.504–4 Group award basis.
(a) Example 1.
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Federal Acquisition Regulation
25.504–4
Offers
Item
A
1
2
3
4
5
.........................................................................
.........................................................................
.........................................................................
.........................................................................
.........................................................................
B
C
DO = $55,000
NEL = 13,000
NEL = 11,500
NEL = 24,000
DO = 18,000
EL = $56,000
EL = 10,000
DO = 12,000
EL = 28,000
NEL = 10,000
NEL = $50,000
EL = 13,000
DO = 10,000
NEL = 22,000
DO = 14,000
121,500
116,000
109,000
Key: DO = Domestic end product; EL = Eligible product; NEL = Noneligible product.
Item 3: Low offer A is noneligible and Offer
B is a domestic offer. Apply a 6 percent factor to Offer A. The evaluated price of Offer A
is higher than Offer B; select B.
Item 4: Low offer A is noneligible. Since
neither offer is a domestic offer, no evaluation factor applies; select A.
Item 5: Low offer B is noneligible; apply a
6 percent factor to Offer B. Offer A is still
higher than Offer B; select B.
STEP 2: Evaluate Offer C against the tentative award pattern for Offers A and B:
Problem: Offeror C specifies all-ornone award. Assume all offerors are
large businesses. The Trade Agreements Act does not apply.
Analysis: (see 25.503)
STEP 1: Evaluate Offers A & B before considering Offer C and determine which offer
has the lowest evaluated cost for each line
item (the tentative award pattern):
Item 1: Low offer A is domestic; select A.
Item 2: Low offer B is eligible; do not apply
factor; select B.
Offers
Item
Tentative award pattern
from A and B
Low offer
1
2
3
4
5
.........................................................................
.........................................................................
.........................................................................
.........................................................................
.........................................................................
A
B
B
A
B
C
DO=$55,000
EL=10,000
DO=12,000
NEL=24,000
*NEL=10,600
* NEL=$53,000
EL=13,000
DO=10,000
NEL=22,000
DO=14,000
111,600
112,000
* Offer + 6 percent.
On a line item basis, apply a factor to any
noneligible offer if the other offer for that
line item is domestic.
For Item 1, apply a factor to Offer C because Offer A is domestic and the acquisition
was not subject to the Trade Agreements
Act. The evaluated price of Offer C, Item 1,
becomes $53,000 ($50,000 plus 6 percent). Apply
a factor to Offer B, Item 5, because it is a
noneligible product and Offer C is domestic.
The evaluated price of Offer B is $10,600
($10,000 plus 6 percent). Evaluate the remaining items without applying a factor.
STEP 3: The tentative unrestricted award
pattern from Offers A and B is lower than
the evaluated price of Offer C. Award the
combination of Offers A and B. Note that if
Offer C had not specified all-or-none award,
award would be made on Offer C for line
items 1, 3, and 4, totaling an award of $82,000.
(b) Example 2.
Offers
Item
A
1
2
3
4
.........................................................................
.........................................................................
.........................................................................
.........................................................................
B
C
DO=$50,000
NEL=10,300
EL=20,400
DO=10,500
EL=$50,500
NEL=10,000
EL=21,000
DO=10,300
NEL=$50,000
EL=10,200
NEL=20,200
DO=10,400
91,200
91,800
90,800
Problem: The solicitation specifies award
on a group basis. Assume the Buy American
Act applies and the acquisition cannot be set
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25.600
48 CFR Ch. 1 (10–1–03 Edition)
aside for small business concerns. All
offerors are large businesses.
Analysis: (see 25.503(c))
STEP 1: Determine which of the offers are
domestic (see 25.503(c)(1)):
Domestic
[percent]
A
B
C
60,500/91,200=66.3%
10,300/91,800=11.2%
10,400/90,800=11.5%
Determination
Domestic
Foreign
Foreign
STEP 2: Determine whether foreign offers
are eligible or noneligible offers (see
25.503(c)(2)):
Domestic + eligible
[percent]
A
B
C
N/A .......................
81,800/91,800=89.1%
20,600/90,800=22.7%
Determination
Domestic
Eligible
Noneligible
STEP 3: Determine whether to apply an
evaluation factor (see 25.503(c)(3)). The low
offer (Offer C) is a foreign offer. There is no
eligible offer lower than the domestic offer.
Therefore, apply the factor to the low offer.
Addition of the 6 percent factor (use 12 percent if Offer A is a small business) to Offer C
yields an evaluated price of $96,248 ($90,800 +
6 percent). Award on Offer A (see
25.502(c)(4)(ii)). Note that, if Offer A were
greater than Offer B, an evaluation factor
would not be applied and award would be on
Offer C (see 25.502(c)(3)).
[64 FR 72419, Dec. 27, 1999; 65 FR 4633, Jan. 31,
2000]
Subpart 25.6—Trade Sanctions
25.600
Scope of subpart.
This subpart implements sanctions
imposed by the President pursuant to
Section 305(g)(1) of the Trade Agreements Act of 1979 (19 U.S.C. 2515(g)(1)),
on European Union (EU) member states
that discriminate against U.S. products or services (sanctioned EU member states). This subpart does not apply
to contracts for supplies or services
awarded and performed outside the
United States, or to the Department of
Defense. For thresholds unique to individual agencies, see agency regulations.
25.601
Policy.
(a) Except as provided in 25.602, agencies shall not award contracts for—
(1) Sanctioned EU country end products with an estimated acquisition
value less than $169,000;
(2) Sanctioned EU country construction with an estimated acquisition
value less than $6,481,000; or
(3) Sanctioned EU country services as
follows (Federal Service Code or Category from the Federal Procurement
Data System Product/Service Code
Manual is indicated in parentheses):
(i) Service contracts regardless of acquisition value for—
(A) All transportation services, including launching services (all V codes,
J019, J998, J999, and K019);
(B) Dredging (Y216 and Z216);
(C) Management and operation of
certain Government or privately owned
facilities used for Government purposes, including federally funded research and development centers (all M
codes);
(D) Development, production or coproduction of program material for
broadcasting, such as motion pictures
(T006 and T016);
(E) Research and development (all A
codes);
(F) Airport concessions (S203);
(G) Legal services (R418);
(H) Hotel and restaurant services
(S203);
(I) Placement and supply of personnel
services (V241 and V251);
(J) Investigation and security services (S206, S211, and R423);
(K) Education and training services
(all U codes and R419);
(L) Health and social services (all O
and G codes);
(M) Recreational, cultural, and sporting services (G003); or
(N) Telecommunications services (encompassing only voice telephony,
telex, radio telephony, paging, and satellite services) (S1, D304, D305, D316,
D317, and D399).
(ii) All other service contracts with
an estimated acquisition value less
than $169,000.
(b) Determine the applicability of
sanction thresholds in the manner provided at 25.403(b).
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, June 6, 2000; 67 FR 56124, Aug. 30,
2002]
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Federal Acquisition Regulation
25.701
25.602 Exceptions.
(a) The sanctions in 25.601 do not
apply to—
(1) Purchases at or below the simplified acquisition threshold awarded
using simplified acquisition procedures;
(2) Total small business set-asides in
accordance with 19.502–2;
(3) Contracts in support of U.S. national security interests; or
(4) Contracts for essential spare, repair, or replacement parts not otherwise available from nonsanctioned
countries.
(b)(1) The head of the agency, without power of redelegation, may authorize the award of a contract or class of
contracts for sanctioned EU country
end products, services, and construction, the purchase of which is otherwise prohibited by 25.601(a), if the head
of the agency determines that such action is necessary—
(i) In the public interest;
(ii) To avoid the restriction of competition in a manner that would limit
the acquisition in question to, or would
establish a preference for, the services,
articles, materials, or supplies of a single manufacturer or supplier; or
(iii) Because there would be or are an
insufficient number of potential or actual offerors to ensure the acquisition
of services, articles, materials, or supplies of requisite quality at competitive prices.
(2) When the head of the agency
makes a determination in accordance
with paragraph (b)(1) of this section,
the agency must notify the U.S. Trade
Representative within 30 days after
contract award.
Subpart 25.7—Prohibited Sources
25.701 Restrictions.
(a)(1) The Government generally does
not acquire supplies or services that
cannot be imported lawfully into the
United States. Therefore, except as
provided in paragraph (a)(2) of this section, even for overseas use, agencies
and their contractors and subcontractors must not acquire any supplies or
services originating from sources within, or that were located in or transported from or through
(i) Cuba (31 CFR part 515);
(ii) Iran (31 CFR part 560);
(iii) Iraq (31 CFR part 575);
(iv) Libya (31 CFR part 550);
(v) North Korea (31 CFR part 500);
(vi) Sudan (31 CFR part 538);
(vii) Territory of Afghanistan controlled by the Taliban (Executive Order
13129 of July 4, 1999, Blocking Property
and Prohibiting Transactions With the
Taliban); or
(viii) Serbia, excluding the territory
of Kosovo (Executive Order 13121 of
April 30, 1999, Blocking Property of the
Governments of the Federal Republic
of Yugoslavia (Serbia and Montenegro),
the Republic of Serbia, and the Republic of Montenegro, and Prohibiting
Trade Transactions Involving the Federal Republic of Yugoslavia (Serbia and
Montenegro) in Response to the Situation in Kosovo).
(2)(i) Unless agency procedures require a higher level of approval, the
contracting officer may, in unusual circumstances, acquire for use outside the
United States supplies and services restricted in paragraph (a)(1) of this section.
Examples
of
unusual
circumstances are an emergency or when
the supplies or services are not otherwise available and a substitute is not
acceptable.
(ii) The contracting officer must provide documentation in the contract file
whenever this exception is used.
(b) Agencies and their contractors
and subcontractors must not acquire
any supplies or services from entities
controlled by the Government of Iraq
or other specially designated nationals
(31 CFR Chapter V, Appendix A).
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36028, June 6, 2000]
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct.
1, 2003, § 25.701 was revised, effective Oct. 31,
2003. For the convenience of the user, the revised text is set forth below:
25.701 Restrictions.
(a) Except as authorized by the Office of
Foreign Assets Control (OFAC) in the Department of the Treasury, agencies and their
contractors and subcontractors must not acquire any supplies or services if any proclamation, Executive order, or statute administered by OFAC, or if OFAC’s implementing
regulations at 31 CFR chapter V, would prohibit such a transaction by a person subject
to the jurisdiction of the United States.
(b) Except as authorized by OFAC, most
transactions involving Cuba, Iran, Libya,
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25.702
48 CFR Ch. 1 (10–1–03 Edition)
and Sudan are prohibited, as are most imports from North Korea into the United
States or its outlying areas. In addition,
lists of entities and individuals subject to
economic sanctions are included in OFAC’s
List of Specially Designated Nationals and
Blocked
Persons
at
http://www.epls.gov/
Terlist1.html. More information about these
restrictions, as well as updates, is available
in OFAC’s regulations at 31 CFR chapter V
and/or on OFAC’s Web site at http://
www.treas.gov/ofac.
25.702
Source of further information.
Refer questions concerning the restrictions in 25.701 to the Department
of the Treasury, Office of Foreign Assets Control, Washington, D.C. 20220
(Telephone (202) 622–2520).
[65 FR 36028, June 6, 2000]
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct.
1, 2003, § 25.702 was amended by removing
‘‘622–2520’’ and adding ‘‘622–2490’’ in its place,
effective Oct. 31, 2003.
Subpart 25.8—Other International
Agreements and Coordination
25.801
Subpart 25.9—Customs and Duties
25.900
General.
Procedures.
(a) When placing contracts with contractors located outside the United
States, for performance outside the
United States, contracting officers
must—
(1) Determine the existence and applicability of any international agreements and ensure compliance with
these agreements; and
(2) Conduct the necessary advance acquisition planning and coordination between the appropriate U.S. executive
agencies and foreign interests as required by these agreements.
(b) The Department of State publishes many international agreements
in the ‘‘United States Treaties and
Other International Agreements’’ series. Copies of this publication normally are available in overseas legal
offices and U.S. diplomatic missions.
(c) Contracting officers must award
all contracts with Taiwanese firms or
Scope of subpart.
This subpart provides policies and
procedures for exempting from import
duties certain supplies purchased under
Government contracts.
25.901
Policy.
United States laws impose duties on
foreign supplies imported into the customs territory of the United States.
Certain exemptions from these duties
are available to Government agencies.
Agencies must use these exemptions
when the anticipated savings to appropriated funds will outweigh the administrative costs associated with processing required documentation.
25.902
Treaties and agreements between the
United States and foreign governments
affect the evaluation of offers from foreign entities and the performance of
contracts in foreign countries.
25.802
organizations through the American
Institute of Taiwan (AIT). AIT is under
contract to the Department of State.
Procedures.
For regulations governing importations and duties, see the Customs Regulations issued by the U.S. Customs
Service, Department of the Treasury
(19 CFR Chapter 1). Except as provided
elsewhere in the Customs Regulations
(see 19 CFR 10.100), all shipments of imported supplies purchased under Government contracts are subject to the
usual Customs entry and examination
requirements. Unless the agency obtains an exemption (see 25.903), those
shipments are also subject to duty.
25.903
Exempted supplies.
(a) Subchapters VIII and X of Chapter 98 of the Harmonized Tariff Schedule of the United States (19 U.S.C. 1202)
list supplies for which exemptions from
duty may be obtained when imported
into the customs territory of the
United States under a Government
contract. For certain of these supplies,
the contracting agency must certify to
the Commissioner of Customs that
they are for the purpose stated in the
Harmonized Tariff Schedule (see 19
CFR 10.102–104, 10.114, and 10.121 and 15
CFR part 301 for requirements and formats).
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Federal Acquisition Regulation
25.1002
(b) Supplies (excluding equipment)
for Government-operated vessels or aircraft may be withdrawn from any customs-bonded warehouse, from continuous customs custody elsewhere than
in a bonded warehouse, or from a foreign-trade zone, free of duty and internal revenue tax as provided in 19 U.S.C.
1309 and 1317. The contracting activity
must cite this authority on the appropriate customs form when making purchases (see 19 CFR 10.59—10.65).
Subpart 25.10—Additional Foreign
Acquisition Regulations
25.1001 Waiver of right to examination
of records.
(a) Policy. The clause at 52.215–2,
Audit and Records—Negotiation, prescribed at 15.209(b), and paragraph (d)
of the clause at 52.212–5, Contract
Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items, prescribed at
12.301(b)(4), implement 10 U.S.C. 2313
and 41 U.S.C. 254d. The basic clauses
authorize examination of records by
the Comptroller General.
(1) Insert the appropriate basic
clause, whenever possible, in negotiated contracts with foreign contractors.
(2) The contracting officer may use
52.215–2 with its Alternate III or 52.212–
5 with its Alternate I after—
(i) Exhausting all reasonable efforts
to include the basic clause;
(ii) Considering factors such as alternate sources of supply, additional cost,
and time of delivery; and
(iii) The head of the agency has executed a determination and findings in
accordance with paragraph (b) of this
section, with the concurrence of the
Comptroller General. However, concurrence of the Comptroller General is not
required if the contractor is a foreign
government or agency thereof or is precluded by the laws of the country involved from making its records available for examination.
(b) Determination and findings. The determination and findings must—
(1) Identify the contract and its purpose, and identify if the contract is
with a foreign contractor or with a for-
eign government or an agency of a foreign government;
(2) Describe the efforts to include the
basic clause;
(3) State the reasons for the contractor’s refusal to include the basic
clause;
(4) Describe the price and availability
of the supplies or services from the
United States and other sources; and
(5) Determine that it will best serve
the interest of the United States to use
the appropriate alternate clause in
paragraph (a)(2) of this section.
25.1002
Use of foreign currency.
(a) Unless an international agreement or the Trade Agreements Act (see
25.408(a)(3)) requires a specific currency, contracting officers must determine whether solicitations for contracts to be entered into and performed
outside the United States will require
submission of offers in U.S. currency or
a specified foreign currency. In unusual
circumstances, the contracting officer
may permit submission of offers in
other than a specified currency.
(b) To ensure a fair evaluation of offers, solicitations generally should require all offers to be priced in the same
currency. However, if the solicitation
permits submission of offers in other
than a specified currency, the contracting officer must convert the offered prices to U.S. currency for evaluation purposes. The contracting officer must use the current market exchange rate from a commonly used
source in effect as follows:
(1) For acquisitions conducted using
sealed bidding procedures, on the date
of bid opening.
(2) For acquisitions conducted using
negotiation procedures—
(i) On the date specified for receipt of
offers, if award is based on initial offers; otherwise
(ii) On the date specified for receipt
of final proposal revisions.
(c) If a contract is priced in foreign
currency, the agency must ensure that
adequate funds are available to cover
currency fluctuations to avoid a violation of the Anti-Deficiency Act (31
U.S.C. 1341, 1342, 1511–1519).
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25.1101
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 25.11—Solicitation
Provisions and Contract Clauses
25.1101 Acquisition of supplies.
The following provisions and clauses
apply to the acquisition of supplies and
the acquisition of services involving
the furnishing of supplies.
(a)(1) Insert the clause at 52.225–1,
Buy American Act—Supplies, in solicitations and contracts with a value exceeding $2,500 ($7,500 for acquisitions as
described in 13.201(g)(1)(i) or $15,000 for
acquisitions
as
described
in
13.201(g)(1)(ii))
but
not
exceeding
$25,000; and in solicitations and contracts with a value exceeding $25,000, if
none of the clauses prescribed in paragraphs (b) and (c) of this section apply,
except if—
(i) The solicitation is restricted to
domestic end products in accordance
with Subpart 6.3;
(ii) The acquisition is for supplies for
use within the United States and an exception to the Buy American Act applies (e.g., nonavailability or public interest); or
(iii) The acquisition is for supplies
for use outside the United States.
(2) Insert the provision at 52.225–2,
Buy American Act Certificate, in solicitations containing the clause at
52.225–1.
(b)(1)(i) Insert the clause at 52.225–3,
Buy American Act—North American
Free Trade Agreement—Israeli Trade
Act, in solicitations and contracts if—
(A) The acquisition is for supplies, or
for services involving the furnishing of
supplies, for use within the United
States, and the acquisition value is
$25,000 or more, but is less than
$169,000; and
(B) No exception in 25.401 applies. For
acquisitions of agencies not subject to
the Israeli Trade Act (see 25.406), see
agency regulations.
(ii) If the acquisition value is $25,000
or more but is less than $50,000, use the
clause with its Alternate I.
(iii) If the acquisition value is $50,000
or more but is less than $56,190, use the
clause with its Alternate II.
(2)(i) Insert the provision at 52.225–4,
Buy American Act—North American
Free Trade Agreement—Israeli Trade
Act Certificate, in solicitations containing the clause at 52.225–3.
(ii) If the acquisition value is $25,000
or more but is less than $50,000, use the
provision with its Alternate I.
(iii) If the acquisition value is $50,000
or more but is less than $56,190, use the
provision with its Alternate II.
(c)(1) Insert the clause at 52.225–5,
Trade Agreements, in solicitations and
contracts valued at $169,000 or more, if
the Trade Agreements Act applies (see
25.401 and 25.403) and the agency has determined that the restrictions of the
Buy American Act are not applicable
to U.S.-made end products. If the agency has not made such a determination,
the contracting officer must follow
agency procedures.
(2) Insert the provision at 52.225–6,
Trade Agreements Certificate, in solicitations containing the clause at
52.225–5.
(d) Insert the provision at 52.225–7,
Waiver of Buy American Act for Civil
Aircraft and Related Articles, in solicitations for civil aircraft and related articles (see 25.407), if the acquisition
value is less than $169,000.
(e) Insert the clause at 52.225–8, DutyFree Entry, in solicitations and contracts for supplies that may be imported into the United States and for
which duty-free entry may be obtained
in accordance with 25.903(a), if the
value of the acquisition—
(1) Exceeds $100,000; or
(2) Is $100,000 or less, but the savings
from waiving the duty is anticipated to
be more than the administrative cost
of waiving the duty. When used for acquisitions valued at $100,000 or less, the
contracting officer may modify paragraphs (b)(1) and (i)(2) of the clause to
reduce the dollar figure.
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, June 6, 2000; 67 FR 21535, Apr. 30,
2002; 67 FR 56122, Aug. 30, 2002; 67 FR 56124,
Aug. 30, 2002; 68 FR 4051, Jan. 27, 2003]
25.1102 Acquisition of construction.
(a) Insert the clause at 52.225–9, Buy
American Act—Construction Materials, in solicitations and contracts for
construction that is performed in the
United States valued at less than
$6,481,000.
(1) List in paragraph (b)(2) of the
clause all foreign construction material excepted from the requirements of
the Buy American Act.
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Federal Acquisition Regulation
25.1103
(2) If the head of the agency determines that a higher percentage is appropriate, substitute the higher evaluation percentage in paragraph (b)(3)(i) of
the clause.
(b)(1) Insert the provision at 52.225–10,
Notice of Buy American Act Requirement—Construction Materials, in solicitations containing the clause at
52.225–9.
(2) If insufficient time is available to
process a determination regarding the
inapplicability of the Buy American
Act before receipt of offers, use the
provision with its Alternate I.
(c) Insert the clause at 52.225–11, Buy
American Act— Construction Materials under Trade Agreements, in solicitations and contracts for construction that is performed in the United
States valued at $6,481,000 or more.
(1) List in paragraph (b)(3) of the
clause all foreign construction material excepted from the requirements of
the Buy American Act, other than designated country or NAFTA country
construction material.
(2) If the head of the agency determines that a higher percentage is appropriate, substitute the higher evaluation percentage in paragraph (b)(4)(i) of
the clause.
(3) For acquisitions valued at
$6,481,000 or more, but less than
$7,304,733, use the clause with its Alternate I.
(d)(1) Insert the provision at 52.225–12,
Notice of Buy American Act Requirement—Construction Materials under
Trade Agreements, in solicitations containing the clause at 52.225–11.
(2) If insufficient time is available to
process a determination regarding the
inapplicability of the Buy American
Act before receipt of offers, use the
provision with its Alternate I.
(3) For acquisitions valued at
$6,481,000 or more, but less than
$7,304,733, use the clause with its Alternate II.
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, June 6, 2000; 67 FR 21536, Apr. 30,
2002; 67 FR 56124, Aug. 30, 2002]
25.1103 Other provisions and clauses.
(a) Restrictions on certain foreign purchases. Insert the clause at 52.225–13,
Restrictions on Certain Foreign Purchases, in solicitations and contracts
with a value exceeding $2,500, $7,500 for
acquisitions
as
described
in
13.201(g)(1)(i), or $15,000 for acquisitions
as described in 13.201(g)(1)(ii), unless an
exception applies (see 25.701(a)(2)).
(b) Translations. Insert the clause at
52.225–14,
Inconsistency
Between
English Version and Translation of
Contract, in solicitations and contracts
if anticipating translation into another
language.
(c) Sanctions. (1) Except as provided
in paragraph (c)(2) of this section, insert the clause at—
(i) 52.225–15, Sanctioned European
Union Country End Products, in solicitations and contracts for supplies valued at less than $169,000; or
(ii) 52.225–16, Sanctioned European
Union Country Services, in solicitations and contracts for services—
(A) Listed in 25.601(a)(3)(i); or
(B) Valued at less than $169,000.
(2) Do not insert the clauses in paragraph (c)(1) of this section in—
(i) Solicitations issued and contracts
awarded by—
(A) A contracting activity located
outside of the United States, provided
the supplies will be used or the services
will be performed outside of the United
States; or
(B) The Department of Defense;
(ii) Purchases at or below the simplified acquisition threshold awarded
using simplified acquisition procedures;
(iii) Total small business set-asides;
(iv) Contracts in support of U.S. national security interests;
(v) Contracts for essential spare, repair, or replacement parts available
only from sanctioned EU member
states; or
(vi) Contracts for which the head of
the agency has made a determination
in accordance with 25.602(b).
(d) Foreign currency offers. Insert the
provision at 52.225–17, Evaluation of
Foreign Currency Offers, in solicitations that permit the use of other than
a specified currency. Insert in the provision the source of the rate to be used
in the evaluation of offers.
[64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, 36028, June 6, 2000; 67 FR 21538, Apr.
30, 2002; 67 FR 56122, 56124, Aug. 30, 2002; 68 FR
4051, Jan. 27, 2003]
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Pt. 26
48 CFR Ch. 1 (10–1–03 Edition)
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct.
1, 2003, § 25.1103 was amended in paragraph (a)
by removing the words ‘‘(see 25.701(a)(2)’’, effective Oct. 31, 2003.
PART 26—OTHER
SOCIOECONOMIC PROGRAMS
Subpart 26.1—Indian Incentive Program
Sec.
26.100
26.101
26.102
26.103
26.104
Scope of subpart.
Definitions.
Policy.
Procedures.
Contract clause.
Subpart 26.2—Disaster or Emergency
Assistance Activities
26.200
26.201
Scope of subpart.
Policy.
Subpart 26.3—Historically Black Colleges
and Universities and Minority Institutions
26.300 Scope of subpart.
26.301 [Reserved]
26.302 General policy.
26.303 Data collection and reporting
quirements.
26.304 Solicitation provision.
re-
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 56 FR 41737, Aug. 22, 1991, unless
otherwise noted.
NOTE: This part has been created to facilitate promulgation of additional FAR and
agency level socioeconomic coverage which
properly fall under FAR Subchapter D—Socioeconomic Programs, but neither implements nor supplements existing FAR Parts
19 or 22 through 25.
Subpart 26.1—Indian Incentive
Program
26.100 Scope of subpart.
This subpart implements 25 U.S.C.
1544, which provides an incentive to
prime contractors that use Indian organizations and Indian-owned economic enterprises as subcontractors.
26.101 Definitions.
As used in this subpart—
Indian means any person who is a
member of any Indian tribe, band,
group, pueblo, or community that is
recognized by the Federal Government
as eligible for services from the Bureau
of Indian Affairs (BIA) in accordance
with 25 U.S.C. 1452(c) and any ‘‘Native’’
as defined in the Alaska Native Claims
Settlement Act (43 U.S.C. 1601).
Indian organization means the governing body of any Indian tribe or entity established or recognized by the
governing body of an Indian tribe for
the purposes of 25 U.S.C., chapter 17.
Indian-owned
economic
enterprise
means any Indian-owned (as determined by the Secretary of the Interior)
commercial, industrial, or business activity established or organized for the
purpose of profit, provided that Indian
ownership constitutes not less than 51
percent of the enterprise.
Indian tribe means any Indian tribe,
band, group, pueblo, or community, including native villages and native
groups (including corporations organized by Kenai, Juneau, Sitka, and Kodiak) as defined in the Alaska Native
Claims Settlement Act, that is recognized by the Federal Government as eligible for services from BIA in accordance with 25 U.S.C. 1452(c).
Interested party means a prime contractor or an actual or prospective offeror whose direct economic interest
would be affected by the award of a
subcontract or by the failure to award
a subcontract.
[56 FR 41737, Aug. 22, 1991, as amended at 61
FR 39210, July 26, 1996; 65 FR 24323, Apr. 25,
2000]
26.102
Policy.
Indian organizations and Indianowned economic enterprises shall have
the maximum practicable opportunity
to participate in performing contracts
awarded by Federal agencies. In fulfilling this requirement, the Indian Incentive Program allows an incentive
payment equal to 5 percent of the
amount paid to a subcontractor in performing the contract, if the contract so
authorizes and the subcontractor is an
Indian organization or Indian-owned
economic enterprise.
[61 FR 39211, July 26, 1996]
26.103
Procedures.
(a) Contracting officers and prime
contractors, acting in good faith, may
rely on the representation of an Indian
organization or Indian-owned economic
enterprise as to its eligibility, unless
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Federal Acquisition Regulation
26.201
an interested party challenges its status or the contracting officer has independent reason to question that status.
(b) In the event of a challenge to the
representation of a subcontractor, the
contracting officer shall refer the matter to the U.S. Department of the Interior, Bureau of Indian Affairs (BIA),
Attn: Chief, Division of Contracting
and Grants Administration, 1849 C
Street, NW., MS–2626–MIB, Washington, DC 20240–4000. The BIA will determine the eligibility and notify the
contracting officer.
(c) The BIA will acknowledge receipt
of the request from the contracting officer within 5 working days. Within 45
additional working days, BIA will advise the contracting officer, in writing,
of its determination.
(d) The contracting officer will notify
the prime contractor upon receipt of a
challenge.
(1) To be considered timely, a challenge shall—
(i) Be in writing;
(ii) Identify the basis for the challenge;
(iii) Provide detailed evidence supporting the claim; and
(iv) Be filed with and received by the
contracting officer prior to award of
the subcontract in question.
(2) If the notification of a challenge
is received by the prime contractor
prior to award, it shall withhold award
of the subcontract pending the determination by BIA, unless the prime contractor determines, and the contracting officer agrees, that award
must be made in order to permit timely performance of the prime contract.
(3) Challenges received after award of
the subcontract shall be referred to
BIA, but the BIA determination shall
have prospective application only.
(e) If the BIA determination is not
received within the prescribed time period, the contracting officer and the
prime contractor may rely on the representation of the subcontractor.
(f) Subject to the terms and conditions of the contract and the availability of funds, contracting officers
shall authorize an incentive payment
of 5 percent of the amount paid to the
subcontractor. Contracting officers
shall seek funding in accordance with
agency procedures.
[56 FR 41737, Aug. 22, 1991, as amended at 57
FR 20377, May 12, 1992; 61 FR 39211, July 26,
1996; 62 FR 40236, July 25, 1997; 64 FR 10532,
Mar. 4, 1999]
26.104 Contract clause.
Contracting officers in civilian agencies may insert the clause at 52.226–1,
Utilization of Indian Organizations and
Indian-Owned Economic Enterprises, in
solicitations and contracts if—
(a) In the opinion of the contracting
officer, subcontracting possibilities
exist for Indian organizations or Indian-owned economic enterprises; and
(b) Funds are available for any increased costs as described in paragraph
(b)(2) of the clause at 52.226–1.
[65 FR 24323, Apr. 25, 2000]
Subpart 26.2—Disaster or
Emergency Assistance Activities
SOURCE: 61 FR 39200, July 26, 1996, unless
otherwise noted.
26.200 Scope of subpart.
This subpart implements 42 U.S.C.
5150, which provides a preference for
local organizations, firms, and individuals when contracting for major disaster or emergency assistance activities (see 6.302–5).
26.201 Policy.
(a) When contracting under this subpart for major disaster or emergency
assistance activities, such as debris
clearance, distribution of supplies, or
reconstruction, preference shall be
given, to the extent feasible and practicable, to those organizations, firms,
or individuals residing or doing business primarily in the area affected by
such major disaster or emergency.
(b) The authority to provide preference under this subpart applies only
to those acquisitions, including those
which do not exceed the simplified acquisition threshold, conducted during
the term of a major disaster or emergency declaration made by the President of the United States under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance
Act (42 U.S.C. 5121 et seq.).
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26.300
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 26.3—Historically Black
Colleges and Universities and
Minority Institutions
SOURCE: 62 FR 12703, Mar. 17, 1997, unless
otherwise noted.
26.300 Scope of subpart.
(a) This subpart implements Executive Order 12928 of September 16, 1994,
which promotes participation of Historically Black Colleges and Universities (HBCUs) and Minority Institutions (MIs) in Federal procurement.
(b) This subpart does not pertain to
contracts performed entirely outside
the United States and its outlying
areas.
[62 FR 12703, Mar. 17, 1997, as amended at 68
FR 28083, May 22, 2003]
26.301
[Reserved]
26.302 General policy.
It is the policy of the Government to
promote participation of HBCUs and
MIs in Federal procurement.
26.303 Data collection and reporting
requirements.
Executive Order 12928 requires periodic reporting to the President on the
progress of departments and agencies
in complying with the laws and requirements mentioned in the Executive
order.
26.304
Solicitation provision.
Insert the provision at 52.226–2, Historically Black College or University
and Minority Institution Representation, in solicitations exceeding the
micro-purchase threshold, for research,
studies, supplies, or services of the
type normally acquired from higher
educational institutions. For DoD,
NASA, and Coast Guard acquisitions,
also insert the provision in solicitations that contain the clause at 52.219–
23, Notice of Price Evaluation Adjustment for Small Disadvantaged Business Concerns.
[64 FR 36224, July 2, 1999]
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SUBCHAPTER E—GENERAL CONTRACTING REQUIREMENTS
PART 27—PATENTS, DATA, AND
COPYRIGHTS
Sec.
27.000
Scope of part.
Subpart 27.1—General
27.101
27.102
27.103
27.104
Applicability.
[Reserved]
Policy.
General guidance.
Subpart 27.2—Patents
27.200 Scope of subpart.
27.201 Authorization and consent.
27.201–1 General.
27.201–2 Clauses on authorization and consent.
27.202 Notice and assistance.
27.202–1 General.
27.202–2 Clause on notice and assistance.
27.203 Patent indemnification of Government by contractor.
27.203–1 General.
27.203–2 Clauses for sealed bid contracts (excluding construction).
27.203–3 Negotiated contracts (excluding
construction).
27.203–4 Clauses for negotiated contracts
(excluding construction).
27.203–5 Clause for construction contracts
and for dismantling, demolition, and removal of improvements contracts.
27.203–6 Clause for Government waiver of indemnity.
27.204 Reporting of royalties—anticipated
or paid.
27.204–1 General.
27.204–2 Solicitation provision for royalty
information.
27.204–3 Patents—notice of Government as a
licensee.
27.205 Adjustment of royalties.
27.206 Refund of royalties.
27.206–1 General.
27.206–2 Clause for refund of royalties.
27.207 Classified contracts.
27.207–1 General.
27.207–2 Clause for classified contracts.
27.208 Use of patented technology under the
North American Free Trade Agreement.
27.209 Use of patented technology under the
General Agreement on Tariffs and Trade
(GATT).
Subpart 27.3—Patent Rights Under
Government Contracts
27.300
27.301
Scope of subpart.
Definitions.
27.302 Policy.
27.303 Contract clauses.
27.304 Procedures.
27.304–1 General.
27.304–2 Contracts placed by or for other
Government agencies.
27.304–3 Contracts for construction work or
architect-engineer services.
27.304–4 Subcontracts.
27.304–5 Appeals.
27.305 Administration of patent rights
clauses.
27.305–1 Patent rights follow-up.
27.305–2 Follow-up by contractor.
27.305–3 Follow-up by Government.
27.305–4 Conveyance of invention rights acquired by the Government.
27.305–5 Publication or release of invention
disclosures.
27.306 Licensing background patent rights
to third parties.
Subpart 27.4—Rights in Data and
Copyrights
27.400 Scope of subpart.
27.401 Definitions.
27.402 Policy.
27.403 Data rights—general.
27.404 Basic rights in data clause.
27.405 Other data rights provisions.
27.406 Acquisition of data.
27.407 Rights to technical data in successful
proposals.
27.408 Cosponsored research and development activities.
27.409 Solicitation provisions and contract
clauses.
Subpart 27.5 [Reserved]
Subpart 27.6—Foreign License and
Technical Assistance Agreements
27.601
General.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 49 FR 12974, Mar. 30, 1984, unless
otherwise noted.
27.000
Scope of part.
This part prescribes policies, procedures, and contract clauses pertaining
to patents and directs agencies to develop coverage for Rights in Data and
Copyrights.
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27.101
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 27.1—General
27.101
Applicability.
The policies, procedures, and clauses
prescribed by this part 27 are applicable to all agencies. Agencies are authorized to adopt alternate policies,
procedures, and clauses, but only to
the extent determined necessary to
meet the specific requirements of laws,
executive orders, treaties, or international agreements. Any agency action adopting such alternate policies,
procedures, and clauses shall be covered in published agency regulations.
27.102
[Reserved]
27.103
Policy.
[49 FR 12974, Mar. 30, 1984, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
The policies pertaining to patents,
data, and copyrights are set forth in
this part 27 and the related clauses in
part 52.
27.104
(f) The Government honors the rights
in data resulting from private developments and limits its demands for such
rights to those essential for Government purposes.
(g) The Government honors rights in
patents, data, and copyrights, and complies with the stipulations of law in
using or acquiring such rights.
(h) Generally, the Government requires that contractors obtain permission from copyright owners before including privately-owned copyrighted
works in data required to be delivered
under Government contracts.
General guidance.
(a) The Government encourages the
maximum practical commercial use of
inventions made while performing Government contracts.
(b) Generally, the Government will
not refuse to award a contract on the
grounds that the prospective contractor may infringe a patent.
(c) Generally, the Government encourages the use of inventions in performing contracts and, by appropriate
contract clauses, authorizes and consents to such use, even though the inventions may be covered by U.S. patents and indemnification against infringement may be appropriate.
(d) Generally, the Government should
be indemnified against infringement of
U.S. patents resulting from performing
contracts when the supplies or services
acquired under the contracts normally
are or have been sold or offered for sale
by any supplier to the public in the
commercial open market or are the
same as such supplies or services with
relatively minor modifications.
(e) The Government acquires supplies
or services on a competitive basis in
accordance with part 6, but it is important that the efforts directed toward
full and open competition not improperly demand or use data relating to private developments.
Subpart 27.2—Patents
27.200 Scope of subpart.
This subpart prescribes policy with
respect to—
(a) Patent infringement liability resulting from work performed by or for
the Government;
(b) Royalties payable in connection
with performing Government contracts; and
(c) Security requirements covering
patent applications containing classified subject matter filed by contractors.
27.201
Authorization and consent.
27.201–1 General.
(a) In those cases where the Government has authorized or consented to
the manufacture or use of an invention
described in and covered by a patent of
the United States, any suit for infringement of the patent based on the
manufacture or use of the invention by
or for the United States by a contractor (including a subcontractor at
any tier) can be maintained only
against the Government in the U.S.
Claims Court and not against the contractor or subcontractor (28 U.S.C.
1498). To ensure that work by a contractor or subcontractor under a Government contract may not be enjoined
by reason of patent infringement, the
Government shall give authorization
and consent in accordance with this
regulation. The liability of the Government for damages in any such suit
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Federal Acquisition Regulation
27.202–2
against it may, however, ultimately be
borne by the contractor or subcontractor in accordance with the terms of
any patent indemnity clause also included in the contract, and an authorization and consent clause does not detract from any patent indemnification
commitment by the contractor or subcontractor. Therefore, both a patent
indemnity clause and an authorization
and consent clause may be included in
the same contract.
(b) The contracting officer shall not
include in any solicitation or contract—
(1) Any clause whereby the Government expressly agrees to indemnify the
contractor against liability for patent
infringement; or
(2) Any authorization and consent
clause when both complete performance and delivery are outside the
United States, its possessions, and
Puerto Rico.
27.201–2 Clauses on authorization and
consent.
(a) The contracting officer shall insert the clause at 52.227–1, Authorization and Consent, in solicitations and
contracts (including those for construction; architect-engineer services;
dismantling, demolition, or removal of
improvements; and noncommon carrier
communication services), except when
using simplified acquisition procedures
or both complete performance and delivery are outside the United States,
its possessions, and Puerto Rico. Although the clause is not required when
simplified acquisition procedures are
used, it may be used with them.
(b) The contracting officer shall insert the clause with its Alternate I in
all R&D solicitations and contracts (including those for construction and architect-engineer services calling exclusively for R&D work or exclusively for
experimental work), unless both complete performance and delivery are outside the United States, its possessions,
and Puerto Rico. When a proposed contract involves both R&D work and supplies or services, and the R&D work is
the primary purpose of the contract,
the contracting officer shall use this
alternate. In all other proposed contracts involving both R&D work and
supplies or services, the contracting officer shall use the basic clause. Also,
when a proposed contract involves either R&D or supplies and materials, in
addition to construction or architectengineer work, the contracting officer
shall use the basic clause.
(c) If the solicitation or contract is
for communication services with a
common carrier and the services are
unregulated and not priced by a tariff
schedule set by a regulatory body, the
contracting officer shall use the clause
with its Alternate II.
[49 FR 12974, Mar. 30, 1984, as amended at 60
FR 34758, July 3, 1995]
27.202
Notice and assistance.
27.202–1
General.
The contractor is required to notify
the contracting officer of all claims of
infringement that come to the contractor’s attention in connection with performing a Government contract. The
contractor is also required, when requested, to assist the Government with
any evidence and information in its
possession in connection with any suit
against the Government, or any claims
against the Government made before
suit has been instituted, on account of
any alleged patent or copyright infringement arising out of or resulting
from the contract performance.
27.202–2 Clause on notice and assistance.
The contracting officer shall insert
the clause at 52.227–2, Notice and Assistance Regarding Patent and Copyright Infringement, in supply, service,
or research and development solicitations and contracts (including construction and architect-engineer contracts) which anticipate a contract
value above the simplified acquisition
threshold, except when complete performance and delivery are outside the
United States, its possessions, and
Puerto Rico, unless the contracts indicate that the supplies or other
deliverables are ultimately to be
shipped into one of those areas.
[60 FR 34758, July 3, 1995]
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27.203
48 CFR Ch. 1 (10–1–03 Edition)
27.203 Patent indemnification of Government by contractor.
27.203–1 General.
(a) To the extent set forth in this section, the Government requires reimbursement for liability for patent infringement arising out of or resulting
from performing construction contracts or contracts for supplies or services that normally are or have been
sold or offered for sale by any supplier
to the public in the commercial open
market or that are the same as such
supplies or services with relatively
minor
modifications.
Appropriate
clauses for indemnification of the Government are prescribed in the following
subsections.
(b) A patent indemnity clause shall
not be used in the following situations:
(1) When the clause at 52.227–1, Authorization and Consent, with its Alternate I, is included in the contract,
except that in contracts calling also
for supplies of the kind described in
paragraph (a) above, a patent indemnity clause may be used solely with respect to such supplies.
(2) When the contract is for supplies
or services (or such items with relatively minor modifications) that
clearly are not or have not been sold or
offered for sale by any supplier to the
public in the commercial open market.
However, a patent indemnity clause
may be included in (i) sealed bid contracts to obtain an indemnity regarding specific components, spare parts, or
services so sold or offered for sale (see
27.203–2(b) below), and (ii) contracts to
be awarded (either by sealed bid or negotiation) if a patent owner contends
that the acquisition would result in
patent infringement and the prospective contractor, after responding to a
solicitation that did not contain an indemnity clause, is willing to indemnify
the Government against such infringement either (A) without increase in
price on the basis that the patent is invalid or not infringed, or (B) for other
good reasons.
(3) When both performance and delivery are to be outside the United States,
its possessions, and Puerto Rico, unless
the contract indicates that the supplies
or other deliverables are ultimately to
be shipped into one of those areas.
(4) When the contract is awarded
using simplified acquisition procedures.
(5) When the contract is solely for architect-engineer work (see part 36).
[49 FR 12974, Mar. 30, 1984, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 34759, July 3, 1995]
27.203–2 Clauses for sealed bid contracts (excluding construction).
(a) Except when prohibited by 27.203–
1(b) above, the contracting officer shall
insert the clause at 52.227–3, Patent Indemnity, in sealed bid contracts for
supplies or services (excluding construction and dismantling, demolition,
and removal of improvements), if the
contracting officer determines that the
supplies or services (or such items with
relatively minor modifications) normally are or have been sold or offered
for sale by any supplier to the public in
the commercial open market. Also the
clause may be included as authorized
in 27.203–1(b)(2)(i).
(b) In solicitations and contracts (excluding those for construction) that
call in part for specific components,
spare parts, or services (or such items
with relatively minor modifications)
that normally are or have been sold or
offered for sale by any supplier to the
public in the commercial open market,
the contracting officer may use the
clause with its Alternate I or II, as appropriate. The choice between Alternate I (identification of excluded
items) and Alternate II (identification
of included items) should be based upon
simplicity, Government administrative
convenience and ease of identification
of the items.
(c) In solicitations and contracts for
communication services and facilities
where performance is by a common
carrier, and the services are unregulated and are not priced by a tariff
schedule set by a regulatory body, use
the basic clause with its Alternate III.
[49 FR 12974, Mar. 30, 1984, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
27.203–3 Negotiated contracts (excluding construction).
A patent indemnity clause is not required in negotiated contracts, (except
construction contracts covered at
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27.204–1
27.203–5), but may be used as discussed
in 27.203–4 below. A decision to omit a
patent indemnity clause in a negotiated fixed-price contract described in
this subsection should be based on a
price consideration to the Government
for forgoing the indemnification rights
normally received by commercial purchasers of the same supplies or services.
[49 FR 12974, Mar. 30, 1984, as amended at 51
FR 2665, Jan. 17, 1986]
27.203–4 Clauses for negotiated contracts (excluding construction).
(a) The contracting officer may insert the clause at 52.227–3, Patent Indemnity—
(1) As authorized in 27.203–1(b)(2)(ii);
and
(2) Except as prohibited by 27.203–
1(b), in solicitations anticipating negotiated contracts (and such contracts)
for supplies or services (excluding construction and dismantling, demolition,
and removal of improvements), if the
contracting officer determines that the
supplies or services (or such items with
relatively minor modifications) normally are or have been sold or offered
for sale by any supplier to the public in
the commercial open market. Ordinarily, the contracting officer, in consultation with the prospective contractor, should be able to determine
whether the supplies or services being
purchased normally are or have been
sold or offered for sale by any supplier
to the public in the commercial open
market. (For negotiated construction
contracts, see 27.203–5).
(b) In solicitations and contracts
that call in part for specific components, spare parts, or services (or such
items with relatively minor modifications) that normally are or have been
sold or offered for sale by any supplier
to the public in the commercial open
market, the contracting officer may
use the clause with its Alternate I or
II, as appropriate. The choice between
Alternate I (identification of excluded
items) and Alternate II (identification
of included items) should be based upon
simplicity, Government administrative
convenience, and the ease of identification of the items.
(c) In solicitations and contracts for
communication services and facilities
where performance is by a common
carrier, and the services are unregulated and are not priced by a tariff
schedule set by a regulatory body, the
clause shall be used with its Alternate
III.
27.203–5 Clause for construction contracts and for dismantling, demolition, and removal of improvements
contracts.
Except as prohibited by 27.203–1(b),
the contracting officer shall insert the
clause at 52.227–4, Patent Indemnity—
Construction Contracts, in solicitations and contracts for construction or
that are fixed-price for dismantling,
demolition, or removal of improvements. If it is determined that the construction will necessarily involve the
use of structures, products, materials,
equipment, processes, or methods that
are nonstandard, noncommercial, or
special, the contracting officer may expressly exclude them from the patent
indemnification by using the basic
clause with its Alternate I.
27.203–6 Clause for Government waiver of indemnity.
If, in the Government’s interest, it is
appropriate to exempt one or more specific United States patents from the
patent indemnity clause, the contracting officer shall obtain written approval from the agency head or designee and shall insert the clause at
52.227–5, Waiver of Indemnity, in solicitations and contracts in addition to
the appropriate patent indemnity
clause. The contracting officer shall
document the contract file with a copy
of the written approval.
27.204 Reporting of royalties—anticipated or paid.
27.204–1
General.
(a)(1) To determine whether royalties
anticipated or actually paid under Government contracts are excessive, improper, or inconsistent with any Government rights in particular inventions, patents, or patent applications,
contracting officers shall require prospective contractors to furnish certain
royalty information and shall require
contractors to furnish certain royalty
reports. Contracting officers shall take
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27.204–2
48 CFR Ch. 1 (10–1–03 Edition)
appropriate action to reduce or eliminate excessive or improper royalties.
(2) Royalty information shall not be
required (except for information under
27.204–3) in sealed bid contracts unless
the need for such information is approved at a level above that of the contracting officer as being necessary for
proper protection of the Government’s
interests.
(b) Any solicitations that may result
in a negotiated contract for which royalty information is desired or for which
cost or pricing data is obtained (see
15.403) should contain a provision requesting information relating to any
proposed charge for royalties. If the response to a solicitation includes a
charge for royalties, the contracting
officer shall, before award of the contract, forward the information relating
to the proposed payments of royalties
to the office having cognizance of patent matters for the contracting activity concerned. The cognizant office
shall promptly advise the contracting
officer of appropriate action. Before
award, the contracting officer shall
take action to protect the Government’s interest with respect to such
royalties, giving due regard to all pertinent factors relating to the proposed
contract and the advice of the cognizant office.
(c) The contracting officer, when considering the approval of a subcontract,
shall require and obtain the same royalty information and take the same action with respect to such subcontracts
in relation to royalties as required for
prime contracts under paragraph (b) of
this subsection. However, consent need
not be withheld pending receipt of advice in regard to such royalties from
the office having cognizance of patent
matters.
(d) The contracting officer shall forward the royalty information and/or
royalty reports received to the office
having cognizance of patent matters
for the contracting activity concerned
for advice as to appropriate action.
[49 FR 12974, Mar. 30, 1984, as amended at 52
FR 19803, May 27, 1987; 56 FR 15152, Apr. 15,
1991; 62 FR 51271, Sept. 30, 1997]
27.204–2 Solicitation provision for royalty information.
The contracting officer shall insert a
solicitation provision substantially as
shown in 52.227–6, Royalty Information,
in any solicitation that may result in a
negotiated contract for which royalty
information is desired or for which cost
or pricing data is obtained under 15.403.
If the solicitation is for communication services and facilities by a common carrier, use the provision with its
Alternate I.
[49 FR 12974, Mar. 30, 1984, as amended at 56
FR 15153, Apr. 15, 1991; 62 FR 51271, Sept. 30,
1997]
27.204–3 Patents—notice
ment as a licensee.
of
(a) When the Government is obligated to pay a royalty on a patent because of a license agreement between
the Government and a patent owner
and the contracting officer knows (or
has reason to believe) that the licensed
patent will be applicable to a prospective contract, the Government should
furnish information relating to the
royalty to prospective offerors since it
serves the interest of both the Government and the offerors. In such situations, the contracting officer should include in the solicitation a notice of the
license, the number of the patent, and
the royalty rate recited in the license.
(b) When the Government is obligated to pay such a royalty, the solicitation should also require offerors to
furnish information indicating whether
or not each offeror is a licensee under
the patent or the patent owner. This
information is necessary so that the
Government may either (1) evaluate an
offeror’s price by adding an amount
equal to the royalty, or (2) negotiate a
price reduction with an offeror-licensee
when the offeror is licensed under the
same patent at a lower royalty rate.
(c) If the Government is obligated to
pay a royalty on a patent involved in
the prospective contract, the contracting officer shall insert in the solicitation, substantially as shown, the
provision at 52.227–7, Patents—Notice
of Government Licensee.
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Federal Acquisition Regulation
27.207–1
27.205 Adjustment of royalties.
(a) If at any time the contracting officer has reason to believe that any
royalties paid, or to be paid, under an
existing or prospective contract or subcontract are inconsistent with Government rights, excessive, or otherwise
improper, the facts shall be promptly
reported to the office having cognizance of patent matters for the contracting activity concerned. The cognizant office shall review the royalties
thus reported and such royalties as are
reported under 27.204 and 27.206 and, in
accordance with agency procedures,
shall either recommend appropriate action to the contracting officer or, if authorized, shall take appropriate action.
(b) In coordination with the cognizant office, the contracting officer
shall promptly act to protect the Government against payment of royalties
on supplies or services—
(1) With respect to which the Government has a royalty-free license;
(2) At a rate in excess of the rate at
which the Government is licensed; or
(3) When the royalties in whole or in
part otherwise constitute an improper
charge.
(c) In appropriate cases, the contracting officer in coordination with
the cognizant office shall obtain a refund pursuant to any refund of royalties clause in the contract (see 27.206)
or negotiate for a reduction of royalties.
(d) For guidance in evaluating information furnished pursuant to 27.204 and
27.205(a) above, see 31.205–37 and 31.311–
34. See also 31.109 regarding advance
understandings on particular cost
items, including royalties.
27.206
Refund of royalties.
27.206–1 General.
When a fixed-price contract is negotiated under circumstances that make
it questionable whether or not substantial amounts of royalties will have to
be paid by the contractor or a subcontractor, such royalties may be included
in the target or contract price, provided the contract specifies that the
Government will be reimbursed the
amount of such royalties if they are
not paid. Such circumstances might include, for example, either a pending
Government anti-trust action or prospective litigation on the validity of a
patent or patents or on the enforceability of an agreement (upon which
the contractor or subcontractor bases
the asserted obligation) to pay the royalties to be included in the target or
contract price.
27.206–2 Clause for refund of royalties.
The contracting officer shall insert
the clause at 52.227–9, Refund of Royalties, in negotiated fixed-price contracts
and solicitations contemplating such
contracts if the contracting officer determines that circumstances make it
questionable whether or not substantial amounts of royalties will have to
be paid by the contractor or a subcontractor at any tier.
27.207
Classified contracts.
27.207–1 General.
(a) Unauthorized disclosure of classified subject matter, whether in patent
applications or resulting from the
issuance of a patent, may be a violation of 18 U.S.C. 792 et seq. (Espionage
and Censorship), and related statutes,
and may be contrary to the interests of
national security.
(b) Upon receipt from the contractor
of a patent application, not yet filed,
that has been submitted by the contractor in compliance with paragraph
(a) or (b) of the clause at 52.227–10, Filing of Patent Applications—Classified
Subject Matter, the contracting officer
shall ascertain the proper security
classification of the patent application.
Upon a determination that the application contains classified subject matter,
the contracting officer shall inform the
contractor of any instructions deemed
necessary or advisable relating to
transmittal of the application to the
United States Patent Office in accordance with procedures in the National
Industrial Security Program Operating
Manual. If the material is classified Secret or higher, the contracting officer
shall make every effort to notify the
contractor of the determination within
30 days, pursuant to paragraph (a) of
the clause.
(c) In the case of all applications
filed under the provisions of this section 27.207, the contracting officer,
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27.207–2
48 CFR Ch. 1 (10–1–03 Edition)
upon receiving the application serial
number, the filing date, and the information furnished by the contractor
under paragraph (d) of the clause at
52.227–10, Filing of Patent Applications—Classified Subject Matter, shall
promptly submit that information to
personnel having cognizance of patent
matters in order that the steps necessary to ensure the security of the application may be taken.
(d) A request for the approval referred to in paragraph (c) of the clause
at 52.227–10, Filing of Patent Applications—Classified Subject Matter, must
be considered and acted upon promptly
by the contracting officer in order to
avoid the loss of valuable patent rights
of the Government or the contractor.
[49 FR 12974, Mar. 30, 1984, as amended at 61
FR 31617, June 20, 1996]
27.207–2 Clause for classified contracts.
The contracting officer shall insert
the clause at 52.227–10, Filing of Patent
Applications—Classified Subject Matter, in all classified solicitations and
contracts and in all solicitations and
contracts where the nature of the work
or classified subject matter involved in
the work reasonably might be expected
to result in a patent application containing classified subject matter.
27.208 Use of patented technology
under the North American Free
Trade Agreement.
(a) The requirements of this section
apply to the use of technology covered
by a valid patent when the patent holder is from a country that is a party to
the North American Free Trade Agreement (NAFTA).
(b) Article 1709(10) of NAFTA generally requires a user of technology
covered by a valid patent to make a
reasonable effort to obtain authorization prior to use of the patented technology. However, NAFTA provides that
this requirement for authorization may
be waived in situations of national
emergency or other circumstances of
extreme urgency, or public noncommercial use.
(c) Section 6 of Executive Order 12889
of December 27, 1993, waives the requirement to obtain advance authorization for—
(1) An invention used or manufactured by or for the Federal Government, except that the patent owner
must be notified whenever the agency
or its contractor, without making a
patent search, knows or has demonstrable reasonable grounds to know
that an invention described in and covered by a valid U.S. patent is or will be
used or manufactured without a license; and
(2) The existence of a national emergency or other circumstances of extreme urgency, except that the patent
owner must be notified as soon as it is
reasonably practicable to do so.
(d) Section 6(c) of Executive Order
12889 provides that the notice to the
patent owner does not constitute an
admission of infringement of a valid
privately owned patent.
(e) When addressing issues regarding
compensation for the use of patented
technology,
Government
personnel
should be advised that NAFTA uses the
term ‘‘adequate remuneration.’’ Executive Order 12889 equates ‘‘remuneration’’ to ‘‘reasonable and entire compensation’’ as used in 28 U.S.C. 1498, the
statute which gives jurisdiction to the
U.S. Court of Federal Claims to hear
patent and copyright cases involving
infringement by the U.S. Government.
(f) Depending on agency procedures,
either the technical/requiring activity
or the contracting officer shall ensure
compliance with the notice requirements of NAFTA Article 1709(10). A
contract award should not be suspended pending notification to the
right holder.
(g) When questions arise regarding
the notice requirements or other matters relating to this section, the contracting officer should consult with
legal counsel.
[61 FR 31648, June 20, 1996]
27.209 Use of patented technology
under the General Agreement on
Tariffs and Trade (GATT).
(a) Article 31 of Annex 1C, Agreement
on Trade-Related Aspects of Intellectual Property Rights, to GATT (Uruguay Round) addresses situations
where the law of a member country allows for use of a patent without authorization from the patent holder, including use by the Government.
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Federal Acquisition Regulation
27.302
(b) The contracting officer should
consult with legal counsel regarding
questions under this section.
[61 FR 39212, July 26, 1996]
Subpart 27.3—Patent Rights Under
Government Contracts
27.300 Scope of subpart.
This subpart prescribes policies, procedures, and contract clauses with respect to inventions made in the performance of work under a Government
contract or subcontract thereunder if a
purpose of the contract or subcontract
is the conduct of experimental, developmental, or research work, except to
the extent statutory requirements necessitate different agency policies, procedures, and clauses as specified in
agency supplemental regulations.
27.301 Definitions.
As used in this subpart—
Invention means any invention or discovery that is or may be patentable or
otherwise protectable under title 35 of
the U.S. Code or any novel variety of
plant that is or may be protectable
under the Plant Variety Protection
Act (7 U.S.C. 2321, et seq.).
Made when used in relation to any invention, means the conception or first
actual reduction to practice of such invention.
Nonprofit organization means a domestic university or other institution
of higher education or an organization
of the type described in section
501(c)(3) of the Internal Revenue Code
of 1954 (26 U.S.C. 501(c)) and exempt
from taxation under section 501(a) of
the Internal Revenue Code (26 U.S.C.
501(a)), or any nonprofit scientific or
educational
organization
qualified
under a State nonprofit organization
statute.
Practical application means to manufacture, in the case of a composition or
product; to practice, in the case of a
process or method; or to operate, in the
case of a machine or system; and, in
each case, under such conditions as to
establish that the invention is being
utilized and that its benefits are, to the
extent permitted by law or Government regulations, available to the public on reasonable terms.
Small business firm means a small
business concern as defined at 15 U.S.C.
632 and implementing regulations of
the Administrator of the Small Business Administration. (For the purpose
of this definition, the size standard
contained in 13 CFR 121.3–8 for small
business contractors and in 13 CFR
121.3–12 for small business subcontractors will be used. See FAR part 19).
Subject invention means any invention
of the contractor conceived or first actually reduced to practice in the performance of work under a Government
contract; provided, that in the case of a
variety of plant, the date of determination defined in section 41(d) of the
Plant Variety Protection Act, 7 U.S.C.
2401(d), must also occur during the period of contract performance.
[49 FR 12974, Mar. 30, 1984, as amended at 54
FR 25063, June 12, 1989 and 55 FR 25525, June
21, 1990; 66 FR 2130, Jan. 10, 2001]
27.302 Policy.
(a) Introduction. The policy of this
section is based on Chapter 18 of title
35, U.S.C. (Pub. L. 95–517, Pub. L. 98–
620, 37 CFR part 401), the Presidential
Memorandum on Government Patent
Policy to the Heads of Executive Departments and Agencies dated February 18, 1983, and Executive Order
12591, which provides that, to the extent permitted by law, the head of each
Executive Department and agency
shall promote the commercialization,
in accord with the Presidential Memorandum, of patentable results of federally funded research by granting to all
contractors, regardless of size, the title
to patents made in whole or in part
with Federal funds, in exchange for
royalty-free use by or on behalf of the
Government. The objectives of this policy are to use the patent system to promote the utilization of inventions arising from federally supported research
or development; to encourage maximum participation of industry in federally supported research and development efforts; to ensure that these inventions are used in a manner to promote free competition and enterprise;
to promote the commercialization and
public availability of the inventions
made in the United States by United
States industry and labor; to ensure
that the Government obtains sufficient
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27.302
48 CFR Ch. 1 (10–1–03 Edition)
rights in federally supported inventions to meet the needs of the Government and protect the public against
nonuse or unreasonable use of inventions; and, to minimize the costs of administering policies in this area.
(b) Contractor right to elect title. Under
the policy set forth in paragraph (a) of
this section, each contractor may,
after disclosure to the Government as
required by the patent rights clause included in the contract, elect to retain
title to any invention made in the performance of work under the contract.
To the extent an agency’s statutory requirements necessitate a different policy, or different procedures and/or contract clauses to effectuate the policy
set forth in paragraph (a) of this section, such policy, procedures, and
clauses shall be contained in or expressly referred to in that agency’s
supplement to this subpart. In addition, a contract may provide otherwise
(1) when the contractor is not located
in the United States or does not have a
place of business located in the United
States or is subject to the control of a
foreign-government (see 27.303(c)), (2)
in exceptional circumstances when it is
determined by the agency that restriction or elimination of the right to retain title in any subject invention will
better promote the policy and objectives of Chapter 18 of title 35, U.S.C.
and the Presidential Memorandum, (3)
when it is determined by a Government
authority which is authorized by statute or Executive order to conduct foreign intelligence or counterintelligence
activities that the restriction or elimination of the right to retain title to
any subject invention is necessary to
protect the security of such activities,
or (4) when the contract includes the
operation of a Government-owned, contractor-operated facility of the Department of Energy primarily dedicated to
the Department’s naval nuclear propulsion or weapons related programs and
all funding agreement limitations
under 35 U.S.C. 202(a)(iv) for agreements with small business firms and
nonprofit organizations are limited to
inventions occurring under the above
two programs.
In the case of small business firms
and nonprofit organizations, when an
agency justifies and exercises the ex-
ception at subparagraph (b)(2) of this
section on the basis of national security, the contract shall provide the
contractor with the right to elect ownership to any invention made under
such contract as provided by the clause
at 52.227–11, Patent Rights—Retention
by the Contractor (Short Form), if the
invention is not classified by the agency within 6 months of the date it is reported to the agency, or within the
same time period the Department of
Energy (DOE) does not, as authorized
by regulation, law or Executive order
or implementing regulations thereto,
prohibit unauthorized dissemination of
the invention. Contracts in support of
DOE’s naval nuclear propulsion program are exempted from this paragraph. When a contract involves a series of separate task orders, an agency
may apply the exceptions at subparagraph (b) (2) or (3) of this section to individual task orders, and it may structure the contract so that modified patent rights clauses will apply to the
task order even though the clause at
52.227–11 is applicable to the remainder
of the work. In those instances when
the Government has the right to acquire title at the time of contracting,
the contractor may, nevertheless, request greater rights to an identified
investion (see 27.304–1(a)). The right of
the contractor to retain title shall, in
any event, be subject to the provisions
of paragraphs (c) through (g) of this
section.
(c) Government license. The Government shall have at least a nonexclusive,
nontransferable,
irrevocable,
paid-up license to practice, or have
practiced for or on behalf of the United
States, any subject invention throughout the world; and may, if provided in
the contract (see Alernative I of the
applicable patent rights clause), have
additional rights to sublicense any foreign government or international organization pursuant to existing treaties
or agreements identified in the contract, or to otherwise effectuate such
treaties or agreements. In the case of
long term contracts, the contract may
also provide (see Alternate II) such
rights with respect to treaties or agreements to be entered into by the Government after the award of the contract.
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Federal Acquisition Regulation
27.302
(d) Government right to receive title. (1)
The Government has the right to receive title to any invention if the contract so provides pursuant to a determination made in accordance with subparagraph (b) (1), (2), (3), or (4) of this
section. In addition, to the extent provided in the patent rights clause, the
Government has the right to receive
title to an invention—
(i) If the contractor has not disclosed
the invention within the time specified
in the clause;
(ii) In any country where the contractor does not elect to retain rights
or fails to elect to retain rights to the
invention within the time specified in
the clause;
(iii) In any country where the contractor has not filed a patent application within the time specified in the
clause;
(iv) In any country where the contractor decides not to continue prosecution of a patent application, pay
maintenance fees, or defend in a reexamination or opposition proceeding on
the patent; and/or
(v) In any country where the contractor no longer desires to retain
title.
(2) For the purposes of this paragraph, election or filing in a European
Patent Office Region or under the Patent Cooperation Treaty constitutes
election or filing in any country covered therein to meet the times specified in the clause, provided that the
Government has the right to receive
title in those countries not subsequently designated by the contractor.
(e) Utilization reports. The Government shall have the right to require
periodic reporting on the utilization or
efforts at obtaining utilization that are
being made by the contractor or its licensees or assignees. Such reporting by
small business firms and nonprofit organizations may be required in accordance with instructions as may be
issued by the Department of Commerce. Agencies should protect the
confidentiality or utilization reports
which are marked with restrictions to
the extent permitted by 35 U.S.C. 205 or
other applicable laws and 37 CFR part
401. Agencies shall not disclose such
utilization reports to persons outside
the Government without permission of
the contractor. Contractors will continue to provide confidential markings
to help prevent inadvertent release
outside the agency.
(f) March-in rights. (1) With respect to
any subject invention in which a contractor has acquired title, contracts
provide that the agency shall have the
right (unless provided otherwise in accordance with 27.304–1(f)) to require the
contractor, an assignee, or exclusive licensee of a subject invention to grant a
nonexclusive, partially exclusive, or
exclusive license in any field of use to
a responsible applicant or applicants,
upon terms that are reasonable under
the circumstances, and if the contractor, assignee, or exclusive licensee
refuses such request, to grant such a license itself, if the agency determines
that such action is necessary—
(i) Because the contractor or assignee
has not taken, or is not expected to
take within a reasonable time, effective steps to achieve practical application of the subject invention in such
field of use;
(ii) To alleviate health or safety
needs which are not reasonably satisfied by the contractor, assignee, or
their licensees;
(iii) To meet requirements for public
use specified by Federal regulations
and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or
(iv) Because the agreement required
by paragraph (g) below has neither
been obtained nor waived, or because a
licensee of the exclusive right to use or
sell any subject invention in the
United States is in breach of its agreement obtained pursuant to paragraph
(g) below.
(2) This right of the agency shall be
exercised only after the contractor has
been provided a reasonable time to
present facts and show cause why the
proposed agency action should not be
taken, and afforded an opportunity to
take appropriate action if the contractor wishes to dispute or appeal the
proposed action, in accordance with
27.304–1(g).
(g) Preference for United States industry. Unless provided otherwise in accordance with 27.304–1(f), contracts provide that no contractor which receives
title to any subject invention and no
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27.302
48 CFR Ch. 1 (10–1–03 Edition)
assignee of any such contractor shall
grant to any person the exclusive right
to use or sell any subject invention in
the United States unless such person
agrees that any products embodying
the subject invention or produced
through the use of the subject invention will be manufactured substantially in the United States. However, in
individual cases, the requirement for
such an agreement may be waived by
the agency upon a showing by the contractor or assignee that reasonable but
unsuccessful efforts have been made to
grant licenses on similar terms to potential licensees that would be likely
to manufacture substantially in the
United States or that under the circumstances domestic manufacture is
not commercially feasible.
(h) Small business preference. (1) Nonprofit organization contractors are expected to use efforts that are reasonable under the circumstances to attract small business licensees. They
are also expected to give small business firms that meet the standard outlined in the clause at 52.227–11, Patent
Rights—Retention by the Contractor
(Short Form), a preference over other
applicants for licenses. What constitutes reasonable efforts to attract
small business licensees will vary with
the circumstances and the nature, duration, and expense of efforts needed to
bring the invention to the market.
Subparagraph (k)(4) of the clause is not
intended, for example, to prevent nonprofit organizations from providing
larger firms with a right of first refusal
or other options in inventions that relate to research being supported under
long-term or other arrangements with
larger companies. Under such circumstances, it would not be reasonable
to seek and to give a preference to
small business licensees.
(2) Small business firms that believe
a nonprofit organzations is not meeting its obligations under the clause
may report their concerns to the Secretary of Commerce. To the extent
deemed appropriate, the Secretary of
Commerce will undertake informal investigation of the concern, and, if appropriate, enter into discussions or negotiations with the nonprofit organization to the end of improving its efforts
in meeting its obligations under the
clause. However, in no event will the
Secretary of Commerce intervene in
ongoing negotiations or contractor decisions concerning the licensing of a
specific subject invention. All the
above investigations, discussions, and
negotiations of the Secretary of Commerce will be in coordinations with
other interested agencies, including
the Small Business Administration;
and in the case of a contract for the operation of a Government-owned, contractor-operated research or production facility, the Secretary of Commerce will coordinate with the agency
responsible for the facility prior to any
discussions or negotiations with the
contractor.
(i) Minimum rights to contractor. (1)
When the Government acquires title to
a subject invention, the contractor is
normally granted a revocable, nonexclusive, royalty-free license to that
invention throughout the world. The
contractor’s license extends to its domestic subsidiaries and affiliates, if
any, within the corporate structure of
which the contractor is a part and includes the right to grant sublicenses of
the same scope to the extent the contractor was legally obligated to do so
at the time the contract was awarded.
The license is transferable only with
the approval of the contracting officer
except when transferred to the successor of that part of the contractor’s
business to which the invention pertains.
(2) The contractor’s domestic license
may be revoked or modified to the extent necessary to achieve expeditious
practical application of the subject invention pursuant to an application for
an exclusive license submitted in accordance with the applicable provisions
in the Federal Property Management
Regulations and agency licensing regulations. This license will not be revoked in that field of use or the geographical areas in which the contractor
has achieved practical application and
continues to make the benefits of the
invention reasonably accessible to the
public. The license in any foreign country may be revoked or modified to the
extent the contractor, its licensees, or
its domestic subsidiaries or affiliates
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Federal Acquisition Regulation
27.303
have failed to achieve practical application in that country. See the procedures at 27.304–1(e).
(j) Confidentiality of inventions. The
publication of information disclosing
an invention by any party before the
filing of a patent application may create a bar to a valid patent. Accordingly, 35 U.S.C. 205 and 37 CFR part 40
provide that Federal agencies are authorized to withhold from disclosure to
the public information disclosing any
invention in which the Federal Government owns or may own a right, title, or
interest (including a nonexclusive license) for a reasonable time in order
for a patent application to be filed.
Furthermore, Federal agencies shall
not be required to release copies of any
document which is part of an application for patent filed with the United
States Patent and Trademark Office or
with any foreign patent office. The
Presidential Memorandum on Government Patent Policy specifies that
agencies should protect the confidentiality of invention disclosures and
patent applications required in performance or in consequence of awards
to the extent permitted by 35 U.S.C. 205
or other applicable laws.
[49 FR 12974, Mar. 30, 1984, as amended at 50
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 2665, Jan. 17, 1986; 54 FR 25063,
June 12, 1989 and 55 FR 25525, June 21, 1990; 62
FR 40237, July 25, 1997]
27.303
Contract clauses.
In contracts (and solicitations therefor) for experimental, developmental,
or research work (but see 27.304–3 regarding contracts for construction
work or architect-engineer services), a
patent rights clause shall be inserted
as follows:
(a)(1) The contracting officer shall
insert the clause at 52.227–11, Patent
Rights—Retention by the Contractor
(Short Form), if all the following conditions apply:
(i) The contractor is a small business
concern or nonprofit organization as
defined in 27.301 or, except for contracts of the Department of Defense
(DOD), the Department of Energy
(DOE), or the National Aeronautics and
Space Administration (NASA), any
other type of contractor.
(ii) No alternative patent rights
clause is used in accordance with paragraph (c) or (d) of this section or 27.304–
2.
(2) To the extent the information is
not required elsewhere in the contract,
and unless otherwise specified by agency supplemental regulations, the contracting officer may modify 52.227–11(f)
to require the contractor to do one or
more of the following:
(i) Provide periodic (but not more
frequently than annually) listings of
all subject inventions required to be
disclosed during the period covered by
the report.
(ii) Provide a report prior to the
closeout of the contract listing all subject inventions or stating that there
were none.
(iii) Provide, upon request, the filing
date, serial number and title, a copy of
the patent application, and patent
number and issue date for any subject
invention in any country in which the
contractor has applied for patents.
(iv) Furnish the Government an irrevocable power to inspect and make
copies of the patent application file
when a Federal Government employee
is a coinventor.
(3) If the acquisition of patent rights
for the benefit of a foreign government
is required under a treaty or executive
agreement, or if the agency head or a
designee determines at the time of contracting that it would be in the national interest to acquire the right to
sublicense foreign governments or
international organizations pursuant
to any existing or future treaty or
agreement, the contracting officer
shall use the clause at 52.227–11, with
its Alternate I. If other rights are necessary to effectuate the treaty or
agreement, Alternate I may be appropriately modified. In long term contracts, Alternate II shall be added if
necessary to effectuate treaties or
agreements to be entered into.
(4) If the contracting officer includes
the clause at 52.227–11, Patent Rights—
Retention by the Contractor (Short
Form), in a contract with a nonprofit
organization for the operation of a
Government-owned facility, the contracting officer will include Alternate
III in lieu of subparagraph (k)(3) of the
clause.
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27.303
48 CFR Ch. 1 (10–1–03 Edition)
(5) If the contract is for the operation
of a Government-owned facility, the
contracting officer may include Alternate IV with the clause at 52.227–11.
(b)(1) The contracting officer shall
insert the clause at 52.227–12, Patent
Rights—Retention by the Contractor
(Long Form), if all the following conditions apply:
(i) The contractor is other than a
small business firm or nonprofit organization.
(ii) No alternative clause is used in
accordance with paragraph (c) or (d) of
this section or 237.304–2.
(iii) The contracting agency is one of
those
excepted
under
subdivision
(a)(1)(i) of this section.
(2) If the acquisition of patent rights
for the benefit of a foreign government
is required under a treaty or executive
agreement or if the agency head or a
designee determines at the time of contracting that it would be in the national interest to acquire the right to
sublicense foreign governments or
international organizations pursuant
to any existing or future treaty or
agreement, the contracting officer
shall use the clause at 52.227–12, with
its Alternate I. If other rights are necessary to effectuate the treaty or
agreement, Alternate I may be appropriately modified. In long term contracts, Alternate II shall be added if
necessary to effectuate treaties or
agreements to be entered into.
(c)(1) The contracting officer shall insert the clause at 52.227–13, Patent
Rights—Acquisition by the Government, if any of the following conditions
apply:
(i) No alternative clause is used in
accordance with subparagraphs (c) (2)
and (4) or paragraph (d) of this section
or 27.304–2.
(ii) The work is to be performed outside the United States, its possessions,
and Puerto Rico by contractors that
are not small business firms, nonprofit
organizations as defined in 27.301, or
domestic firms. For purposes of this
subparagraph, the contracting officer
may presume that a contractor is not a
domestic firm unless it is known that
the firm is not foreign owned, controlled, or influenced. (See 27.304–4(a)
regarding subcontracts with U.S.
firms.)
(2) Pursuant to their statutory requirements, DOE and NASA may specify in their supplemental regulations
use of a modified version of the clause
at 52.227–13 in contracts with other
than small business concerns or nonprofit organizations.
(3) If the acquisition of patent rights
for the benefit of a foreign government
is required under a treaty or executive
agreement or if the agency head or a
designee determines at the time of contracting that it would be in the national interest to acquire the right to
sublicense foreign governments or
international organizations pursuant
to any existing or future treaty or
agreement, the contracting officer
shall use the clause with its Alternate
I. If other rights are necessary to effectuate the treaty or agreement, Alternate I may be appropriately modified.
In long term contracts, Alternate II
shall be added if necessary to effectuate treaties or agreements to be entered into.
(4) Section 401 of title 37 of the Code
of Federal Regulations provides that in
contracts with small business firms
and nonprofit organizations, when an
agency exercises the exceptions at
27.302(b) (2) or (3) it shall use the clause
at 52.227–11, with such modifications as
are necessary to address the exceptional circumstances or concerns which
led to the use of the exception. The
greater rights determinations provision of 52.227–13(b)(2) shall be included
in the modified clause.
(d)(1) If one of the following applies,
the contracting officer may insert the
clause prescribed in paragraph (a) or
(b) of this section as otherwise applicable, agency supplemental regulations
may provide another clause and specify
its use, or the contracting officer shall
insert the clause prescribed in paragraph (c) of this section:
(i) The contractor is not located in
the United States or does not have a
place of business located in the United
States or is subject to the control of a
foreign government.
(ii) There are exceptional circumstances and the agency head determines that restriction or elimination
of the right to retain title to any subject invention will better promote the
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Federal Acquisition Regulation
27.304–1
policy and objectives of chapter 18 of
title 35 of the United States Code.
(iii) It is determined by a Government authority which is authorized by
statute or executive order to conduct
foreign intelligence or counterintelligence activities that restriction or
elimination of the right to retain any
subject invention is necessary to protect the security of such activities.
(iv) The contract includes the operation of a Government-owned, contractor-operated facility of the Department of Energy primarily dedicated to
that Department’s naval nuclear propulsion or weapons related programs.
(2) Before using any of the exceptions
under subparagraph (d)(1) of this section in a contract with a small business firm or a nonprofit organization
and before using the exception of subdivision (d)(1)(ii) of this section for any
contractor, the agency shall prepare a
written determination, including a
statement of facts supporting the determination, that the conditions identified in the exception exist. A separate
statement of facts shall be prepared for
each exceptional circumstances determination, except that in appropriate
cases a single determination may apply
to both a contract and any subcontract
issued under it, or to any contract to
which an exception is applicable. In
cases when subdivision (d)(1)(ii) of this
section is used, the determination shall
also include an analysis justifying the
determination. This analysis should
address, with specificity, how the alternate provisions will better achieve the
objectives set forth in 35 U.S.C. 200. For
contracts with small business firms
and nonprofit organizations, a copy of
each determination, statement of facts,
and, if applicable, analysis shall be
promptly provided to the contractor or
offeror along with a notification of its
appeal rights under 35 U.S.C. 202(b)(4)
in accordance with 27.304–1(a). In the
case of small business and nonprofit
contractors, except for determination
under subdivision (d)(1)(iii) of this section, the agency shall, within 30 days
after award of a contract, also provide
copies of each determination, statement of fact, and analysis to the Secretary of Commerce. These shall be
sent within 30 days after the award of
the contract to which they pertain. In
the case of contracts with small business concerns, copies will also be sent
to the Chief Counsel for Advocacy of
the Small Business Administration.
(e) For those agencies excepted under
paragraph (a)(1)(i) of this section, only
small business firms or non-profit organizations qulaify for the clause at
52.227–11. If one of these agencies has
reason to question the status of the
prospective contractor, the agency
may file a protest in accordance with
13 CFR 121.3–5 if small business firm
status is questioned, or require the prospective contractor to furnish evidence
of its status as a nonprofit organization.
(f) Alternates I and II to the clauses
at 52.227–11, 52.227–12, and 52–227–13, as
applicable, may be modified to make
clear that the rights granted to the foreign government or international organization may be for additional rights
beyond a license or sublicense if so required by the applicable treaty or
international agreement. For example,
in some cases exclusive licenses or
even assignment of title in the foreign
country involved might be required. In
addition, an Alternate may be modified
to provide for direct licensing by the
contractor of the foreign government
or international organization.
[54 FR 25065, June 12, 1989 and 55 FR 25525,
June 21, 1990; 62 FR 236, Jan. 2, 1997]
27.304
Procedures.
27.304–1
General.
(a) Contractor appeals of exceptions. (1)
In accordance with 35 U.S.C. 202(b)(4), a
small business firm or nonprofit organization contractor has the right to an
administrative review of a determination to use one of the exceptions at
27.303(d)(1)(i)–(iv) if the contractor believes that a determination is either (i)
contrary to the policies and objectives
of this subsection or (ii) constitutes an
abuse of discretion by the agency. Subparagraphs (a) (2) thru (7) of this subsection specify the procedures to be
followed by contractors and agencies in
such cases. The assertion of such a
claim by the contractor shall not be
used as a basis for withholding or delaying the award of a contract or for
suspending performance under an
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27.304–1
48 CFR Ch. 1 (10–1–03 Edition)
award. However, pending final resolution of the claim, the contract may be
issued with the patent rights provision
proposed by the agency; but should the
final decision be in favor of the contractor, the contract will be amended
accordingly and the amendment made
retroactive to the effective date of the
contract.
(2) A contractor may appeal a determination by providing written notice
to the agency within 30 working days
from the time it receives a copy of the
agency’s determination, or within such
longer time as an agency may specify
in its regulations. The contractor’s notice should specifically identify the
basis for the appeal.
(3) The appeal shall be decided by the
head of the agency or designee who is
at a level above the person who made
the determination. If the notice raises
a genuine dispute over the material
facts, the head of the agency or designee shall undertake or refer the matter for fact-finding.
(4) Fact-finding shall be conducted in
accordance with procedures established
by the agency. Such procedures shall
be as informal as practicable and be
consistent with principles of fundamental fairness. The procedures should
afford the contractor the opportunity
to appear with counsel, submit documentary evidence, present witnesses,
and confront such persons as the agency may rely upon. A transcribed record
shall be made and shall be available at
cost to the contractor upon request.
The requirement for a transcribed
record may be waived by mutual agreement of the contractor and the agency.
(5) The official conducting the factfinding shall prepare or adopt written
findings of fact and transmit them to
the head of the agency or designee
promptly after the conclusion of the
fact-finding proceeding along with a
recommended decision. A copy of the
findings of fact and recommended decision shall be sent to the contractor by
registered or certified mail.
(6) Fact-finding should be completed
within 45 working days from the date
the agency receives the contractor’s
written notice.
(7) When fact-finding has been conducted, the head of the agency or designee shall base his or her decision on
the facts found, together with any argument submitted by the contractor,
agency officials, or any other information in the administrative record. In
cases referred for fact-finding, the
agency head or designee may reject
only those facts that have been found
to be clearly erroneous, but must explicitly state the rejection and indicate
the basis for the contrary finding. The
agency head or designee may hear oral
arguments after fact-finding provided
that the contractor or contractor’s attorney or representative is present and
given an opportunity to make arguments and rebuttal. The decision of the
agency head or designee shall be in
writing and if it is unfavorable to the
contractor, include an explanation of
the basis of the decision. The decision
of the agency or designee shall be made
within 30 working days after fact-finding or, if there was no fact-finding,
within 45 working days from the date
the agency received the contractor’s
written notice. In accordance with 35
U.S.C. 203, a small business firm or a
nonprofit organization contractor adversely affected by a determination
under this section may, at any time
within 60 days after the determination
is issued, file a petition in the United
States Claims Court, which shall have
jurisdiction to determine the appeal on
the record and to affirm, reverse, remand, or modify, as appropriate, the
determination of the Federal agency.
(b) Greater rights determination. Whenever the contract contains the clause
at 52.227–13, Patent Rights—Acquisition by the Government, the contractor (or an employee-inventor of the
contractor after consultation with the
contractor) may request greater rights
to an identified invention within the
period specified in such clause. Requests for greater rights may be granted if the agency head or designee determines that the interests of the United
States and the general public will be
better served thereby. In making such
determinations, the agency head or
designee shall consider at least the following objectives:
(1) Promoting the utilization of inventions arising from federally-supported research and development.
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Federal Acquisition Regulation
27.304–1
(2) Ensuring that inventions are used
in a manner to promote full and open
competition and free enterprise.
(3) Promoting public availability of
inventions made in the United States
by United States industry and labor.
(4) Ensuring that the Government obtains sufficient rights in federally supported inventions to meet the needs of
the Government and protect the public
against nonuse or unreasonable use of
inventions.
(c) Retention of rights by inventor. If
the contractor does not elect to retain
title to a subject invention, the agency
may consider and, after consultation
with the contractor, grant requests for
retention or rights by the inventor. Retention of rights by the inventor will
be subject to the conditions in paragraph (d) (except subparagraphs (d)(1)),
(f)(4), and paragraphs (h), (i), and (j) of
the applicable Patent Rights—Retention by the Contractor clause.
(d) Government assignment to contractor of rights in Government employees’
inventions. When a Government employee is a coinventor of an invention
made under a contract with a small
business firm or nonprofit organization, the agency employing the coinventor may transfer or reassign
whatever right it may acquire in the
subject invention from its employee to
the contractor, subject at least to the
conditions of 35 U.S.C. 202–204.
(e) Additional requirements. (1) If it is
desired to have the right to require any
of the following, when using the clause
at 52.227–11, Patent Rights—Retention
by the Contractor (Short Form), the
contract shall be modified to require
the contractor to do one or more of the
following:
(i) Provide periodic (but not more
frequently than annually) listings of
all subject inventions required to be
disclosed during the period covered by
the report.
(ii) Provide a report prior to the
closeout of the contract listing all subject inventions or stating that there
were none.
(iii) Provide, upon request, the filing
date, serial number, and title; a copy of
the patent application; and patent
number and issue date for any subject
invention in any country in which the
contractor has applied for patents.
(iv) Furnish the Government an irrevocable power to inspect and make
copies of the patent application file
when a Federal Government employee
is a coinventor.
(2) To the extent provided by such
modification (and automatically under
the terms of the clauses at 52.227–12,
Patent Rights—Retention by the Contractor (Long Form), and 52.227–13, Patent Rights—Acquisition by the Government), the contracting officer may require the contractor to—
(i) Furnish a copy of each subcontract containing a patent rights
clause (but if a copy of a subcontract is
furnished under another clause, a duplicate shall not be requested under the
patent rights clause);
(ii) Submit interim and final invention reports listing subject inventions
and notifying the contracting officer of
all subcontracts awarded for experimental, developmental, or research
work;
(iii) Submit information regarding
the filing date, serial number and title,
and, upon request, a copy of the patent
application, and patent number and
issue date for any subject invention in
any country for which the contractor
has retained title; and
(iv) Submit periodic reports on the
utilization of a subject invention or on
efforts at obtaining utilization that are
being made by the contractor or its licensees or assignees.
(3) The contractor is required to deliver to the contracting officer an instrument confirmatory of all rights to
which the Government is entitled and
to furnish the Government an irrevocable power to inspect and make copies of the patent application file. Such
delivery should normally be made
within 6 months after filing each patent application, or within 6 months
after submitting the invention disclosure if the application has been previously filed.
(f) Revocation or modification of contractor’s minimum rights. Before revocation or modification of the contractor’s
license in accordance with 27.302(i)(2),
the contracting officer will furnish the
contractor a written notice of intention to revoke or modify the license,
and the contractor will be allowed 30
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27.304–1
48 CFR Ch. 1 (10–1–03 Edition)
days (or such other time as may be authorized by the contracting officer for
good cause shown by the contractor)
after the notice to show cause why the
license should not be revoked or modified. The contractor has the right to
appeal, in accordance with applicable
regulations in 37 CFR part 404 and
agency licensing regulations, any decisions concerning the revocation or
modification.
(g) Exercise of march-in rights. The following procedures shall govern the exercise of the march-in rights set forth
in 35 U.S.C. 203, paragraph (j) of the
Patent Rights—Retention by the Contractor
clauses,
and
subdivision
(c)(1)(ii) of the Patent Rights—Acquisition by the Government clause:
(1) When the agency receives information that it believes might warrant
the exercise of march-in rights, before
initiating any march-in proceeding in
accordance with the procedures of subparagraph (g)(2) of this section, it shall
notify the contractor in writing of the
information and request informal written or oral comments from the contractor. In the absence of any comments from the contractor within 30
days the agency may, at its discretion,
initiate the procedures below. If a comment is received, whether or not within
30 days, then the agency shall, within
60 days after it receives the comment,
either initiate the procedures below or
notify the contractor, in writing, that
it will not pursue march-in rights
based on the information about which
the contractor was notified.
(2) A march-in proceeding shall be
initiated by the issuance of a written
notice by the agency head or a designee
to the contractor and its assignee or
exclusive licensee, as applicable and if
known to the agency, stating that the
Government has determined to exercise
march-in rights. The notice shall state
the reasons for the proposed march-in,
in terms sufficient to put the contractor on notice of the facts upon
which the action is based, and shall
specify the field or fields of use in
which the Government is considering
requiring licensing. The notice shall
advise the contractor, assignee, or exclusive licensee of its rights as set
forth in this section and in any supplemental agency regulations or proce-
dures. The determination to exercise
march-in rights shall be made by the
head of the agency or designee.
(3) Within 30 days after the receipt of
the written notice of march-in, the
contractor, its assignee or exclusive licensee, may submit in person, in writing, or through a representative information or argument in opposition to
the proposed march-in, including any
additional specific information which
raises a genuine dispute over the material facts upon which the march-in is
based. If the information presented
raises a genuine dispute over the material facts, the head of the agency or
designee shall undertake or refer the
matter to another official for fact-finding.
(4) Fact-finding shall be conducted in
accordance with the procedures established by the agency. Such procedures
shall be as informal as practicable and
be consistent with principles of fundamental fairness. The procedures should
afford the contractor the opportunity
to appear with counsel, submit documentary evidence, present witnesses,
and confront such persons as the agency may present. A transcribed record
shall be made and shall be available at
cost to the contractor upon request.
The requirement for a transcribed
record may be waived by mutual agreement of the contractor and the agency.
Any portion of the march-in proceeding, including a fact-finding hearing that involves testimony or evidence relating to the utilization or efforts at obtaining utilization that are
being made by the contractor, its assignee, or licensees shall be closed to
the public, including potential licensees. In accordance with 35 U.S.C.
202(c)(5), agencies shall not disclose
any such information obtained during
a march-in proceeding to persons outside the Government except when such
release is authorized by the contractor,
its assignee, or licensee.
(5) The official conducting the factfinding shall prepare or adopt written
findings of fact and transmit them to
the head of the agency or designee
promptly after the conclusion of the
factfinding proceeding along with a
recommended determination. A copy of
the findings of fact shall be sent to the
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Federal Acquisition Regulation
27.304–2
contractor, its assignee, or exclusive licensee by registered or certified mail.
The contractor, its assignee or exclusive licensee, and agency representatives will be given 30 days to submit
written arguments to the head of the
agency or designee; and, upon request
by the contractor, oral arguments will
be held before the agency head or designee that will make the final determination.
(6) In case in which fact-finding has
been conducted, the head of the agency
or designee shall base his or her determination on the facts found, together
with any other information and written or oral arguments submitted by the
contractor, its assignee or exclusive licensee and agency representatives, and
any other information in the administrative record. The consistency of the
exercise of march-in rights with the
policy and objectives of 35 U.S.C. 200
shall also be considered. In cases referred for fact-finding, the head of the
agency or designee may reject only
those facts that have been found to be
clearly erroneous, but must explicitly
state the rejection and indicate the
basis for the contrary finding. Written
notice of the determination whether
march-in rights will be exercised shall
be made by the head of the agency or
designee and sent to the contractor, its
assignee, or exclusive licensee, by certified or registered mail within 90 days
after the completion of fact-finding or
90 days after oral arguments, whichever is later, or the proceedings will be
deemed to have been terminated and
thereafter no march-in based on the
facts and reasons upon which the proceeding was initiated may be exercised.
(7) An agency may, at any time, terminate a march-in proceeding if it is
satisfied that it does not wish to exercise march-in rights.
(8) These procedures shall also apply
to the exercise of march-in rights
against inventors receiving title to
subject inventions under 35 U.S.C.
202(d) and, for that purpose, the term
contractor, as used herein, shall be
deemed to include the inventory and
the term exclusive licensee shall be
deemed to include partially exclusive
licensee.
(9) An agency determination unfavorable to the contractor, its assignee, or
exclusive licensee shall be held in abeyance pending the exhaustion of appeals
or petitions filed under 35 U.S.C. 203(2).
(h) Licenses and assignments under
contracts with nonprofit organizations. If
the contractor is a nonprofit organization, the clause at 52.227–11 provides
that certain contractor actions require
agency approval, as specified below.
Agencies shall provide procedures for
obtaining such approval.
Rights to a subject invention in the
United States may not be assigned
without the approval of the contracting agency, except where such assignment is made to an organization
which has as one of its primary functions the management of inventions
(provided that such assignee will be
subject to the same provisions as the
contractor).
[54 FR 25066, June 12, 1989 and 55 FR 25525,
June 21, 1990]
27.304–2 Contracts placed by or for
other Government agencies.
The following procedures apply unless agency agreements provide otherwise:
(a) When a Government agency requests another Government agency to
award a contract on its behalf, the request should explain any special circumstances surrounding the contract
and specify and furnish the patent
rights clause to be used. Normally, the
clause will be in accordance with the
policies and procedures of this subpart.
If, however, the request states that a
clause of the requesting agency is required (e.g., because of statutory requirements, a deviation, or exceptional
circumstances) that clause shall be
used rather than those of this subpart.
(1) If the request states that an agency clause is required and the work to
be performed under the contract is not
severable and is funded wholly or in
part by the agency, then that agency
clause and no other patent rights
clause shall be included in the contract.
(2) If the request states that an agency clause is required, and the work to
be performed under the contract is severable and is only in part for the requesting agency, then the work which
is on behalf of the requesting agency
shall be identified in the contract, and
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27.304–3
48 CFR Ch. 1 (10–1–03 Edition)
the agency clause shall be made applicable to that portion. In such situations, the remaining portion of the
work (for the agency awarding the contract) shall likewise be identified and
the appropriate patent rights clause (if
required) shall be made applicable to
that remaining portion.
(3) If the request states that an agency clause is not required in any resulting contract, then the appropriate patent rights clause shall be used, if a patent rights clause is required.
(b) Where use of the specified clause,
or any modification, waiver, or omission of the Government’s rights under
any provisions therein, requires a written determination, the reporting of
such determination, or a deviation, if
any such acts are required in accordance with 27.303(d)(2), it shall be the responsibility of the requesting agency
to make such determination, submit
the required reports, and obtain such
deviations, in consultation with the
contracting agency, unless otherwise
agreed between the contracting and requesting agencies. However, a deviation to a specified clause of the requesting agency shall not be made
without prior approval of that agency.
(c) The requesting agency may require, and provide instructions regarding, the forwarding or handling of any
invention disclosures or other reporting requirements of the specified
clauses. Normally the requesting agency shall be responsible for the handling
of any disclosed inventions, including
the filing of patent applications where
the Government receives title, and the
custody, control, and licensing thereof,
unless provided otherwise in the instructions or other agreements with
the contracting agency.
[49 FR 12974, Mar. 30, 1984, as amended at 54
FR 25068, June 12, 1989 and 55 FR 25525, June
21, 1990]
27.304–3 Contracts for construction
work or architect-engineer services.
(a) If a solicitation or contract for
construction work or architect-engineer services has as a purpose the performance of experimental, developmental, or research work or test and
evaluation studies involving such work
and calls for, or can be expected to involve, the design of a Government fa-
cility or of novel structures, machines,
products, materials, processes, or
equipment
(including
construction
equipment), it shall include a patent
rights clause selected in accordance
with the policies and procedures of this
subpart 27.3.
(b) A solicitation or contract for construction work or architect-engineer
services that calls for or can be expected to involve only standard types of
construction to be built by previously
developed equipment, methods, and
processes shall not include a patent
rights clause. The term standard types
of construction means construction in
which the distinctive features, if any,
in all likelihood will amount to no
more than—
(1) Variations in size, shape, or capacity of otherwise structurally orthodox and conventionally acting structures or structural groupings; or
(2) Purely artistic or esthetic (as distinguished from functionally significant) architectural configurations and
designs of both structural and nonstructural members or groupings,
which may or may not be sufficiently
novel or meritorious to qualify for design protection under the design patent
or copyright laws.
27.304–4 Subcontracts.
(a) The policies and procedures covered by this subpart apply to all contracts at any tier. Hence, a contractor
awarding a subcontract and a subcontractor awarding a lower-tier subcontract that has as a purpose the conduct of experimental, developmental,
or research work is required to determine the appropriate patent rights
clause to be included that is consistent
with these policies and procedures.
Generally, the clause at either 52.227–
11, 52.227–12, or 52.227–13 is to be used
and will be so specified in the patent
rights clause contained in the highertier contract, but the contracting officer may direct the use of a particular
patent rights clause in any lower-tier
contract in accordance with the policies and procedures of this subpart. For
instance, when the clause at 52.227–13 is
in the prime contract because the work
is to be performed overseas, any subcontract with a nonprofit organization
would contain the clause at 52.227–11.
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Federal Acquisition Regulation
27.305–1
(b) Whenever a prime contractor or a
subcontractor considers the inclusion
of a particular clause in a subcontract
to be inappropriate or a subcontractor
refuses to accept the proffered clause,
the matter shall be resolved by the
agency contracting officer in consultation with counsel.
(c) It is Government policy that contractors shall not use their ability to
award subcontracts as economic leverage to acquire rights for themselves in
inventions
resulting
from
subcontracts.
27.304–5 Appeals.
(a) The agency official initially authorized to take any of the following
actions shall provide the contractor
with a written statement of the basis
for the action at the time the action is
taken, including any relevant facts
that were relied upon in taking the action:
(1) A refusal to grant an extension to
the invention disclosure period under
subparagraph (c)(4) of the clauses at
52.227–11 and 52.227–12.
(2) A request for a conveyance of title
to the Government under 27.302(d)(1)(i)
through (v).
(3) A refusal to grant a waiver under
27.302(g), Preference for U.S. Industry.
(4) A refusal to approve an assignment under 27.304–1(h)(1).
(5) A refusal to approve an extension
of the exclusive license period under
27.304–1(h)(2).
(b) Each agency shall establish and
publish procedures under which any of
the agency actions listed in paragraph
(a) above may be appealed to the head
of the agency or designee. Review at
this level shall consider both the factual and legal basis for the action and
its consistency with the policy and objectives of 35 U.S.C. 200–206 and this
subpart.
(c) Appeals procedures established
under paragraph (b) of this subsection
shall include administrative due process procedures and standards for factfinding at least comparable to those
set forth in 37 CFR part 401.6(e)–(g)
whenever there is a dispute as to the
factual basis for an agency request for
a conveyance of title under 27.302(d)(1)
(i) through (v) including any dispute as
to whether or not an invention is a subject invention.
(d) To the extent that any of the actions described in paragraph (a) above
are subject to appeal under the Contract Disputes Act, the procedures
under that Act will satisfy the requirements of paragraphs (b) and (c) above.
[49 FR 12974, Mar. 30, 1984, as amended at 54
FR 25068, June 12, 1989 and 55 FR 25525, June
21, 1990]
27.305 Administration of patent rights
clauses.
27.305–1
Patent rights follow-up.
(a) It is important that the Government and the contractor know and exercise their rights in inventions conceived or first actually reduced to
practice in the course of or under Government contracts in order to ensure
their expeditious availability to the
public and to enable the Government,
the contractor, and the public to avoid
unnecessary payment of royalties and
to defend themselves against claims
and suits for patent infringement. To
attain these ends, contracts having a
patent rights clause should be so administered that—
(1) Inventions are identified, disclosed, and reported as required by the
contract, and elections are made;
(2) The rights of the Government in
such inventions are established;
(3) Where patent protection is appropriate, patent applications are timely
filed and prosecuted by contractors or
by the Government;
(4) The rights of the Government in
filed patent applications are documented by formal instruments such as
licenses or assignments; and
(5) Expeditious commercial utilization of such inventions is achieved.
(b) If a subject invention is made
under funding agreements of more than
one agency, at the request of the contractor or on their own initiative, the
agencies shall designate one agency as
responsible for administration of the
rights of the Government in the invention.
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27.305–2
27.305–2
48 CFR Ch. 1 (10–1–03 Edition)
Follow-up by contractor.
(a) Contractor procedures. If required
by the applicable clause, the contractor shall establish and maintain effective procedures to ensure its patent
rights obligations are met and that
subject inventions are timely identified and disclosed, and when appropriate, patent applications are filed.
(b) Contractor reports. Contractors
shall submit all reports required by the
patent rights clause to the contracting
officer or other representative designated for such purpose in the contract. Agencies may, in their implementing instructions, provide specific
forms for use on an optional basis for
such reporting.
27.305–3
Follow-up by Government.
(a) Agencies shall maintain appropriate follow-up procedures to protect
the Government’s interest and to
check that subject inventions are identified and disclosed, and when appropriate, patent applications are filed,
and that the Government’s rights
therein are established and protected.
Follow-up activities for contracts that
include a clause referenced in 27.304–2
shall be coordinated with the appropriate agency.
(b) The contracting officer administering the contract (or other representative specifically designated in
the contract for such purpose) is responsible for receiving invention disclosures, reports, confirmatory instruments, notices, requests, and other
documents and information submitted
by the contractor pursuant to a patent
rights clause. If the contractor fails to
furnish documents or information as
called for by the clause within the time
required, the contracting officer shall
promptly request the contractor to
supply the required documents or information and, if the failure persists,
shall take appropriate action to secure
compliance. Invention disclosures, reports, confirmatory instruments, notices, requests, and other documents
and information relating to patent
rights clauses shall be promptly furnished by the contracting officer administering the contract (or other designee) to the procuring agency or contracting activity for which the pro-
curement was made for appropriate action.
(c) Contracting activities shall establish appropriate procedures to detect
and correct failures by the contractor
to comply with its obligations under
the patent rights clauses, such as failures to disclose and report subject inventions, both during and after contract performance. Ordinarily a contractor should have written instructions for its employees covering compliance with these contract obligations. Government effort to review and
correct contractor compliance with its
patent rights obligations should be directed primarily towards contracts
that, because of the nature of the research, development, or experimental
work or the large dollar amount spent
on such work, are more likely to result
in subject inventions significant in
number or quality, and towards contracts when there is reason to believe
the contractors may not be complying
with their contractual obligations.
Other contracts may be reviewed using
a spot-check method, as feasible. Appropriate follow-up procedures and activities may include the investigation
or review of selected contracts or contractors by those qualified in patent
and technical matters to detect failures to comply with contract obligations.
(d) Follow-up activities should include, where appropriate, use of Government patent personnel—
(1) To interview agency technical
personnel to identify novel developments made in contracts;
(2) To review technical reports submitted by contractors with cognizant
agency technical personnel;
(3) To check the Official Gazette of
the United States Patent and Trademark Office and other sources for patents issued to the contractor in fields
related to its Government contracts;
and
(4) If additional information is required, to have cognizant Government
personnel interview contractor personnel regarding work under the contract involved, observe the work on
site, and inspect laboratory notebooks
and other records of the contractor related to work under the contract.
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Federal Acquisition Regulation
27.305–5
(e) If it is determined that a contractor or subcontractor does not have
a clear understanding of the rights and
obligations of the parties under a patent rights clause, or that its procedures for complying with the clause are
deficient, a post-award orientation conference or letter should ordinarily be
used to explain these rights and obligations (see subpart 42.5). When a contractor fails to establish, maintain, or
follow effective procedures for identifying, disclosing, and, when appropriate, filing patent applications on inventions (if such procedures are required by the patent rights clause), or
after appropriate notice fails to correct
any deficiency, the contracting officer
may require the contractor to make
available
for
examination
books,
records, and documents relating to the
contractor’s inventions in the same
field of technology as the contract effort to enable a determination of
whether there are such inventions and
may invoke the withholding of payments provision (if any) of the clause.
The withholding of payments provision
(if any) of the patent rights clause or of
any other contract clause may also be
invoked if the contractor fails to disclose a subject invention. Significant
or repeated failures by a contractor to
comply with the patent rights obligation in its contracts shall be documented and made a part of the general
file (see 4.801(c)(3)).
27.305–4 Conveyance
of
invention
rights acquired by the Government.
(a) Agencies are responsible for those
procedures necessary to protect the
Government’s interest in subject inventions. When the Government acquires the entire right, title, and interest in an invention by contract, this is
normally accomplished by an assignment either from each inventor to the
contractor and from the contractor to
the Government, or from the inventor
to the Government with the consent of
the contractor, so that the chain of
title from the inventor to the Government is clearly established. When the
Government’s rights are limited to a license, there should be a confirmatory
instrument to that effect.
(b) The form of conveyance of title
from the inventor to the contractor
must be legally sufficient to convey
the rights the contractor is required to
convey to the Government. Agencies
may, by supplemental instructions, develop suitable assignments, licenses,
and other papers evidencing any rights
of the Government in patents or patent
applications, including such instruments as may be required to be recorded in the Statutory Register or
documented in the Government Register maintained by the U.S. Patent
and Trademark Office pursuant to Executive Order 9424, February 18, 1944.
27.305–5 Publication or release of invention disclosures.
(a) In accordance with the policy at
27.302(i), to protect their mutual interests, contractors and the Government
should cooperate in deferring the publication or release of invention disclosures until the filing of the first patent
application, and use their best efforts
to achieve prompt filing when publication or release may be imminent. The
Government will, on its part and to the
extent authorized by 35 U.S.C. 205,
withhold from disclosure to the public
any invention disclosures reported
under the patent rights clauses of
52.227–11, 52.227–12, or 52.227–13 for a reasonable time in order for patent applications to be filed. The policy in
27.302(i) regarding protection of confidentiality shall be followed.
(b) The Government will also use reasonable efforts to withhold from disclosure to the public for a reasonable time
other information disclosing a reported
invention included in any data delivered pursuant to contract requirements; provided, that the contractor
notifies the agency as to the identity
of the data and the invention to which
it relates at the time of delivery of the
data. Such notification must be to both
the contracting officer and any patent
representative to which the invention
is reported, if other than the contracting officer.
(c) As an additional protection for
small business firms and nonprofit organizations 37 CFR part 401 prescribes
that agencies shall not disclose or release, in accordance with 35 U.S.C. 205,
for a period of 18 months from the filing date of the application to third parties pursuant to request under the
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27.306
48 CFR Ch. 1 (10–1–03 Edition)
Freedom of Information Act or otherwise copies of any document which the
agency obtained under contract which
is part of an application for patent
with the U.S. Patent and Trademark
Office or any foreign patent office filed
by the contractor (or its assignees, licensees, or employees) on a subject invention to which the contractor has
elected to retain title. This prohibition
does not extend to disclosure to other
Government agencies or contractors of
Government agencies under an obligation to maintain such information in
confidence.
[49 FR 12974, Mar. 30, 1984, as amended at 54
FR 25069, June 12, 1989 and 55 FR 25525, June
21, 1990]
27.306 Licensing background patent
rights to third parties.
(a) A contract with a small business
firm or nonprofit organization will not
contain a provision allowing the Government to require the licensing to
third parties of inventions owned by
the contractor that are not subject inventions unless such provision has been
approved by the agency head and written justification has been signed by the
agency head. Any such provision will
clearly state whether the licensing
may be required in connection with the
practice of a subject invention, a specifically identified work object, or
both. The agency head may not delegate the authority to approve such provisions or to sign justifications required for such provisions.
(b) The Government will not require
the licensing of third parties under any
such provision unless the agency head
determines that the use of the invention by others is necessary for the
practice of a subject invention or for
the use of a work object of the contract
and that such action is necessary to
achieve the practical application of the
subject invention or work object. Any
such determination will be on the
record after an opportunity for a hearing, and the contractor shall be given
notification of the determination by
certified or registered mail. The notification shall include a statement that
any action commenced for judicial review of such determination must be
brought by the contractor within 60
days after the notification.
Subpart 27.4—Rights in Data and
Copyrights
SOURCE: 52 FR 18140, May 13, 1987, unless
otherwise noted.
27.400 Scope of subpart.
(a) The policy statement in 27.402 applies to all executive agencies. The remainder of the subpart sets forth civilian agency and National Aeronautics
and Space Administration (NASA) policies, procedures, and instructions with
respect to (1) rights in data and copyrights and (2) acquisition of data. However, these policies, procedures, and instructions are not required to be applicable to NASA solicitations until December 31, 1987 (or until such other
date as the NASA FAR Supplement is
revised to accommodate the policies,
procedures, and instructions contained
in this subpart). Due to the special
mission needs of the Department of Defense (DOD) and as required by 10
U.S.C. 2320, the remainder of the DOD
policies, procedures, and instructions
with respect to rights in data and copyrights and acquisition of data are contained in the DOD FAR Supplement
(DFARS).
(b) Civilian agencies other than
NASA shall implement section 203 of
Public Law 98–577 pertaining to validation of proprietary data restrictions.
[52 FR 18140, May 13, 1987, as amended at 54
FR 34755, Aug. 21, 1989]
27.401 Definitions.
As used in this subpart—
Data means recorded information, regardless of form or the media on which
it may be recorded. The term includes
technical data and computer software.
The term does not include information
incidental to contract administration,
such as financial, administrative, cost
or pricing or management information.
Form, fit, and function data means
data relating to items, components,
processes that are sufficient to enable
physical and functional interchangeability, as well as data identifying
source, size, configuration, mating and
attachment characteristics, functional
characteristics, and performance requirements; except that for computer
software it means data identifying
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Federal Acquisition Regulation
27.403
source, functional characteristics, and
performance requirements, but specifically excludes the source code, algorithm, process, formulae, and flow
charts of the software.
Limited rights means the rights of the
Government in limited rights data, as
set forth in a Limited Rights Notice if
included in a data rights clause of the
contract.
Limited rights data means data, other
than computer software, that embody
trade secrets or are commercial or financial and confidential or privileged,
to the extent that such data pertain to
items, components, or processes developed at private expense, including
minor modifications thereof. (Agencies
may, however, adopt the following alternate definition:
Limited rights data means data developed at private expense that embody
trade secrets or are commercial or financial and confidential or privileged
(see 27.404(c).)
Restricted computer software means
computer software developed at private
expense and that is a trade secret; is
commercial or financial and confidential or privileged; or is published copyrighted computer software; including
minor modifications of such computer
software.
Restricted rights means the rights of
the Government in restricted computer
software as set forth in a Restricted
Rights Notice, if included in a data
rights clause of the contract, or as otherwise may be included or incorporated
in the contract.
Technical data means data other than
computer software, which are of a scientific or technical nature.
Unlimited rights means the rights of
the Government to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in
any manner and for any purpose, and
to have or permit others to do so.
[52 FR 18140, May 13, 1987, as amended at 66
FR 2130, Jan. 10, 2001]
27.402 Policy.
(a) It is necessary for the departments and agencies, in order to carry
out their missions and programs, to acquire or obtain access to many kinds of
data produced during or used in the
performance of their contracts. Agencies require such data to: obtain competition among suppliers; fulfill certain responsibilities for disseminating
and publishing the results of their activities; ensure appropriate utilization
of the results of research, development,
and demonstration activities including
the dissemination of technical information to foster subsequent technological developments; and meet other
programmatic and statutory requirements. Further, for defense purposes,
such data are also required by agencies
to meet specialized acquisition needs
and ensure logistics support.
(b) At the same time, the Government recognizes that its contractors
may have a legitimate proprietary interest (e.g., a property right or other
valid economic interest) in data resulting from private investment. Protection of such data from unauthorized
use and disclosure is necessary in order
to prevent the compromise of such
property right or economic interest,
avoid jeopardizing the contractor’s
commercial position, and preclude impairment of the Government’s ability
to obtain access to or use of such data.
The protection of such data by the
Government is also necessary to encourage qualified contractors to participate in Government programs and
apply innovative concepts to such programs. In light of the above considerations, in applying these policies, agencies shall strike a balance between the
Government’s need and the contractor’s legitimate proprietary interest.
27.403
Data rights—general.
All contracts that require data to be
produced, furnished, acquired or specifically used in meeting contract performance requirements, must contain
terms that delineate the respective
rights and obligations of the Government and the contractor regarding the
use, duplication, and disclosure of such
data, except certain contracts resulting from sealed bidding or similar situations which require only existing data
(other than limited rights data and restricted computer software) to be delivered and reproduction rights are not
needed for such data. As a general rule
the data rights clause at 52.227–14,
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27.404
48 CFR Ch. 1 (10–1–03 Edition)
Rights in Data—General, including Alternates I, II, III, IV, and V, where determined to be appropriate as discussed
in 27.404, is to be used for that purpose.
However, in certain contracts either
the particular subject matter of the
contract or the intended use of the
data may require the use of other prescribed clauses, or may not require the
use of any prescribed clause, as discussed in 27.405 and 27.408. Also, in selecting a data rights clause, it is important to note that any such clause
does not specify the data (in terms of
type, quantity or quality) that is to be
delivered, but only the respective
rights of the Government and the contractor to use, disclose, or reproduce
such data. Accordingly, the contract
should also include appropriate terms
to specify the data to be delivered.
27.404 Basic rights in data clause.
(a) Unlimited rights data. Under the
clause at 52.227–14, Rights in Data—
General, the Government acquires unlimited rights in the following data
(except as provided in paragraph (f) of
this section for copyrighted data): (1)
Data first produced in the performance
of a contract (except to the extent such
data constitute minor modifications to
data that are limited rights data or restricted computer software); (2) form,
fit, and function data delivered under
contract; (3) data (except as may be included with restricted computer software) that constitute manuals or instructional and training material for
installation, operation, or routine
maintenance and repair of items, components, or processes delivered or furnished for use under a contract; and (4)
all other data delivered under the contract other than limited rights data or
restricted computer software (see paragraph (b) of this section). If any of the
foregoing data are published copyrighted data with the notice of 17
U.S.C. 401 or 402, the Government acquires them under a copyright license,
as set forth in paragraph (f) of this section, rather than with unlimited
rights.
(b) Limited rights data and restricted
computer software. The clause at 52.227–
14, Rights in Data—General, enables
the contractor to protect qualifying
limited rights data and restricted com-
puter software by withholding such
data from delivery to the Government
and delivering form, fit, and function
data in lieu thereof. However, when an
agency has a need to obtain delivery of
limited rights data or restricted computer software, the clause may be used
with its Alternates II or III, as set forth
in paragraphs (d) and (e) of this section. These alternatives enable a contracting officer to selectively request
the delivery of such data with limited
rights or restricted rights, either by
specifying such delivery in the contract or by specific request.
(c) Alternate definition of limited rights
data. In the clause at 52.227–14, Rights
in Data—General, in order for data to
qualify as limited rights data, in addition to being data that either embody
a trade secret or are data that are commercial or financial and confidential or
privileged, such data must also pertain
to items, components, or processes developed at private expense, including
minor modifications thereof. However,
for contracts that do not require the
development, use or delivery of items,
components or processes that are intended to be acquired by or for the
Government, an agency may adopt for
general use or for use in specific circumstances the alternate definition of
limited rights data set forth in Alternate I. The alternate definition does
not require that such data pertain to
items, components, or processes developed at private expense; but rather
that such data were developed at private expense and embody a trade secret
or are commercial or financial and confidential or privileged.
(d) Protection of limited rights data
specified for delivery. (1) Contracting officers are authorized to modify the
clause at 52.227–14, Rights in Data—
General, by use of Alternate II, which
Alternate adds subparagraph (g)(2) to
the clause to enable the Government to
require delivery of limited rights data
rather than allowing the contractor to
withhold such data. To obtain such delivery, the contract may identify and
specify data to be delivered, or the contracting officer may require, by written request during contract performance, the delivery of data that has been
withheld or identified as withholdable
under subparagraph (g)(1) of the clause
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Federal Acquisition Regulation
27.404
at 52.227–14 Rights in Data—General. In
addition, if agreed to during negotiations, the contract may specifically
identify data that are not to be delivered under Alternate II or which, if delivered, will be delivered with limited
rights. The limited rights obtained by
the Government are set forth in the
Limited Rights Notice contained in
subparagraph (g)(2) (Alternate II). Such
limited rights data will not, without
permission of the contractor, be used
by the Government for purposes of
manufacture, and will not be disclosed
outside the Government except for certain specific purposes as may be set
forth in the Notice, and then only if
the Government makes the disclosure
subject to prohibition against further
use and disclosure by the recipient.
The following are examples of specific
purposes which may be adopted by an
agency in its supplement and added to
the Limited Rights Notice of subparagraph (g)(2) of the clause (Alternate II):
(i) Use (except for manufacture) by
support service contractors.
(ii) Evaluation by nongovernment
evaluators.
(iii) Use (except for manufacture) by
other contractors participating in the
Government’s program of which the
specific contract is a part, for information and use in connection with the
work performed under each contract.
(iv) Emergency repair or overhaul
work.
(v) Release to a foreign government,
or instrumentality thereof, as the interests of the United States Government may require, for information or
evaluation, or for emergency repair or
overhaul work by such government.
(2) As an aid in determining whether
the clause at 52.227–14 should be used
with its Alternate II, the provision at
52.227–15, Representation of Limited
Rights Data and Restricted Computer
Software, may be included in any solicitation containing the clause at 52.227–
14, Rights in Data—General. This provision requests that an offeror state in
response to a solicitation, to the extent
feasible, whether limited rights data
are likely to be used in meeting the
data delivery requirements set forth in
the solicitation. In addition, the need
for Alternate II should be considered
during negotiations or discussion with
an offeror, particularly where negotiations are based on an unsolicited proposal. However, use of the clause at
52.227–14, Rights in Data—General,
without Alternate II does not preclude
this Alternate from being used subsequently by modification during contract performance, should the need
arise for delivery of limited rights data
that have been withheld or identified
as withholdable.
(3) Whenever data that would qualify
as limited rights data, if it were to be
delivered in human readable form, is
formatted as a computer data base for
the purpose of delivery under a contract containing the clause at 52.227–14,
Rights in Data—General, such data is
to be treated as limited rights data,
rather than restricted computer software, for the purposes of paragraph (g)
of that clause.
(e) Protection of restricted computer
software specified for delivery. (1) Contracting officers are authorized to modify the clause at 52.227–14, Rights in
Data—General, by use of Alternate III,
which Alternate adds subparagraph
(g)(3) to the clause to enable the Government to require delivery of restricted computer software rather than
allowing the contractor to withhold
such restricted computer software. To
obtain such delivery, the contract may
identify and specify the computer software to be delivered, or the contracting
officer may require by written request
during contract performance, the delivery of computer software that has been
withheld or identified as withholdable
under subparagraph (g)(1) of the clause.
In addition, if agreed to during negotiations, the contract may specifically
identify computer software that are
not to be delivered under Alternate III
or which, if delivered, will be with restricted rights. In considering whether
to use the clause at 52.227–14 with its
Alternate III, it should be particularly
noted that unlike other data, computer
software is also an end item in itself,
such that if withheld and form, fit, and
function data provided in lieu thereof,
an operational program will not be acquired. Thus, if delivery of restricted
computer software is anticipated to be
needed to meet contract performance
requirements, the contracting officer
should assure that the clause is used
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27.404
48 CFR Ch. 1 (10–1–03 Edition)
with its Alternate III. Unless otherwise
agreed to (see paragraph (e)(2) of this
section) the restricted rights obtained
by the Government are set forth in the
Restricted Rights Notice contained in
subparagraph (g)(3) (Alternate III). Such
restricted computer software will not
be used or reproduced by the Government, or disclosed outside the Government, except that the computer software may be—
(i) Used or copied for use in or with
the computer or computers for which it
was acquired, including use at any
Government installation to which such
computer or computers may be transferred;
(ii) Used or copied for use in or with
a backup computer if any computer for
which it was acquired becomes inoperative;
(iii) Reproduced for safekeeping (archives) or backup purposes;
(iv) Modified, adapted, or combined
with other computer software, provided
that the modified, combined, or adapted portions of any derivative software
incorporating restricted computer software are made subject to the same restricted rights;
(v) Disclosed to and reproduced for
use by support service contractors,
subject to the same restriction under
which the Government acquired the
software;
(vi) Used or copied for use in or
transferred to a replacement computer;
and
(vii) Used in accordance with subdivisions (e)(1) (i) through (v) of this section, without disclosure prohibitions, if
the computer software is published
copyrighted computer software.
(2) The restricted rights set forth in
subparagraph (e)(1) of this section are
the minimum rights the Government
normally obtains with restricted computer software and will automatically
apply when such software is acquired
under the Restricted Rights Notice of
subparagraph (g)(3) (Alternate III) of the
clause. However, either greater or lesser rights, consistent with the purposes
and needs for which the software is to
be acquired, may be specified by the
contracting officer in a particular contract or prescribed in agency regulations. For example, consideration
should be given to any networking
needs or any requirements for use of
the computer software from remote
terminals. Also, in addressing such
needs, the scope of the restricted rights
may be different for the documentation
accompanying the computer software
than for the programs and data bases.
Any additions to, or limitations on, the
restricted rights set forth in the Restricted Rights Notice of subparagraph
(g)(3) of the clause are to be expressly
stated in the contract or in a collateral
agreement incorporated in and made
part of the contract, and the notice
modified accordingly.
(3) As an aid in determining whether
the clause should be used with its Alternate III, the provision at 52.227–15, Representation of Limited Rights Data and
Restricted Computer Software, may be
included in any solicitation containing
the clause at 52.227–14, Rights in Data—
General. This provision requests that
an offeror state, in response to a solicitation, to the extent feasible, whether
restricted computer software is likely
to be used in meeting the data delivery
requirements set forth in the solicitation. In addition, the need for Alternate
III should be considered during negotiations or discussions with an offeror,
particularly where negotiations are
based on an unsolicited proposal. However, use of the clause at 52.227–14,
Rights in Data—General, without Alternate III does not preclude this Alternate
from being used subsequently by modification during contract performance,
should the need arise for the delivery
of restricted computer software that
has been withheld or identified as
withholdable.
(f) Copyrighted data.—(1) Data first
produced in the performance of a contract. (i) In order to enhance the transfer or dissemination of information
produced at Government expense, contractors are normally authorized, without prior approval of the contracting
officer, to establish claim to copyright
subsisting in technical or scientific articles based on or containing data first
produced in the performance of work
under a contract containing the clause
at 52.227–14, Rights in Data—General
and published in academic, technical or
professional journals, symposia proceedings and similar works. Otherwise,
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the permission of the contracting officer is required in accordance with subdivision (f)(1)(ii) of this section or any
applicable agency regulations, to establish claim to copyright subsisting in
data first produced in the performance
of a contract unless the clause is used
with its Alternate IV in accordance with
subdivision (f)(1)(iii) of this section.
Agencies may, however, restrict copyright under certain circumstances in
accordance with subparagraph (g)(3) of
this section.
(ii) Usually, permission for a contractor to establish claim to copyright
subsisting in data first produced under
the contract will be granted when
copyright protection will enhance the
appropriate transfer or dissemination
of such data and the commercialization
of products or processes to which it
pertains. The request for permission
must be made in writing, and may be
made either prior to contract award or
subsequently during contract performance. It should identify the data involved or furnish copies of the data for
which permission is requested, as well
as a statement as to the intended publication or dissemination media or
other purpose for which copyright is
desired. The request normally will be
granted unless—(A) the data consist of
a report that represents the official
views of the agency or that the agency
is required by statute to prepare; (B)
the data are intended primarily for internal use by the Government; (C) the
data are of the type that the agency
itself distributes to the public under an
agency program; (D) the Government
determines that limitation on distribution of the data is in the national interest; (E) the Government determines
that the data should be disseminated
without restriction.
(iii) An Alternate IV is provided for
use with the clause at 52.227–14, Rights
in Data—General, which Alternate provides a substitute subparagraph (c)(1)
in the clause granting blanket permission for contractors to establish claim
to copyright subsisting in all data first
produced in the performance of the
contract without further request being
made by the contractor. Alternate IV
shall be used in all contracts for basic
or applied research (other than those
for management or operation of Gov-
ernment facilities and in contracts and
subcontracts in support of programs
being conducted at such facilities or
where international agreements require otherwise) to be performed solely
by colleges and universities. Alternate
IV will not be used in contracts with
colleges and universities if a purpose of
the contract is for development of computer software for distribution to the
public (including use in solicitations)
by or on behalf of the Government. In
addition, Alternate IV may be used in
other contracts if an agency determines to grant blanket permission for
contractors to establish claim to copyright subsisting in all data first produced in the performance of contract
without further request being made by
the contractor. In any contract where
Alternate IV is used, the contract may
exclude any data, items or categories
of data from the blanket permission
granted, either by express provisions in
the contract or by the addition of a
subparagraph (d)(3) to the clause, consistent with subparagraph (g)(3) of this
section.
(iv) Whenever a contractor establishes claim to copyright subsisting in
data (other than computer software)
first produced in the performance of a
contract, the Government is granted a
paid-up
nonexclusive,
irrevocable,
worldwide license to reproduce, prepare
derivative works, distribute to the public, perform publicly and display publicly by or on behalf of the Government, for all such data, as set forth in
subparagraph (c)(1) of the clause at
52.227–14, Rights in Data—General. For
computer software the scope of the
Government’s license does not include
the right to distribute to the public.
Agencies may also, either on a case-bycase basis, or on a class basis if provided in implementing regulations, obtain a license of different scope than
set forth in subparagraph (c)(1) of the
clause if the agency determines that
such different license will substantially enhance the transfer or dissemination of any data first produced under
the contract, and will not interfere
with the Government’s use of the data
as contemplated by the contract or if
required for international agreements.
If an agency obtains such a different license, the scope of that license shall be
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27.404
48 CFR Ch. 1 (10–1–03 Edition)
clearly stated in a conspicuous place
on the medium on which the data is recorded. That is, if a report, the scope of
the different license shall be put on the
cover, or first page, of the report. If
computer software, the scope of the different license shall be placed on the
most conspicuous place available.
(v) Whenever a contractor establishes
claim to copyright in data first produced in the performance of a contract,
irrespective of which Alternate is used
with the clause or the scope of the Government’s license, the contractor is required to affix the applicable copyright
notices of 17 U.S.C. 401 or 402, and acknowledgment of Government sponsorship (including the contract number) to
the data whenever such data are delivered to the Government, published, or
deposited for registration as a published work in the U.S. Copyright Office. Failure to do so could result in
such data being treated as unlimited
rights data (see paragraph (i) of this
section).
(2) Data not first produced in the performance of a contract. (i) Contractors
are not to incorporate in data delivered
under a contract any data that is not
first produced under the contract and
that is marked with the copyright notice of 17 U.S.C. 401 or 402, without either (A) acquiring for or granting to
the Government certain copyright license rights for the data, or (B) obtaining permission from the contracting officer to do otherwise. The copyright license the Government acquires for
such data will normally be of the same
scope as discussed in subdivision
(f)(1)(iv) of this section, and is set forth
in subparagraph (c)(2) of the clause at
52.227–14, Rights in Data—General.
However, agencies may, on a case-bycase basis, or on a class basis if provided in implementing agency regulations, obtain a license of different
scope if the agency determines that
such different license will not be inconsistent with the purpose of acquiring
the data. If a license of a different
scope is acquired, it must be so stated
in the contract and clearly set forth in
a conspicuous place on the data when
delivered to the Government. In addition, if computer software not first
produced under a contract is delivered
with the copyright notice of 17 U.S.C.
401, the Government’s license will be as
set forth in subparagraph (g)(3)
(Alternate III) if included in the clause
at 52.227–14, Rights in Data—General,
or as otherwise may be provided in a
collateral agreement incorporated in
or made part of the contract.
(ii) Contractors delivering data with
both an authorized limited rights or restricted rights notice and the copyright notice of 17 U.S.C. 401 or 402
should modify the copyright notice to
include the following (or similar) statement: Unpublished—all rights reserved
under the copyright laws of the United
States. If this statement is omitted, the
contractor may be afforded an opportunity to correct it in accordance with
paragraph (h) of this section. Otherwise, data delivered with a copyright
notice of 17 U.S.C. 401 or 402 may be
presumed to be published copyrighted
data subject to the applicable license
rights set forth in subdivision (f)(2)(i)
of this section, without disclosure limitations or restrictions.
(iii) If contractor action causes limited rights or restricted rights data to
be published with the copyright notice
of 17 U.S.C. 401 or 402 after its delivery
to the Government, the Government is
relieved of disclosure and use limitations and restrictions regarding such
data, and the contractor should advise
the Government, request that a copyright notice be placed on the copies of
the data delivered to the Government
and acknowledge that the applicable
copyright license set forth in subdivision (f)(2)(i) of this section applies.
(g) Release, publication, and use of
data. (1) In paragraph (d) of the clause
at 52.227–14, Rights in Data—General,
subparagraph (d)(1) recognizes the fact
that normally the contractor has the
right to use, release to others, reproduce, distribute, or publish data first
produced in the performance of a contract, except to the extent such data
may be subject to Federal export control or to national security laws or regulations. In addition, to the extent the
contractor receives or is given access
to data that is necessary for the performance of the contract from or by
the Government or others acting on behalf of the Government, and the data
contains restrictive markings, subparagraph (d)(2) provides an agreement
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Federal Acquisition Regulation
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with the contractor to treat the data
in accordance with the markings, unless otherwise specifically authorized
by the contracting officer.
(2) In contracts for basic or applied
research with universities or colleges,
no restrictions may be placed upon the
conduct of or reporting on the results
of unclassified basic or applied research, except as provided in applicable
U.S. Statutes. For the purposes of this
subparagraph, agency restrictions on
the release or disclosure of computer
software that has been, readily can be,
or is intended to be, developed to the
point of practical application (including for agency distribution under established programs) are not considered
restrictions on the reporting of the results of basic or applied research.
Agencies may also restrict claim to
copyright in any computer software for
purposes of established agency distribution programs, or where required
to accomplish the purpose for which
the software is produced.
(3) Except for the results of basic or
applied research under contracts with
universities or colleges, agencies may,
to the extent provided in their FAR
supplements, place limitations or restrictions on the contractor’s right to
use, release to others, reproduce, distribute, or publish any data first produced in the performance of the contract, including a requirement to assign copyright to the Government or
another party, either by adding a subparagraph (d)(3) to the Rights in
Data—General clause at 52.227–14, or by
express limitations or restrictions in
the contract. In the latter case, the
limitations or restrictions should be
referenced in the Rights in Data—General clause. However, such regulatory
restrictions or limitations are not to
be imposed unless they are determined
by the agency to be necessary in the
furtherance of agency mission objectives, needed to support specific agency
programs, or necessary to meet statutory requirements. Notwithstanding
the provisions of this subparagraph,
agencies may obtain, if provided in
their FAR supplement, for information
purposes only, advance copies of articles intended for publication in academic, scientific or technical journals
or symposia proceedings or similar
works.
(h) Unauthorized marking of data. Except for validation of restrictive markings on technical data under contracts
for major systems, or for support of
major systems, by agencies subject to
the provisions of Title III of the Federal Property and Administrative Services Act of 1949, the Government has,
in accordance with paragraph (e) of the
clause at 52.227–14, Rights in Data—
General, the right to either return to
the contractor data containing markings not authorized by that clause, or
to cancel or ignore such markings.
However, markings will not be canceled or ignored without making written inquiry of the contractor and affording the contractor at least 30 days
to provide a written justification to
substantiate the propriety of the markings. Failure of the contractor to respond, or failure to provide a written
justification to substantiate the propriety of the markings within the time
afforded, may result in the Government’s action to cancel or ignore the
markings. If the contractor provides a
written justification to substantiate
the propriety of the markings, it will
be considered by the contracting officer and the contractor notified of any
determination based thereon. If the
contracting officer determines that the
markings are authorized, the contractor will be so notified in writing.
Further, if the contracting officer determines, with concurrence of the head
of the contracting activity, that the
markings are not authorized, the contractor will be furnished a written determination which shall become the
final agency decision regarding the appropriateness of the markings and the
markings will be cancelled or ignored
and the data will no longer be made
subject to disclosure prohibitions, unless the contractor files suit within 90
days in a court of competent jurisdiction. In any event, the markings will
not be cancelled or ignored unless the
contractor fails to respond within the
period provided, or, if the contractor
does respond, until final resolution of
the matter, either by the contracting
officer’s determination becoming the
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27.405
48 CFR Ch. 1 (10–1–03 Edition)
final agency decision or by final disposition of the matter by court decision if suit is filed. The foregoing procedures may be modified in accordance
with agency regulations implementing
the Freedom of Information Act (5
U.S.C. 552) if necessary to respond to a
request thereunder. In addition, the
contractor is not precluded from bringing a claim under the Contract Disputes Act, including pursuant to the
Disputes clause of this contract if applicable, that may arise as the result of
the Government’s action to remove or
ignore any markings on data, unless
such action occurs as the result of a
final disposition of the matter by a
court of competent jurisdiction.
(i) Omitted or incorrect notices. (1)
Data delivered under a contract containing the clause at 52.227–14, Rights
in Data—General, without a limited
rights notice or restricted rights notice, and without a copyright notice,
will be presumed to have been delivered with unlimited rights, and the
Government assumes no liability for
the disclosure, use, or reproduction of
such data. However, to the extent the
data has not been disclosed without restriction outside the Government, the
contractor may within 6 months (or a
longer period approved by the contracting officer for good cause shown)
request permission of the contracting
officer to have omitted limited rights
or restricted rights notices, as applicable, placed on qualifying data at the
contractor’s expense, and the contracting officer may agree to so permit
if the contractor (i) identifies the data
for which a notice is to be added or corrected, (ii) demonstrates that the omission of the proposed notice was inadvertent, (iii) establishes that use of the
proposed notice is authorized, and (iv)
acknowledges that the Government has
no liability with respect to any disclosure or use of any such data made prior
to the addition of the notice or resulting from the omission of the notice.
(2) The contracting officer may also
(i) permit correction, at the contractor’s expense, of incorrect notices if
the contractor identifies the data on
which correction of the notice is to be
made, and demonstrates that the correct notice is authorized, or (ii) correct
any incorrect notices.
(j) Inspection of data at the contractor’s
facility. Contracting officers may obtain the right to inspect data at the
contractor’s facility by use of Alternate
V, which adds paragraph (j) to provide
that right in the clause at 52.227–14,
Rights in Data—General. Agencies may
also adopt Alternate V for general use.
The data subject to inspection may be
data withheld or withholdable under
subparagraph (g)(1) of the clause. Such
inspection may be made by the contracting officer or designee (including
nongovernmental personnel under the
same conditions as the contracting officer) for the purpose of verifying a
contractor’s assertion regarding the
limited rights or restricted rights status of the data, or for evaluating work
performance under the contract. This
right may be exercised up to 3 years
after acceptance of all items to be delivered under the contract. The contract may specify data items that are
not subject to inspection under paragraph (j) (Alternate V). If the contractor
demonstrates to the contracting officer
that there would be a possible conflict
of interest if inspection were made by a
particular representative, the contracting officer shall designate an alternate representative.
[52 FR 18140, May 13, 1987, as amended at 64
FR 10532, Mar. 4, 1999]
27.405
Other data rights provisions.
(a) Production of special works. (1) The
clause at 52.227–17, Rights in Data—
Special Works, is to be used in contracts (or may be made applicable to
portions thereof) that are primarily for
the production or compilation of data
(other than limited rights data or restricted computer software) for the
Government’s own use, or when there
is a specific need to limit distribution
and use of the data and/or to obtain indemnity for liabilities that may arise
out of the content, performance, or disclosure of the data. Examples are contracts for—
(i) The production of audiovisual
works, including motion pictures or
television recordings with or without
accompanying sound, or for the preparation of motion picture scripts, musical compositions, sound tracks, translation, adaptation, and the like;
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Federal Acquisition Regulation
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(ii) Histories of the respective agencies, departments, services, or units
thereof;
(iii) Surveys of Government establishments;
(iv) Works pertaining to the instruction or guidance of Government officers and employees in the discharge of
their official duties;
(v) The compilation of reports, books,
studies, surveys, or similar documents
that do not involve research, development, or experimental work;
(vi) The collection of data containing
personally identifiable information
such that the disclosure thereof would
violate the right of privacy or publicity
of the individual to whom the information relates;
(vii) Investigatory reports;
(viii) The development, accumulation, or compilation of data (other
than that resulting from research, development, or experimental work performed by the contractor), the early release of which could prejudice followon acquisition activities or agency regulatory or enforcement activities; or
(ix) The development of computer
software programs, where the program—
(A) May give a commercial advantage; or;
(B) Is agency mission sensitive, and
release could prejudice agency mission,
programs, or follow-on acquisitions.
(2) The contract may specify the purposes and conditions (including time
limitations) under which the data may
be used, released, or reproduced other
than for contract performance. Contracts for the production of audiovisual
works, sound recordings, etc., may include limitations in connection with
talent releases, music licenses, and the
like that are consistent with the purposes for which the works are acquired.
(3) Subdivision (c)(1)(ii) of the clause
at 52.227–17, Rights in Data—Special
Works, which enables the Government
to obtain assignment of copyright in
any data first produced in the performance of the contract, may be deleted if
the contracting officer determines that
such assignment is not needed to further the objectives of the contract.
(4) Paragraph (e) of the clause, which
requires the contractor to indemnify
the Government against any liability
incurred as the result of any violation
of trade secrets, copyrights, right of
privacy or publicity, or any libelous or
other unlawful matter arising out of or
contained in any production or compilation of data that are subject to the
clause, may be deleted or limited in
scope where the contracting officer determines that, because of the nature of
the particular data involved, such liability will not arise.
(5) When the audiovisual or other
special works are produced to accomplish a public purpose other than acquisition for the Government’s own use
(such as for production and distribution to the public of such works by
other than a Federal agency) agencies
are authorized to modify the Rights in
Data—Special Works clause for use in
such contracts, with rights in data provisions which meet agency mission
needs yet protect free speech and freedom of expression, as well as the artistic license of the creator of the work.
(b) Rights relating to existing data other
than limited rights data—(1) Acquisition
of existing audiovisual and similar works.
The clause at 52.227–18, Rights in
Data—Existing Works, is for use in
contracts exclusively for the acquisition (without modification) of existing
motion pictures, television recordings,
and other audiovisual works; sound recordings; musical, dramatic, and literary works; pantomimes and choreographic works; pictorial, graphic, and
sculptural works; and works of a similar nature. The contract may set forth
limitations consistent with the purposes for which the works covered by
the contract are being acquired. Examples of these limitations are (i) means
of exhibition or transmission, (ii) time,
(iii) type of audience, and (iv) geographical location. If the contract requires that works of the type indicated
in subparagraph (b)(1) of this section
are to be modified through editing,
translation, or addition of subject matter, etc. (rather than purchased in existing form) the clause at 52.227–17,
Rights in Data—Special Works, is to be
used. (See paragraph (a) of this section.)
(2) Acquisition of existing computer software. (i) When contracting other than
from GSA’s Multiple Award Schedule
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48 CFR Ch. 1 (10–1–03 Edition)
contracts for the acquisition of existing computer software (i.e., privately
developed software normally vended
commercially under a license or lease
agreement restricting its use, disclosure, or reproduction), no specific contract clause prescribed in this subpart
need be used, but the contract (or purchase order) must specifically address
the Government’s rights to use, disclose and reproduce the software,
which rights must be sufficient for the
Government to fulfill the need for
which the software is being acquired.
Such rights may be negotiated and set
forth in the contract using the guidance concerning restricted rights as set
forth in 27.404(e), or the clause at
52.227–19, Commercial Computer Software—Restricted Rights, may be used.
Restricted computer software acquired
under GSA Multiple Award Schedule
contracts and orders are excluded from
this requirement. The guidance concerning rights set forth in 27.404(e), as
well as those in the clause at 52.227–19,
are the minimum rights the Government usually should accept. Thus if
greater rights than these minimum
rights are needed, or lesser rights are
to be acquired, they must be negotiated and set forth in the contract (or
purchase order). This includes any additions to, or limitations on, the rights
set forth in paragraph (b) of the clause
at 52.227–19 when used. Examples of
greater rights may be those necessary
for networking purposes or use of the
software from remote terminals communicating with a host computer
where the software is located. If the
computer software is to be acquired
with unlimited rights, the contract
must also so state. In addition, the
contract must adequately describe the
computer programs and/or data bases,
the form (tapes, punch cards, disk
pack, and the like), and all the necessary
documentation
pertaining
thereto. If the acquisition is by lease or
license, the disposition of the computer
software (by returning to the vendor or
destroying) at the end of the term of
the lease or license must be addressed.
(ii) If the contract incorporates,
makes reference to, or uses a vendor’s
standard commercial lease, license, or
purchase agreement, such agreement
shall be reviewed to assure that it is
consistent with subdivision (b)(2)(i) of
this section. Caution should be exercised in accepting a vendor’s terms and
conditions, since they may be directed
to commercial sales and may not be appropriate for Government contracts.
Any inconsistencies in a vendor’s
standard commercial agreement shall
be addressed in the contract and the
contract terms shall take precedence
over the vendor’s standard commercial
agreement. If the clause at 52.227–19,
Commercial Computer Software—Restricted Rights, is used, inconsistencies
in the vendor’s standard commercial
agreement regarding the Government’s
right to use, duplicate or disclose the
computer software are reconciled by
that clause.
(iii) If a prime contractor under a
contract containing the clause at
52.227–14, Rights in Data—General, with
subparagraph (g)(3) (Alternate III) in
the clause, acquires restricted computer software from a subcontractor
(at any tier) as a separate acquisition
for delivery to or for use on behalf of
the Government, the contracting officer may approve any additions to, or
limitations on the restricted rights in
the Restricted Rights Notice of subparagraph (g)(3) in a collateral agreement incorporated in and made part of
the contract.
(3) Other existing data and works. Except for existing audiovisual and similar works pursuant to subparagraph
(b)(1) of this section, and existing computer software pursuant to subparagraph (b)(2) of this section, no clause
contained in this subpart is required to
be included in (i) contracts solely for
the acquisition of books, periodicals,
and other printed items in the exact
form in which such items are to be obtained unless reproduction rights are
to be acquired; or (ii) other contracts
(e.g., contracts resulting from sealed
bidding) that require only existing data
(other than limited rights data) to be
delivered and such data are available
without disclosure prohibitions, unless
reproduction rights to the data are to
be obtained. If the reproduction rights
to the data are to be obtained in any
contract of the type described in subdivision (b)(3) (i) or (ii) of this section,
such rights must be specifically set
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Federal Acquisition Regulation
27.406
forth in the contract. No clause contained in this subpart is required to be
included in contracts substantially for
on-line data base services in the same
form as they are normally available to
the general public.
(c) Contracts awarded under Small
Business Innovative Research (SBIR) Program. The clause at 52.227–20, Rights in
Data—SBIR Program, is for use in all
Phase I and Phase II contracts awarded
under the Small Business Innovative
Research Program (SBIR) established
pursuant to Pub. L. 97–219 (the Small
Business Innovation Development Act
of 1982). The clause is limited to use
solely in contracts awarded under the
SBIR Program, and is the only data
rights clause to be used in such contracts.
[52 FR 18140, May 13, 1987, as amended at 63
FR 34077, June 22, 1998]
27.406
Acquisition of data.
(a) General. (1) It is the Government’s
practice to determine, to the extent
feasible, its data requirements in time
for inclusion in solicitations. The data
requirements may be subject to revision during contract negotiations.
Since the preparation, reformatting,
maintenance and updating, cataloging,
and storage of data represents an expense to both the Government and the
contractor, efforts should be made to
keep the contract data requirements to
a minimum, consistent with the purposes of the contract.
(2) To the extent feasible, all known
data requirements, including the time
and place for delivery and any limitations and restrictions to be imposed on
the contractor in the handling of the
data, shall be specified in the contract.
Further, and to the extent feasible, in
major system acquisitions, data requirements shall be set out as separate
contract line items. In establishing the
contract data requirements and in
specifying data items to be delivered
by a contractor, agencies may, consistent with subparagraph (a)(1) of this
section, develop their own contract
schedule provisions in agency procedures (including data requirements
lists) for listing, specifying, identifying
source, assuring delivery, and handling
any data required to be delivered, first
produced, or specifically used in the
performance of the contract.
(3) Data delivery requirements should
normally not require that a contractor
provide the Government, as a condition
of the procurement, unlimited rights in
data that qualify as limited rights data
or restricted computer software. Rather, form, fit, and function data may be
furnished with unlimited rights in lieu
of the qualifying data, or the qualifying data may be furnished with limited rights or restricted rights if needed (see 27.404 (d) and (e)). If greater
rights are needed such need should be
clearly set forth in the solicitation and
the contractor fairly compensated for
such greater rights.
(b) Additional data requirements. (1)
Recognizing that in some contracting
situations, such as experimental, developmental, research, or demonstration
contracts, it may not be feasible to ascertain all the data requirements at
the time of contracting, the clause at
52.227–16, Additional Data Requirements, may be used to enable the subsequent ordering by the contracting officer of additional data first produced
or specifically used in the performance
of such contracts as the actual requirements become known. The clause shall
normally be used in solicitations and
contracts involving experimental, developmental, research or demonstration work (other than basic or applied
research to be performed under a contract solely by a university or college
when the contract amount will be
$500,000 or less) unless all the requirements for data are believed to be
known at the time of contracting and
specified in the contract. If the contract is for basic or applied research to
be performed by a university or college, and the contracting officer believes the contract effort will in the future exceed $500,000, even though the
initial award does not, the contracting
officer may include the clause in the
initial award.
(2) Data may be ordered under the
clause at 52.227–16, Additional Data Requirements, at any time during contract performance or within a period of
3 years after acceptance of all items to
be delivered under the contract. The
contractor is to be compensated for
converting the data into the prescribed
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27.406
48 CFR Ch. 1 (10–1–03 Edition)
form, for reproduction, and for delivery. In order to minimize storage costs
for the retention of data, the contractor may be relieved of retention requirements for specified data items by
the contracting officer at any time
during the retention period required by
the clause. The contracting officer may
permit the contractor to identify and
specify in the contract data not to be
ordered for delivery under the Additional Data Requirements clause if
such data is not necessary to meet the
Government’s requirements for data.
Also, the contracting officer may alter
the Additional Data Requirements
clause by deleting the term or specifically used in paragraph (a) thereof if delivery of such data is not necessary to
meet the Government’s requirements
for data. Any data ordered under this
clause will be subject to the Rights in
Data—General clause (or other equivalent clause setting forth the respective
rights of the Government and the contractor) in the contract, and data authorized to be withheld under such
clause will not be required to be delivered under the Additional Data Requirements clause, except as provided
in Alternate II or Alternate III, if included in the clause (see 27.404 (d) and
(e)).
(3) Agencies not having an established program for dissemination of
computer software shall give consideration to not ordering additional computer software under the clause at
52.227–16, Additional Data Requirements, for the sole purpose of disseminating or marketing of the software to
the public especially if this will provide the contractor additional incentive to make improvements to the software at its own expense and disseminate or market it. This should not preclude an agency from including a summary description of computer software
available from a contractor in any data
dissemination programs which it operates, with a statement as to how the
potential user can obtain it through
the contractor, licensee, or assignee. In
cases where the contracting officer orders software for internal purposes,
consideration shall be given, consistent
with the Government’s needs, to not
ordering particular source codes, algorithms, processes, formulae or flow
charts of the software if the contractor
shows that this aids its efforts to disseminate or market the software.
(c) Acceptance of data. As required by
41 U.S.C. 418a(d)(7), acceptability of
technical data delivered under a contract shall be in accordance with the
appropriate contract clause as required
by subpart 46.3, and the clause at
52.227–21, Technical Data Declaration,
Revision, and Withholding of Payment—Major Systems, when it is included in the contract. (See paragraph
(d) of this section.)
(d) Major system acquisition. (1) In
order to assure that technical data
needed to support a major system acquisition are timely delivered and are
complete, accurate, and satisfy the requirements of the contract concerning
the data, the clause at 52.227–21, Technical Data Declaration, Revision, and
Withholding of Payment—Major Systems, is to be included in contracts for
or in support of a major system (as the
term major system is defined in section
4 of the Office of Federal Procurement
Policy Act, as amended by Pub. L. 98–
577), including every detailed design,
development, or production contract
for a major system acquisition and
contracts for any individual part, component, subassembly, assembly, or subsystem integral to the major system,
and other property which may be replaced during the service life of the
system, and including spare parts and
replenishment spare parts.
(2) The clause at 52.227–21, Technical
Data, Declaration, Revision, and Withholding of Payment—Major Systems,
requires the contractor, upon delivery
of any technical data made subject to
the clause in the contract, to declare
that to the best of its knowledge and
belief, such data are complete, accurate, and comply with contract requirements. It also provides for corrections of any deficiencies in the data, as
well as for the ability of the contracting officer to request revisions of
the data to reflect engineering design
changes made during performance of
the contract and affecting form, fit,
and function of the items the data depict. Further included is the authority
for the contracting officer to withhold
payment under the contract to assure
timely delivery of the technical data
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Federal Acquisition Regulation
27.407
and/or assure correction if the technical data are not complete, accurate,
and in compliance with contract requirements.
(3) When the clause at 52.227–21, Technical Data, Declaration, Revision and
Withholding of Payment—Major Systems, is used, the section of the contract specifying data delivery requirements (see subparagraph (a)(2) of this
section) shall expressly identify those
line items of technical data to which
the clause applies. Upon delivery of
such technical data, the contracting officer or designee shall review the technical data and the contractor’s declaration relating thereto to assure that the
data are complete, accurate, and comply with contract requirements. If not,
the contractor is to be requested to
correct the deficiencies, and payment
may be withheld until such is done.
Final payment should not be made
under the contract until it has been determined that the delivery requirements of those line items of data to
which the clause applies have been satisfactorily met.
(4) In a contract for or in support of
a major system awarded by a civilian
agency other than NASA or the U.S.
Coast Guard the contracting officer
shall include contractual provisions requiring, as an element of performance
under the contract, the delivery of any
technical data, other than computer
software, relating to the major system
or supplies for the major system procured or to be procured by the Government, which are to be developed exclusively with Federal funds in the performance of the contract if the delivery of such technical data is needed to
ensure the competitive acquisition of
supplies or services that will be required in substantial quantities in the
future. The clause at 52.227–22, Major
System—Minimum Rights, is to be included in such contracts in addition to
the clause at 52.227–14, Rights in Data—
General, and other required clauses, to
ensure that the Government acquires
at least those rights required by Pub.
L. 98–577 in technical data developed
exclusively with Federal funds. In any
contract to which this subparagraph
(d)(4) applies, technical data, other
than computer software, relating to a
major system or supplies for a major
system, procured or to be procured by
the Government and also relating to
the design, development, or manufacture of products or processes offered or
to be offered for sale to the public (except for such data as may be necessary
for the Government to operate or
maintain the product, or use the process if obtained by the United States as
an element of performance under the
contract), shall not be required to be
provided to the Government from persons who have developed such products
or processes as a condition for the procurement of such products or processes
by the Government.
[52 FR 18140, May 13, 1987, as amended at 62
FR 236, Jan. 2, 1997]
27.407 Rights to technical data in successful proposals.
(a) Contracting officers may, in consideration of contract award, desire to
acquire unlimited rights in technical
data (but not commercial or financial
information) contained in a successful
proposal upon which a contract award
is based. However, before such unlimited rights are acquired, the prospective contractor must be afforded the
opportunity either (1) to advise the
contracting officer that the technical
data, or portions thereof (to be identified by the prospective contractor), are
covered by any restrictive notice regarding the disclosure and use of proposal information authorized by subpart 15.2 or 15.6 (or any agency supplement thereto), and request that such
protection be maintained by excluding
the data from the Government’s rights;
or (2) to establish to the contracting
officer’s satisfaction that identified
portions of the technical data do not
relate directly to or will not be utilized
in the work to be performed under the
contract, and request that such portions be excluded from the Government’s rights.
(b) If unlimited rights to technical
data in successful proposals, as set
forth in paragraph (a) of this section,
are to be acquired, it shall be by use of
the clause at 52.227–23, Rights to Proposal Data (Technical). Any excluded
technical data will be identified by inserting appropriate proposal page numbers in the clause, which clause enables
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27.408
48 CFR Ch. 1 (10–1–03 Edition)
the identification of data to be excluded from the Government’s rights,
as discussed in paragraph (a) of this
section. Such exclusion is not dispositive of the protective status of the
data, but any excluded technical data,
as well as any commercial and financial information contained in the proposal, will remain subject to the policies in subpart 15.2 or 15.6 (or agency
supplements thereto) relating to proposal information (i.e., will be used for
evaluation purposes only). If the clause
at 52.227–23, Rights to Proposal Data
(Technical), is included in a contract,
the prospective contractor must be specifically afforded the opportunity to
exclude technical data as set forth in
paragraph (a) of this section, and the
contract file must reflect that fact. If
there is a need to have access to any of
the excluded technical data during contract
performance,
consideration
should be given to their acquisition as
limited rights data, if they so qualify,
in accordance with27.404(d).
[52 FR 18140, May 13, 1987, as amended at 62
FR 51271, Sept. 30, 1997]
27.408 Cosponsored research and development activities.
(a) In contracts involving cosponsored research and development wherein the contractor is required to make
substantial contributions of funds or
resources (i.e., by cost-sharing or by repayment of nonrecurring costs), and
the contractor’s and the Government’s
respective contributions to any item,
component, process, or computer software, developed or produced under the
contract are not readily segregable, the
contracting officer may limit the acquisition of or acquire less than unlimited rights to any data developed and
delivered under such contract. Agencies may regulate the use of this authority in their supplements. Basically
such rights should, at a minimum, assure use of the data for agreed-to Governmental purposes (including reprocurement rights as appropriate),
and will address any disclosure limitations or restrictions to be imposed on
the data. Also, consideration may be
given to directed licensing provisions if
needed to carry out the objectives of
the contract. Since the purpose of the
cosponsored research and development,
the legitimate proprietary interests of
the contractor, the needs of the Government, and the respective contributions of both parties may vary, no specific clauses are prescribed, but a
clause providing less than unlimited
rights in the Government for data developed and delivered under the contract (such as license rights) may be
tailored to the circumstances consistent with the foregoing and the policy set forth in 27.402. As a guide, such
clause may be appropriate when the
contractor contributes money or resources, or agrees to make repayment
of nonrecurring costs, of a value of approximately 50 percent of the total cost
of the contract (i.e., Government, contractor, and/or third party paid costs),
and the respective contributions are
not readily segregable for any work
element to be performed under the contract. Such clause may be used for all
or for only specifically identified tasks
or work elements under the contract.
In the latter instance, its use will be in
addition to whatever other data rights
clause is prescribed under this subpart,
with the contract specifically identifying which clause is to apply to which
tasks or work elements. Further, such
clause may not be appropriate where
the purpose of the contract is to
produce data for dissemination to the
public, or to develop or demonstrate
technologies which will be available, in
any event, to the public for their direct
use.
(b) Where the contractor’s contributions are readily segregable (by performance requirements and the funding
therefor) and so identified in the contract, any data resulting therefrom
may be treated under such clause as
limited rights data or restricted computer software in accordance with
27.404 (d) or (e), as applicable; or if such
treatment is inconsistent with the purpose of the contract, rights to such
data may, if so negotiated and stated
in the contract, be treated in a manner
consistent with paragraph (a) of this
section.
27.409 Solicitation provisions and contract clauses.
(a)(1) The contracting officer shall
insert the clause at 52.227–14, Rights in
Data—General, including its use with
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Federal Acquisition Regulation
27.409
Alternate I through Alternate V as may
be required or authorized in accordance
with paragraphs (b) through (f) of this
section, in solicitations and contracts
if it is contemplated that data will be
produced, furnished, or acquired under
the contract, unless the contract is—
(i) For the production of special
works of the type set forth in 27.405(a),
but the clause at 52.227–14, Rights in
Data— General, shall be included in
the contract and made applicable to
data other than special works, as appropriate;
(ii) For the acquisition of existing
data works, as described in 27.405(b);
(iii) To be performed outside the
United States, its possessions, and
Puerto Rico, in which case agencies
may prescribe different clauses (see
paragraph (n) of this section);
(iv) For architect-engineer services
or construction work, in which case
agencies may utilize the clause at
52.227–17, Rights in Data—Special
Works, or may prescribe different
clauses;
(v) A Small Business Innovation Research contract (see paragraph (l) of
this section);
(vi) For the management, operation,
design, or construction of a Government-owned facility to perform research, development, or production
work, in which case agencies may prescribe different clauses (see paragraph
(p) of this section); or
(vii) A contract involving cosponsored research and development in
which a clause providing for less than
unlimited right has been authorized.
(See 27.408).
(2) Subparagraph (e)(3) of the clause
at 52.227–14, Rights in Data—General,
may be deleted or reserved by an agency not subject to Title III of the Federal Property and Administrative Services Act.
(b) If an agency determines, in accordance with 27.404(c), to adopt the alternate definition of Limited Rights
Data in paragraph (a) of the clause, the
clause shall be used with its Alternate I.
(c) In accordance with 27.404(d), if a
contracting officer determines it is
necessary to obtain the delivery of limited rights data, the clause shall be
used with its Alternate II. The contracting officer shall, when Alternate II
is used, assure that the purposes, if
any, for which limited rights data are
to be disclosed outside the Government
are included in the Limited Rights Notice
of subparagraph (g)(2) of the clause.
(d) In accordance with 27.404(e), if a
contracting officer determines it is
necessary to obtain the delivery of restricted computer software, the clause
shall be used with its Alternate III. Any
greater or lesser rights regarding the
use, duplication, or disclosure of restricted computer software than those
set forth in the Restricted Rights Notice of subparagraph (g)(3) of the clause
must be specified in the contract and
the notice modified accordingly.
(e) The clause shall be used with its
Alternate IV in contracts for basic or
applied research (other than those for
the management or operation of Government facilities or where international agreements require otherwise), to be performed solely by universities and colleges. The clause may be
used with its Alternate IV in other contracts if in accordance with 27.404(f)(1)
an agency determines to grant blanket
permission for the contractor to establish claim to copyright subsisting in all
data first produced without further request being made by the contractor.
When Alternate IV is used, the contract
may exclude items or categories of
data from the blanket permission
granted, either by express provisions in
the contract or by the addition of a
subparagraph (d)(3) to the clause (see
27.404(g)(2)).
(f) In accordance with 27.404(i), if a
contracting officer needs to have the
right to inspect certain data at a contractor’s facility or if by an agency,
generally the clause shall be used with
its Alternate V.
(g) In accordance with 27.404(d)(2), if
the contracting officer desires to have
an offeror state in response to a solicitation, to the extent feasible, whether
limited rights data or restricted computer software are likely to be used in
meeting the data delivery requirements set forth in the solicitation, the
contracting officer shall insert the provision at 52.227–15, Representation of
Limited Rights Data and Restricted
Computer Software, in any solicitation
containing the clause at 52.227–14,
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27.409
48 CFR Ch. 1 (10–1–03 Edition)
Rights in Data—General. The contractor’s response will provide an aid in determining whether the clause should be
used with Alternate II and/or Alternate
III.
(h) The contracting officer shall normally insert the clause at 52.227–16, Additional Data Requirements, in solicitations and contracts involving experimental, developmental, research, or
demonstration work (other than basic
or applied research to be performed
solely by a university or college where
the contract amount will be $500,000 or
less) unless all the requirements for
data are believed to be known at the
time of contracting and specified in the
contract. (See 27.406(b).) This clause
may also be used in other contracts
when considered appropriate.
(i) In accordance with 27.405(a), the
contracting officer shall insert the
clause at 52.227–17, Rights in Data—
Special Works, in solicitations and
contracts primarily for the production
or compilation of data (other than limited rights data or restricted computer
software) for the Government’s internal use, or when there is a specific need
to limit distribution and use of the
data and/or to obtain indemnity for liabilities that may arise out of the content, performance, or disclosure of the
data. Examples of such contracts are
set forth in 27.405(a). The contract may
specify the purposes and conditions (including time limitations) under which
the data may be used, released or reproduced by the contractor for other
than contract performance. Contracts
for the production of audiovisual
works, sound recordings, etc. may include limitations in connection with
talent releases, music licenses, and the
like that are consistent with the purposes for which the data is acquired.
(j) The contracting officer shall insert the clause at 52.227–18, Rights in
Data—Existing Works, in solicitations
and contracts exclusively for the acquisition, without modification, of existing audiovisual and similar works of
the type set forth in 27.405(b)(1). The
contract may set forth limitations consistent with the purposes for which the
work is being acquired. The clause at
52.227–17, Rights in Data—Special
Works, shall be used if existing works
are to be modified, as by editing, translation, addition of subject matter, etc.
(k) In accordance with 27.405(b)(2),
when contracting (other than from
GSA’s Multiple Award Schedule contracts) for the acquisition of existing
computer software, the clause at
52.227–19, Commercial Computer Software-Restricted Rights, may be used in
the solicitation and contract. In any
event, the contracting officer shall assure that the contract contains terms
to obtain sufficient rights for the Government to fulfill the need for which
the software is being acquired and is
otherwise consistent with 27.405(b)(2).
(l) If the contract is a Small Business
Innovation Research (SBIR) contract,
the clause at 52.227–20, Rights in Data—
SBIR Program shall be used in all
Phase I and Phase II contracts awarded
under the Small Business Innovation
Research Program established pursuant to Pub. L. 97–219 (The Small Business Innovation Development Act of
1982).
(m) While no specific clause of this
subpart is required to be included in
contracts solely for the acquisition,
without disclosure prohibitions, of
books, publications and similar items
in the exact form in which such items
exist prior to the request for purchase
(i.e., the off-the-shelf purchase of such
items), or in other contracts (e.g., contracts resulting from sealed bidding)
where only existing data available
without disclosure prohibitions is to be
furnished, if reproduction rights are to
be acquired the contract shall include
terms addressing such rights. (See
27.405(b)(3).)
(n) Agencies may prescribe in their
procedures, as appropriate, a clause
consistent with the policy of 27.402 in
contracts to be performed outside the
United States, its possessions, and
Puerto Rico.
(o) Agencies may prescribe in their
procedures the clause at 52.227–17,
Rights in Data—Special Works, or prescribe, as appropriate, clauses consistent with the policy in 27.402 in contracts for architect-engineer services
and construction work.
(p) Agencies may prescribe in their
procedures, as appropriate, a clause
consistent with the policy of 27.402 in
contracts for management, operation,
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Federal Acquisition Regulation
Pt. 28
design, or construction of Governmentowned research, development, or production facilities, and in contracts and
subcontracts in support of programs
being conducted at such facilities.
(q) In accordance with 27.406(d), the
contracting officer shall insert the
clause at 52.227–21, Technical Data Declaration, Revision, and Withholding of
Payment—Major Systems, in contracts
for major systems acquisitions or for
support of major systems acquisitions.
When used, this clause requires that
the technical data to which it applies
be specified in the contract. (See
27.406(d).)
(r) In the case of civilian agencies except NASA and the U.S. Coast Guard,
the contracting officer shall insert the
clause at 52.227–22, Major System—Minimum Rights, in contracts for major
systems or contracts in support of
major systems.
(s) In accordance with 27.407, if a contracting officer desires to acquire unlimited rights in technical data contained in a successful proposal upon
which a contract award is based, the
contracting officer shall insert the
clause at 52.227–23, Rights to Proposed
Data (Technical). Rights to technical
data in a proposal are not acquired by
mere incorporation by reference of the
proposal in the contract, and if a proposal is incorporated by reference,
27.404 must be followed to assure that
such rights are appropriately addressed.
[52 FR 18140, May 13, 1987, as amended at 55
FR 38517, Sept. 18, 1990; 62 FR 236, Jan. 2,
1997; 64 FR 10532, Mar. 4, 1999]
Subpart 27.5 [Reserved]
Subpart 27.6—Foreign License
and
Technical
Assistance
Agreements
27.601 General.
Agencies shall provide all necessary
rules and regulations as are required
for the proper application of the laws
and policies of the U.S. Government regarding—
(a) Elimination in agreements between domestic concerns and foreign
governments or foreign concerns of
charges for the use of patents in which
the U.S. Government has a royalty-free
license or of charges in agreements for
the use of data that the U.S. Government has a right to use and disclose to
others, that is in the public domain, or
that was acquired by the U.S. Government with the unrestricted right to
use, duplicate, or disclose and to have
or permit others to do so;
(b) Foreign license and technical assistance agreements between the U.S.
Government and United States domestic concerns;
(c) Guidance on negotiating contract
prices and terms concerning patents
and data, including royalties, in contracts between the U.S. Government
and a foreign government or foreign
concern; and
(d) Regulations and guidance on controls on the exportation of data relating to certain designated items, such
as arms or munitions of war, and guidance on reviews of agreements involving such data (see 22 CFR part l24).
PART 28—BONDS AND INSURANCE
Sec.
28.000
28.001
Scope of part.
Definitions.
Subpart 28.1—Bonds and Other Financial
Protections
28.100 Scope of subpart.
28.101 Bid guarantees.
28.101–1 Policy on use.
28.101–2 Solicitation provision or contract
clause.
28.101–3 [Reserved]
28.101–4 Noncompliance with bid guarantee
requirements.
28.102 Performance and payment bonds and
alternative payment protections for construction contracts.
28.102–1 General.
28.102–2 Amount required.
28.102–3 Contract clauses.
28.103 Performance and payment bonds for
other than construction contracts.
28.103–1 General.
28.103–2 Performance bonds.
28.103–3 Payment bonds.
28.103–4 Contract clause.
28.104 Annual performance bonds.
28.105 Other types of bonds.
28.105–1 Advance payment bonds.
28.105–2 Patent infringement bonds.
28.106 Administration.
28.106–1 Bonds and bond related forms.
28.106–2 Substitution of surety bonds.
28.106–3 Additional bond and security.
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48 CFR Ch. 1 (10–1–03 Edition)
28.106–4 Contract clause.
28.106–5 Consent of surety.
28.106–6 Furnishing information.
28.106–7 Withholding contract payments.
28.106–8 Payment to subcontractors or suppliers.
Subpart 28.2—Sureties and Other Security
for Bonds
28.200 Scope of subpart.
28.201 Requirements for security.
28.202 Acceptability of corporate sureties.
28.203 Acceptability of individual sureties.
28.203–1 Security interests by an individual
surety.
28.203–2 Acceptability of assets.
28.203–3 Acceptance of real property.
28.203–4 Substitution of assets.
28.203–5 Release of lien.
28.203–6 Contract clause.
28.203–7 Exclusion of individual sureties.
28.204 Alternatives in lieu of corporate or
individual sureties.
28.204–1 United States bonds or notes.
28.204–2 Certified or cashiers checks, bank
drafts, money orders, or currency.
28.204–3 Irrevocable letter of credit (ILC).
28.204–4 Contract clause.
Subpart 28.3—Insurance
28.301 Policy.
28.302 Notice of cancellation or change.
28.303 Insurance against loss of or damage
to Government property.
28.304 Risk-pooling arrangements.
28.305 Overseas workers’ compensation and
war-hazard insurance.
28.306 Insurance under fixed-price contracts.
28.307 Insurance under cost-reimbursement
contracts.
28.307–1 Group insurance plans.
28.307–2 Liability.
28.308 Self-insurance.
28.309 Contract clauses for workers’ compensation insurance.
28.310 Contract clause for work on a Government installation.
28.311 Solicitation provision and contract
clause on liability insurance under costreimbursement contracts.
28.311–1 Contract clause.
28.311–2 Agency solicitation provisions and
contract clauses.
28.312 Contract clause for insurance of
leased motor vehicles.
28.313 Contract clauses for insurance of
transportation or transportation-related
services.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42286, Sept. 19, 1983, unless
otherwise noted.
28.000
Scope of part.
This part prescribes requirements for
obtaining financial protection against
losses under contracts that result from
the use of the sealed bid or negotiated
methods. It covers bid guarantees,
bonds, alternative payment protections, security for bonds, and insurance.
[67 FR 13056, Mar. 20, 2002]
28.001
Definitions.
As used in this part—
Attorney-in-fact means an agent, independent agent, underwriter, or any
other company or individual holding a
power of attorney granted by a surety
(see also power of attorney at 2.101).
Bid means any response to a solicitation, including a proposal under a negotiated acquisition. See the definition
of ‘‘offer’’ at 2.101.
Bidder means any entity that is responding or has responded to a solicitation, including an offeror under a negotiated acquisition.
Bid guarantee means a form of security assuring that the bidder (1) will
not withdraw a bid within the period
specified for acceptance and (2) will
execute a written contract and furnish
required bonds, including any necessary coinsurance or reinsurance
agreements, within the time specified
in the bid, unless a longer time is allowed, after receipt of the specified
forms.
Bond means a written instrument executed by a bidder or contractor (the
‘‘principal’’), and a second party (‘‘the
surety’’ or ‘‘sureties’’) (except as provided in 28.204), to assure fulfillment of
the principal’s obligations to a third
party (the ‘‘obligee’’ or ‘‘Government’’), identified in the bond. If the
principal’s obligations are not met, the
bond assures payment, to the extent
stipulated, of any loss sustained by the
obligee. The types of bonds and related
documents are as follows:
(1) An advance payment bond secures
fulfillment of the contractor’s obligations under an advance payment provision.
(2) An annual bid bond is a single
bond furnished by a bidder, in lieu of
separate bid bonds, which secures all
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bids (on other than construction contracts) requiring bonds submitted during a specific Government fiscal year.
(3) An annual performance bond is a
single bond furnished by a contractor,
in lieu of separate performance bonds,
to secure fulfillment of the contractor’s obligations under contracts (other
than construction contracts) requiring
bonds entered into during a specific
Government fiscal year.
(4) A patent infringement bond secures fulfillment of the contractor’s
obligations under a patent provision.
(5) A payment bond assures payments
as required by law to all persons supplying labor or material in the prosecution of the work provided for in the
contract.
(6) A performance bond secures performance and fulfillment of the contractor’s obligations under the contract.
Consent of surety means an acknowledgment by a surety that its bond
given in connection with a contract
continues to apply to the contract as
modified.
Penal sum or penal amount means the
amount of money specified in a bond
(or a percentage of the bid price in a
bid bond) as the maximum payment for
which the surety is obligated or the
amount of security required to be
pledged to the Government in lieu of a
corporate or individual surety for the
bond.
Reinsurance means a transaction
which provides that a surety, for a consideration, agrees to indemnify another
surety against loss which the latter
may sustain under a bond which it has
issued.
[48 FR 42286, Sept. 19, 1983, as amended at 61
FR 31652, June 20, 1996; 62 FR 44806, Aug. 22,
1997; 66 FR 2130, Jan. 10, 2001; 67 FR 13056,
Mar. 20, 2002]
Subpart 28.1—Bonds and Other
Financial Protections
28.100
Scope of subpart.
This subpart prescribes requirements
and procedures for the use of bonds, alternative payment protections, and all
types of bid guarantees.
[62 FR 44806, Aug. 22, 1997]
28.101
Bid guarantees.
28.101–1 Policy on use.
(a) A contracting officer shall not require a bid guarantee unless a performance bond or a performance and payment bond is also required (see 28.102
and 28.103). Except as provided in paragraph (c) of this subsection, bid guarantees shall be required whenever a
performance bond or a performance and
payment bond is required.
(b) All types of bid guarantees are acceptable for supply or service contracts
(see annual bid bonds and annual performance bonds coverage in 28.001).
Only separate bid guarantees are acceptable in connection with construction contracts. Agencies may specify
that only separate bid bonds are acceptable in connection with construction contracts.
(c) The chief of the contracting office
may waive the requirement to obtain a
bid guarantee when a performance
bond or a performance and payment
bond is required if it is determined that
a bid guarantee is not in the best interest of the Government for a specific acquisition (e.g., overseas construction,
emergency acquisitions, sole-source
contracts). Class waivers may be authorized by the agency head or designee.
[48 FR 42286, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986; 52 FR 19803, May 27,
1987; 52 FR 30076, Aug. 12, 1987; 54 FR 34755,
Aug. 21, 1989; 61 FR 39213, July 26, 1996]
28.101–2 Solicitation provision or contract clause.
(a) The contracting officer shall insert a provision or clause substantially
the same as the provision at 52.228–1,
Bid Guarantee, in solicitations or contracts that require a bid guarantee or
similar guarantee. For example, the
contracting officer may modify this
provision—
(1) To set a period of time that is
other than 10 days for the return of executed bonds;
(2) For use in connection with construction solicitations when the agency has specified that only separate bid
bonds are acceptable in accordance
with 28.101–1(b);
(3) For use in solicitations for negotiated contracts; or
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28.101–3
48 CFR Ch. 1 (10–1–03 Edition)
(4) For use in service contracts containing options for extended performance.
(b) The contracting officer shall determine the amount of the bid guarantee for insertion in the provision at
52.228–1 (see 28.102–2(a)). The amount
shall be adequate to protect the Government from loss should the successful bidder fail to execute further contractual documents and bonds as required. The bid guarantee amount shall
be at least 20 percent of the bid price
but shall not exceed $3 million. When
the penal sum is expressed as a percentage, a maximum dollar limitation
may be stated.
[61 FR 39213, July 26, 1996, as amended at 65
FR 46070, July 26, 2000]
28.101–3
[Reserved]
28.101–4 Noncompliance
with
bid
guarantee requirements.
(a) In sealed bidding, noncompliance
with a solicitation requirement for a
bid guarantee requires rejection of the
bid, except in the situations described
in paragraph (c) of this subsection
when the noncompliance shall be
waived.
(b) In negotiation, noncompliance
with a solicitation requirement for a
bid guarantee requires rejection of an
initial proposal as unacceptable, if a
determination is made to award the
contract based on initial proposals
without discussion, except in the situations described in paragraph (c) of this
subsection when noncompliance shall
be waived. (See 15.306(a)(2) for conditions regarding making awards based
on initial proposals.) If the conditions
for awarding based on initial proposals
are not met, deficiencies in bid guarantees submitted by offerors determined
to be in the competitive range shall be
addressed during discussions and the
offeror shall be given an opportunity to
correct the deficiency.
(c) Noncompliance with a solicitation
requirement for a bid guarantee shall
be waived in the following circumstances unless the contracting officer determines in writing that acceptance of the bid would be detrimental to
the Government’s interest when—
(1) Only one offer is received. In this
case, the contracting officer may re-
quire the furnishing of the bid guarantee before award;
(2) The amount of the bid guarantee
submitted is less than required, but is
equal to or greater than the difference
between the offer price and the next
higher acceptable offer;
(3) The amount of the bid guarantee
submitted, although less than that required by the solicitation for the maximum quantity offered, is sufficient for
a quantity for which the offeror is otherwise eligible for award. Any award to
the offeror shall not exceed the quantity covered by the bid guarantee;
(4) The bid guarantee is received late,
and late receipt is waived under 14.304;
(5) A bid guarantee becomes inadequate as a result of the correction of
a mistake under 14.407 (but only if the
bidder will increase the bid guarantee
to the level required for the corrected
bid);
(6) A telegraphic offer modification is
received without corresponding modification of the bid guarantee, if the
modification expressly refers to the
previous offer and the offeror corrects
any deficiency in bid guarantee;
(7) An otherwise acceptable bid bond
was submitted with a signed offer, but
the bid bond was not signed by the offeror;
(8) An otherwise acceptable bid bond
is errroneously dated or bears no date
at all; or
(9) A bid bond does not list the
United States as obligee, but correctly
identifies the offeror, the solicitation
number, and the name and location of
the project involved, so long as it is acceptable in all other respects.
[54 FR 48985, Nov. 28, 1989, as amended at 60
FR 34739, July 3, 1995; 62 FR 51271, Sept. 30,
1997]
28.102 Performance
and
payment
bonds and alternative payment protections for construction contracts.
28.102–1
General.
(a) The Miller Act (40 U.S.C. 270a–
270f) requires performance and payment bonds for any construction contract exceeding $100,000, except that
this requirement may be waived (1) by
the contracting officer for as much of
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the work as is to be performed in a foreign country upon finding that it is impracticable for the contractor to furnish such bond, or (2) as otherwise authorized by the Miller Act or other law.
(b)(1) Pursuant to Section 4104(b)(2)
of the Federal Acquisition Streamlining Act of 1994 (Public Law 103–355),
for construction contracts greater than
$25,000, but not greater than $100,000,
the contracting officer shall select two
or more of the following payment protections, giving particular consideration to inclusion of an irrevocable letter of credit as one of the selected alternatives:
(i) A payment bond.
(ii) An irrevocable letter of credit
(ILC).
(iii) A tripartite escrow agreement. The
prime contractor establishes an escrow
account in a federally insured financial
institution and enters into a tripartite
escrow agreement with the financial
institution, as escrow agent, and all of
the suppliers of labor and material.
The escrow agreement shall establish
the terms of payment under the contract and of resolution of disputes
among the parties. The Government
makes payments to the contractor’s escrow account, and the escrow agent
distributes the payments in accordance
with the agreement, or triggers the disputes resolution procedures if required.
(iv) Certificates of deposit. The contractor deposits certificates of deposit
from a federally insured financial institution with the contracting officer, in
an acceptable form, executable by the
contracting officer.
(v) A deposit of the types of security
listed in 28.204–1 and 28.204–2.
(2) The contractor shall submit to
the Government one of the payment
protections selected by the contracting
officer.
(c) The contractor shall furnish all
bonds or alternative payment protection, including any necessary reinsurance agreements, before receiving a notice to proceed with the work or being
allowed to start work.
[48 FR 42286, Sept. 19, 1983, as amended at 61
FR 31652, June 20, 1996]
28.102–2 Amount required.
(a) Definition. As used in this subsection—
Original contract price means the
award price of the contract; or, for requirements contracts, the price payable for the estimated total quantity;
or, for indefinite-quantity contracts,
the price payable for the specified minimum quantity. Original contract price
does not include the price of any options, except those options exercised at
the time of contract award.
(b) Contracts exceeding $100,000 (Miller Act).
(1) Performance bonds. Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal
amount of performance bonds must
equal—
(i) 100 percent of the original contract price; and
(ii) If the contract price increases, an
additional amount equal to 100 percent
of the increase.
(2) Payment bonds. (i) Unless the contracting officer makes a written determination supported by specific findings
that a payment bond in this amount is
impractical, the amount of the payment bond must equal—
(A) 100 percent of the original contract price; and
(B) If the contract price increases, an
additional amount equal to 100 percent
of the increase.
(ii) The amount of the payment bond
must be no less than the amount of the
performance bond.
(c) Contracts exceeding $25,000 but not
exceeding $100,000. Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal
amount of the payment bond or the
amount of alternative payment protection must equal—
(1) 100 percent of the original contract price; and
(2) If the contract price increases, an
additional amount equal to 100 percent
of the increase.
(d) Securing additional payment protection. If the contract price increases, the
Government must secure any needed
additional protection by directing the
contractor to—
(1) Increase the penal sum of the existing bond;
(2) Obtain an additional bond; or
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28.102–3
48 CFR Ch. 1 (10–1–03 Edition)
(3) Furnish additional alternative
payment protection.
(e) Reducing amounts. The contracting officer may reduce the amount
of security to support a bond, subject
to the conditions of 28.203–5(c) or
28.204(b).
[65 FR 46070, July 26, 2000]
28.102–3 Contract clauses.
(a) Insert a clause substantially the
same as the clause at 52.228–15, Performance and Payment Bonds—Construction, in solicitations and contracts for construction that contain a
requirement for performance and payment bonds if the resultant contract is
expected to exceed $100,000. The contracting officer may revise paragraphs
(b)(1) and/or (b)(2) of the clause to establish a lower percentage in accordance with 28.102–2(b). If the provision at
52.228–1 is not included in the solicitation, the contracting officer must set a
period of time for return of executed
bonds.
(b) Insert the clause at 52.228–13, Alternative Payment Protections, in solicitations and contracts for construction, when the estimated or actual
value exceeds $25,000 but does not exceed $100,000. Complete the clause by
specifying the payment protections selected (see 28.102–1(b)(1)) and the deadline for submission. The contracting officer may revise paragraph (b) of the
clause to establish a lower percentage
in accordance with 28.102–2(c).
[48 FR 42286, Sept. 19, 1983, as amended at 61
FR 31652, June 20, 1996; 61 FR 39213, July 26,
1996; 62 FR 44806, Aug. 22, 1997; 65 FR 46070,
July 26, 2000]
28.103 Performance
and
payment
bonds for other than construction
contracts.
28.103–1 General.
(a) Generally, agencies shall not require performance and payment bonds
for other than construction contracts.
However, performance and payment
bonds may be used as permitted in
28.103–2 and 28.103–3.
(b) The contractor shall furnish all
bonds before receiving a notice to proceed with the work.
(c) No bond shall be required after
the contract has been awarded if it was
not specifically required in the contract, except as may be determined
necessary for a contract modification.
28.103–2
Performance bonds.
(a) Performance bonds may be required for contracts exceeding the simplified acquisition threshold when necessary to protect the Government’s interest. The following situations may
warrant a performance bond:
(1) Government property or funds are
to be provided to the contractor for use
in performing the contract or as partial compensation (as in retention of
salvaged material).
(2) A contractor sells assets to or
merges with another concern, and the
Government, after recognizing the latter concern as the successor in interest, desires assurance that it is financially capable.
(3) Substantial progress payments
are made before delivery of end items
starts.
(4) Contracts are for dismantling,
demolition, or removal of improvements.
(b) The Government may require additional performance bond protection
when a contract price is increased.
(c) The contracting officer must determine the contractor’s responsibility
(see subpart 9.1) even though a bond
has been or can be obtained.
[48 FR 42286, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995; 61 FR 39213, July 26,
1996]
28.103–3 Payment bonds.
(a) A payment bond is required only
when a performance bond is required,
and if the use of payment bond is in the
Government’s interest.
(b) When a contract price is increased, the Government may require
additional bond protection in an
amount adequate to protect suppliers
of labor and material.
[48 FR 42286, Sept. 19, 1983, as amended at 61
FR 39213, July 26, 1996]
28.103–4 Contract clause.
The contracting officer shall insert a
clause substantially the same as the
clause at 52.228–16, Performance and
Payment Bonds—Other than Construction, in solicitations and contracts
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that contain a requirement for both
payment and performance bonds. The
contracting officer shall determine the
amount of each bond for insertion in
the clause. The amount shall be adequate to protect the interest of the
Government. The contracting officer
shall also set a period of time (normally 10 days) for return of executed
bonds. Alternate I shall be used when
only performance bonds are required.
[61 FR 39213, July 26, 1996]
28.104
Annual performance bonds.
(a) Annual performance bonds only
apply to non-construction contracts.
They shall provide a gross penal sum
applicable to the total amount of all
covered contracts.
(b) When the penal sums obligated by
contracts are approximately equal to
or exceed the penal sum of the annual
performance bond, an additional bond
will be required to cover additional
contracts.
28.105
Other types of bonds.
The head of the contracting activity
may approve using other types of bonds
in connection with acquiring particular
supplies or services. These types include advance payment bonds and patent infringement bonds.
28.105–1
Advance payment bonds.
Advance payment bonds may be required only when the contract contains
an advance payment provision and a
performance bond is not furnished. The
contracting officer shall determine the
amount of the advance payment bond
necessary to protect the Government.
28.105–2
Patent infringement bonds.
(a) Contracts providing for patent indemnity may require these bonds only
if—
(1) A performance bond is not furnished; and
(2) The financial responsibility of the
contractor is unknown or doubtful.
(b) The contracting officer shall determine the penal sum.
28.106
Administration.
28.106–1 Bonds
forms.
and
bond
The following Standard Forms (SF’s)
and Optional Forms (OF’s) shown in
53.301 and 53.302 shall be used, except in
foreign countries, when a bid bond, performance or payment bond, or an individual surety is required. The bond
forms shall be used as indicated in the
instruction portion of each form.
(a) SF 24, Bid Bond (see 28.101).
(b) SF 25, Performance Bond (see
28.102–1 and 28.106–3(b)).
(c) SF 25–A, Payment Bond (see
28.102–1 and 28.106–3(b)).
(d) SF 25–B, Continuation Sheet (for
SF’s 24, 25, and 25–A).
(e) SF 28, Affidavit of Individual Surety (see 28.203).
(f) SF 34, Annual Bid Bond (see
28.001).
(g) SF 35, Annual Performance Bond
(see 28.104).
(h) SF 273, Reinsurance Agreement
for a Miller Act Performance Bond (see
28.202(a)(4)).
(i) SF 274, Reinsurance Agreement
for a Miller Act Payment Bond (see
28.202(a)(4)).
(j) SF 275, Reinsurance Agreement in
Favor of the United States (see
28.202(a)(4)).
(k) SF 1414, Consent of Surety (see
28.106–5).
(l) SF 1415, Consent of Surety and Increase of Penalty (see 28.106–3).
(m) SF 1416, Payment Bond for Other
Than Construction Contracts (see
28.103–3 and 28.106–3(b)).
(n) SF 1418, Performance Bond for
Other Than Construction Contracts
(see 28.103–2 and 28.106–3(b)).
(o) OF 90, Release of Lien on Real
Property (see 28.203–5).
(p) OF 91, Release of Personal Property from Escrow (see 28.203–5).
[48 FR 42286, Sept. 19, 1983, as amended at 54
FR 48986, Nov. 28, 1989; 61 FR 39213, July 26,
1996]
28.106–2 Substitution of surety bonds.
(a) A new surety bond covering all or
part of the obligations on a bond previously approved may be substituted
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48 CFR Ch. 1 (10–1–03 Edition)
for the original bond if approved by the
head of the contracting activity, or as
otherwise specified in agency regulation.
(b) When a new surety bond is approved, the contracting officer shall
notify the principal and surety of the
original bond of the effective date of
the new bond.
[48 FR 42286, Sept. 19, 1983, as amended at 61
FR 39213, July 26, 1996]
28.106–3
Additional bond and security.
(a) When additional bond coverage is
required and is secured in whole or in
part by the original surety or sureties,
agencies shall use Standard Form 1415,
Consent of Surety and Increase of Penalty. Standard Form 1415 is authorized
for local reproduction, and a copy of
the form is furnished for this purpose
in part 53 of the looseleaf edition of the
FAR.
(b) When additional bond coverage is
required and is secured in whole or in
part by a new surety or by one of the
alternatives described in 28.204 in lieu
of corporate or individual surety, agencies shall use Standard Form 25, Performance Bond; Standard Form 1418,
Performance Bond for Other Than Construction Contracts; Standard Form
25–A, Payment Bond; or Standard
Form 1416, Payment Bond for Other
Than Construction Contracts.
[63 FR 44806, Aug. 22, 1997]
28.106–4
Contract clause.
(a) The contracting officer shall insert the clause at 52.228–2, Additional
Bond Security, in solicitations and
contracts when bonds are required.
(b) In accordance with Section
806(a)(3) of Pub. L. 102–190, as amended
by Sections 2091 and 8105 of Pub. L. 103–
355, the contracting officer shall insert
the clause at 52.228–12, Prospective
Subcontractor Requests for Bonds, in
solicitations and contracts with respect to which a payment bond will be
furnished pursuant to the Miller Act
(see 28.102–1), except for contracts for
the acquisition of commercial items as
defined in Subpart 2.1.
[48 FR 42286, Sept. 19, 1983, as amended at 60
FR 48273, Sept. 18, 1995]
28.106–5
Consent of surety.
(a) When any contract is modified,
the contracting officer shall obtain the
consent of surety if—
(1) An additional bond is obtained
from other than the original surety;
(2) No additional bond is required
and—
(i) The modification is for new work
beyond the scope of the original contract; or
(ii) The modification does not change
the contract scope but changes the
contract price (upward or downward)
by more than 25 percent or $50,000; or
(3) Consent of surety is required for a
novation agreement (See subpart 42.12).
(b) When a contract for which performance or payment is secured by any
of the types of security listed in 28.204
is modified as described in paragraph
(a) of this subsection, no consent of
surety is required.
(c) Agencies shall use Standard Form
1414, Consent of Surety, for all types of
contracts.
[48 FR 42286, Sept. 19, 1983, as amended at 61
FR 31652, June 20, 1996]
28.106–6 Furnishing information.
(a) The surety on the bond, upon its
written request, may be furnished information on the progress of the work,
payments, and the estimated percentage of completion, concerning the contract for which the bond was furnished.
(b) When a payment bond has been
provided, the contracting officer shall,
upon request, furnish the name and address of the surety or sureties to any
subcontractor or supplier who has furnished or been requested to furnish
labor or material for the contract. In
addition, general information concerning the work progress, payments,
and the estimated percentage of completion may be furnished to persons
who have provided labor or materials
and have not been paid.
(c) When a payment bond has been
provided for a contract, the head of the
agency or designee shall furnish a certified copy of the bond and the contract for which it was given to any person who makes a request therefor and
who furnishes an affidavit that the requestor has supplied labor or materials
for such work and payment therefor
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has not been made or that the requestor is being sued on such bond. The
person who makes the request shall be
required to pay such costs of preparation as determined by the head of the
agency or designee to be reasonable
and appropriate (see 40 U.S.C. 270(c)).
(d) Section 806(a)(2) of Pub. L. 102–190,
as amended by Sections 2091 and 8105 of
Pub. L. 103–355, requires that the Federal Government provide information
to subcontractors on payment bonds
under contracts for other than commercial items as defined in Subpart 2.1.
Upon the written or oral request of a
subcontractor/supplier, or prospective
subcontractor/supplier, under a contract with respect to which a payment
bond has been furnished pursuant to
the Miller Act, the contracting officer
shall promptly provide to the requester, either orally or in writing, as
appropriate, any of the following:
(1) Name and address of the surety or
sureties on the payment bond.
(2) Penal amount of the payment
bond.
(3) Copy of the payment bond. The
contracting officer may impose reasonable fees to cover the cost of copying
and providing a copy of the payment
bond.
[48 FR 42286, Sept. 19, 1983, as amended at 50
FR 26903, June 28, 1985; 60 FR 48273, Sept. 18,
1995]
28.106–7 Withholding
ments.
contract
pay-
(a) During contract performance,
agencies shall not withhold payments
due contractors or assignees because
subcontractors or suppliers have not
been paid.
(b) If, after completion of the contract work, the Government receives
written notice from the surety regarding the contractor’s failure to meet its
obligation to its subcontractors or suppliers, the contracting officer shall
withhold final payment. However, the
surety must agree to hold the Government harmless from any liability resulting from withholding the final payment. The contracting officer will authorize final payment upon agreement
between the contractor and surety or
upon a judicial determination of the
rights of the parties.
(c) For any withholding incident to
the labor standards provisions of the
contract, see part 22.
28.106–8 Payment to subcontractors or
suppliers.
The contracting officer will only authorize payment to subcontractors or
suppliers from an ILC (or any other
cash equivalent security) upon a judicial determination of the rights of the
parties, a signed notarized statement
by the contractor that the payment is
due and owed, or a signed agreement
between the parties as to amount due
and owed.
[62 FR 44807, Aug. 22, 1997]
Subpart 28.2—Sureties and Other
Security for Bonds
28.200
Scope of subpart.
This subpart prescribes procedures
for the use of sureties and other security to protect the Government from financial losses.
[62 FR 44807, Aug. 22, 1997]
28.201
Requirements for security.
(a) Agencies shall obtain adequate security for bonds (including coinsurance
and reinsurance agreements) required
or used with a contract for supplies or
services (including construction). Acceptable forms of security include (1)
corporate or individual sureties or (2)
any of the types of security authorized
in lieu of sureties by 28.204.
(b) Solicitations shall not preclude
offerors from using the types of surety
or other security permitted by this
subpart, unless prohibited by law or
regulation.
[48 FR 42286, Sept. 19, 1983, as amended at 55
FR 25530, June 21, 1990; 62 FR 44807, Aug. 22,
1997]
28.202 Acceptability of corporate sureties.
(a)(1) Corporate sureties offered for
bonds furnished with contracts performed in the United States or its outlying areas must appear on the list
contained in the Department of the
Treasury Circular 570, ‘‘Companies
Holding Certificates of Authority as
Acceptable Sureties on Federal Bonds
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28.203
48 CFR Ch. 1 (10–1–03 Edition)
and Acceptable Reinsuring Companies.’’
(2) The penal amount of the bond
should not exceed the surety’s underwriting limit stated in the Department
of the Treasury circular. If the penal
amount exceeds the underwriting
limit, the bond will be acceptable only
if (i) the amount which exceeds the
specified limit is coinsured or reinsured and (ii) the amount of coinsurance or reinsurance does not exceed the
underwriting limit of each coinsurer or
reinsurer.
(3) Coinsurance or reinsurance agreements shall conform to the Department of the Treasury regulations in 31
CFR 223.10 and 223.11. When reinsurance
is contemplated, the contracting office
generally shall require reinsurance
agreements to be executed and submitted with the bonds before making a
final determination on the bonds.
(4) When specified in the solicitation,
the contracting officer may accept a
bond from the direct writing company
in satisfaction of the total bond requirement of the contract. This is permissible until necessary reinsurance
agreements are executed, even though
the total bond requirement may exceed
the insurer’s underwriting limitation.
The contractor shall execute and submit necessary reinsurance agreements
to the contracting officer within the
time specified on the bid form, which
may not exceed 45 calendar days after
the execution of the bond. The contractor shall use Standard Form 273,
Reinsurance Agreement for a Miller
Act Performance Bond, and Standard
Form 274, Reinsurance Agreement for a
Miller Act Payment Bond, when reinsurance is furnished with Miller Act
bonds. Standard Form 275, Reinsurance
Agreement in Favor of the United
States, is used when reinsurance is furnished with bonds for other purposes.
(b) For contracts performed in a foreign country, sureties not appearing on
Treasury Department Circular 570 are
acceptable if the contracting officer determines that it is impracticable for
the contractor to use Treasury listed
sureties.
(c) The Department of the Treasury
issues supplements to Circular 570, notifying all Federal agencies of (1) new
approved corporate surety companies
and (2) the termination of the authority of any specific corporate surety to
qualify as a surety on Federal bonds.
Upon receipt of notification of termination of a company’s authority to
qualify as a surety on Federal bonds,
the contracting officer shall review the
outstanding contracts and take action
necessary to protect the Government,
including, where appropriate, securing
new bonds with acceptable sureties in
lieu of outstanding bonds with the
named company.
(d) The Department of the Treasury
Circular 570 may be obtained from the
U.S. Department of the Treasury, Financial Management Service, Surety
Bond Branch, 401 14th St., SW., 2nd
Floor—West Wing, Washington, DC
20227.
[48 FR 42286, Sept. 19, 1983, as amended at 54
FR 48986, Nov. 28, 1989; 68 FR 28083, May 22,
2003]
28.203 Acceptability
sureties.
of
individual
(a) An individual surety is acceptable
for all types of bonds except position
schedule bonds. The contracting officer
shall determine the acceptability of individuals proposed as sureties, and
shall ensure that the surety’s pledged
assets are sufficient to cover the bond
obligation. (See 28.203–7 for information on excluded individual sureties.)
(b) An individual surety must execute the bond, and the unencumbered
value of the assets (exclusive of all outstanding pledges for other bond obligations) pledged by the individual surety,
must equal or exceed the penal amount
of each bond. The individual surety
shall execute the Standard Form 28 and
provide a security interest in accordance with 28.203–1. One individual surety is adequate support for a bond, provided the unencumbered value of the
assets pledged by that individual surety equal or exceed the amount of the
bond. An offeror may submit up to
three individual sureties for each bond,
in which case the pledged assets, when
combined, must equal or exceed the
penal amount of the bond. Each individual surety must accept both joint
and several liability to the extent of
the penal amount of the bond.
538
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Federal Acquisition Regulation
28.203–1
(c) If the contracting officer determines that no individual surety in support of a bid guarantee is acceptable,
the offeror utilizing the individual surety shall be rejected as nonresponsible,
except as provided in 28.101–4. A finding
of
nonresponsibility
based
on
unacceptability of an individual surety, need not be referred to the Small
Business Administration for a competency review. (See 19.602–1(a)(2)(i)
and 61 Comp. Gen. 456 (1982).)
(d) A contractor submitting an unacceptable individual surety in satisfaction of a performance or payment bond
requirement may be permitted a reasonable time, as determined by the
contracting officer, to substitute an acceptable surety for a surety previously
determined to be unacceptable.
(e) When evaluating individual sureties, contracting officers may obtain
assistance from the office identified in
28.202(d).
(f) Contracting officers shall obtain
the opinion of legal counsel as to the
adequacy of the documents pledging
the assets prior to accepting the bid
guarantee and payment and performance bonds.
(g) Evidence of possible criminal or
fraudulent activities by an individual
surety shall be referred to the appropriate agency official in accordance
with agency procedures.
[54 FR 48986, Nov. 28, 1989]
28.203–1 Security interests by an individual surety.
(a) An individual surety may be accepted only if a security interest in assets acceptable under 28.203–2 is provided to the Government by the individual surety. The security interest
shall be furnished with the bond.
(b) The value at which the contracting officer accepts the assets
pledged must be equal to or greater
than the aggregate penal amounts of
the bonds required by the solicitation
and may be provided by one or a combination of the following methods:
(1) An escrow account with a federally insured financial institution in the
name of the contracting agency. (See
28.203–2(b)(2) with respect to Government securities in book entry form.)
Acceptable securities for deposit in escrow are discussed in 28.203–2. While
the offeror is responsible for establishing the escrow account, the terms
and conditions must be acceptable to
the contracting officer. At a minimum,
the escrow account shall provide for
the following:
(i) The account must provide the contracting officer the sole and unrestricted right to draw upon all or any
part of the funds deposited in the account. A written demand for withdrawal shall be sent to the financial institution by the contracting officer,
after obtaining the concurrence of
legal counsel, with a copy to the offeror/contractor and to the surety. Within
the time period specified in the demand, the financial institution would
pay the Government the amount demanded up to the amount on deposit. If
any dispute should arise between the
Government and the offeror/contractor,
the surety, or the subcontractors or
suppliers with respect to the offer or
contract, the financial institution
would be required, unless precluded by
order of a court of competent jurisdiction, to disburse monies to the Government as directed by the contracting officer.
(ii) The financial institution would
be authorized to release to the individual surety all or part of the balance
of the escrow account, including any
accrued interest, upon receipt of written authorization from the contracting
officer.
(iii) The Government would not be
responsible for any costs attributable
to the establishment, maintenance, administration, or any other aspect of
the account.
(iv) The financial institution would
not be liable or responsible for the interpretation of any provisions or terms
and conditions of the solicitation or
contract.
(v) The financial institution would
provide periodic account statements to
the contracting officer.
(vi) The terms of the escrow account
could not be amended without the consent of the contracting officer.
(2) A lien on real property, subject to
the restrictions in 28.203–2 and 28.203–3.
[54 FR 48986, Nov. 28, 1989]
539
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28.203–2
48 CFR Ch. 1 (10–1–03 Edition)
28.203–2 Acceptability of assets.
(a) The Government will accept only
cash, readily marketable assets, or irrevocable letters of credit from a federally insured financial institution from
individual sureties to satisfy the underlying bond obligations.
(b) Acceptable assets include—
(1) Cash, or certificates of deposit, or
other cash equivalents with a federally
insured financial institution;
(2) United States Government securities at market value. (An escrow account is not required if an individual
surety offers Government securities
held in book entry form at a depository
institution. In lieu thereof, the individual shall provide evidence that the
depository institution has (i) placed a
notation against the individual’s book
entry account indicating that the security has been pledged in favor of the respective agency; (ii) agreed to notify
the agency prior to maturity of the security; and (iii) agreed to hold the proceeds of the security subject to the
pledge in favor of the agency until a
substitution of securities is made or
the security interest is formally released by the agency);
(3) Stocks and bonds actively traded
on a national U.S. security exchange
with certificates issued in the name of
the individual surety. National security exchanges are—(i) the New York
Stock Exchange; (ii) the American
Stock Exchange; (iii) the Boston Stock
Exchange; (iv) the Cincinnati Stock
Exchange; (v) the Midwest Stock Exchange; (vi) the Philadelphia Stock Exchange; (vii) the Pacific Stock Exchange; and (viii) the Spokane Stock
Exchange. These assets will be accepted at 90 percent of their 52-week low, as
reflected at the time of submission of
the bond. Stock options and stocks on
the over-the-counter (OTC) market or
NASDQ Exchanges will not be accepted. Assistance in evaluating the acceptability of securities may be obtained from the Securities and Exchange Commission, Division of Enforcement, 450 Fifth Street NW., Washington, DC 20549.
(4) Real property owned in fee simple
by the surety without any form of concurrent ownership, except as provided
in paragraph (c)(3)(iii) of this subsection, and located in the United
States or its outlying areas. These assets will be accepted at 100 percent of
the most current tax assessment value
(exclusive of encumbrances) or 75 percent of the properties’ unencumbered
market value provided a current appraisal is furnished (see 28.203–3).
(5) Irrevocable letters of credit (ILC)
issued by a federally insured financial
institution in the name of the contracting agency and which identify the
agency and solicitation or contract
number for which the ILC is provided.
(c) Unacceptable assets include but
are not limited to—
(1) Notes or accounts receivable;
(2) Foreign securities;
(3) Real property as follows:
(i) Real property located outside the
United States and its outlying areas.
(ii) Real property which is a principal
residence of the surety.
(iii) Real property owned concurrently regardless of the form of co-tenancy (including joint tenancy, tenancy
by the entirety, and tenancy in common) except where all co-tenants agree
to act jointly.
(iv) Life estates, leasehold estates, or
future interests in real property.
(4) Personal property other than that
listed in paragraph (b) of this subsection (e.g., jewelry, furs, antiques);
(5) Stocks and bonds of the individual
surety in a controlled, affiliated, or
closely held concern of the offeror/contractor;
(6) Corporate assets (e.g., plant and
equipment);
(7) Speculative assets (e.g., mineral
rights);
(8) Letters of credit, except as provided in 28.203–2(b)(5).
[54 FR 48987, Nov. 28, 1989, as amended at 68
FR 28083, May 22, 2003]
28.203–3
Acceptance of real property.
(a) Whenever a bond with a security
interest in real property is submitted,
the individual surety shall provide—
(1) Evidence of title in the form of a
certificate of title prepared by a title
insurance company approved by the
United States Department of Justice.
This list entitled List of Approved Attorneys, Abstracters, and Title Companies is available from the Title Unit,
Land Acquisition Section, Land and
540
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Federal Acquisition Regulation
28.203–5
Natural Resource Division, Department of Justice, Washington, DC 20530.
This title evidence must show fee simple title vested in the surety along
with any concurrent owners; whether
any real estate taxes are due and payable; and any recorded encumbrances
against the property, including the lien
filed in favor of the Government under
paragraph (d) of this subsection;
(2) Evidence of the amount due under
any encumbrance shown in the evidence of title;
(3) A copy of the current real estate
tax assessment of the property or a
current appraisal dated no earlier than
6 months prior to the date of the bond,
prepared by a professional appraiser
who certifies that the appraisal has
been conducted in accordance with the
generally accepted appraisal standards
as reflected in the Uniform Standards
of Professional Appraisal Practice as
promulgated by the Appraisal Foundation, 1029 Vermont Avenue NW., Washington, DC 20005.
(b) Failure to provide evidence that
the lien has been properly recorded will
render the offeror nonresponsible.
(c) The individual surety is liable for
the payment of all administrative costs
of the Government, including legal
fees, associated with the liquidation of
pledged real estate.
(d) The following format, or any document substantially the same, shall be
used by the surety and recorded in the
local recorder’s office when a surety
pledges real estate on Standard Form
28, Affidavit of Individual Surety.
LIEN ON REAL ESTATE
I/we agree that this instrument constitutes
a lien in the amount of $––––– on the property described in this lien. The rights of the
United States Government shall take precedence over any subsequent lien or encumbrance until the lien is formally released by
a duly authorized representative of the
United States. I/we hereby grant the United
States the power of sale of subject property,
including the right to satisfy its reasonable
administrative costs, including legal fees associated with any sale of subject property, in
the event of contractor default if I/we otherwise fail to satisfy the underlying ( ) bid
guarantee, ( ) performance bond, ( ) or
payment bond obligations as an individual
surety on solicitation/contract number –––––
. The lien is upon the real estate now owned
by me/us described as follows: (legal descrip-
tion, street address and other identifying description)
IN WITNESS HEREOF, I/we have hereunto
affixed my/our hand(s) and seal(s) this ––––
DAY OF –––– 19––.
llllllllllllllllllllllll
WITNESS:
llllllllllllllllllllllll
(SEAL)
I, lll, a Notary Public in and for the
(CITY) lll, (STATE) lll, do hereby certify that lll, a party or parties to a certain Agreement bearing the date lll day
of lll 19l, and hereunto annexed, personally appeared before me, the said lll being
personally well known to me as the person(s)
who executed said lien, and acknowledged
the same to be his/her/their act and deed.
GIVEN under my hand and seal this lll
day of lll 19l.
llllllllllllllllllllllll
NOTARY PUBLIC,
STATE
My Commission expires:
[54 FR 48987, Nov. 28, 1989]
28.203–4 Substitution of assets.
An individual surety may request the
Government to accept a substitute
asset for that currently pledged by submitting a written request to the responsible contracting officer. The contracting officer may agree to the substitution of assets upon determining,
after consultation with legal counsel,
that the substitute assets to be pledged
are adequate to protect the outstanding
bond
or
guarantee
obiligations. If acceptable, the substitute assets shall be pledged as provided for in subpart 28.2.
[54 FR 48988, Nov. 28, 1989]
28.203–5 Release of lien.
(a) After consultation with legal
counsel, the contracting officer shall
release the security interest on the individual surety’s assets using the Optional Form 90, Release of Lien on Real
Property, or Optional Form 91, Release
of Personal Property from Escrow, or a
similar release as soon as possible consistent with the conditions in subparagraphs (a) (1) and (2) of this subsection.
A surety’s assets pledged in support of
a payment bond may be released to a
subcontractor or supplier upon Government receipt of a Federal district court
541
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28.203–6
48 CFR Ch. 1 (10–1–03 Edition)
judgment, or a sworn statement by the
subcontractor or supplier that the
claim is correct along with a notarized
authorization of the release by the surety stating that it approves of such release.
(1) Contracts subject to the Miller Act.
The security interest shall be maintained for the later of (i) 1 year following final payment, (ii) until completion of any warranty period (applicable
only to performance bonds), or (iii)
pending resolution of all claims filed
against the payment bond during the 1year period following final payment.
(2) Contracts subject to alternative payment protection (28.102–1(b)(1)). The security interest shall be maintained for
the full contract performance period
plus one year.
(3) Other contracts not subject to the
Miller Act. The security interest shall
be maintained for 90 days following
final payment or until completion of
any warranty period (applicable only
to performance bonds), whichever is
later.
(b) Upon written request, the contracting officer may release the security interest on the individual surety’s
assets in support of a bid guarantee
based upon evidence that the offer supported by the individual surety will not
result in contract award.
(c) Upon written request by the individual surety, the contracting officer
may release a portion of the security
interest on the individual surety’s assets based upon substantial performance of the contractor’s obligations
under its performance bond. Release of
the security interest in support of a
payment bond must comply with the
subparagraphs (a) (1) through (3) of this
subsection. In making this determination, the contracting officer will give
consideration as to whether the
unreleased portion of the lien is sufficient to cover the remaining contract
obligations, including payments to subcontractors and other potential liabilities. The individual surety shall, as a
condition of the partial release, furnish
an affidavit agreeing that the release
of such assets does not relieve the individual surety of its obligations under
the bond(s).
28.203–6
[54 FR 48988, Nov. 28, 1989, as amended at 61
FR 31652, June 20, 1996]
[54 FR 48988, Nov. 28, 1989, as amended at 60
FR 33066, June 26, 1995]
Contract clause.
Insert the clause at 52.228–11 in solicitations and contracts which require
the submission of bid guarantees, performance, or payment bonds.
[54 FR 48988, Nov. 28, 1989]
28.203–7
ties.
Exclusion of individual sure-
(a) An individual may be excluded
from acting as a surety on bonds submitted by offerors on procurement by
the executive branch of the Federal
Government, by the acquiring agency’s
head or designee utilizing the procedures in subpart 9.4. The exclusion
shall be for the purpose of protecting
the Government.
(b) An individual may be excluded for
any of the following causes:
(1) Failure to fulfill the obligations
under any bond.
(2) Failure to disclose all bond obligations.
(3) Misrepresentation of the value of
available assets or outstanding liabilities.
(4) Any false or misleading statement, signature or representation on a
bond
or
affidavit
of
individual
suretyship.
(5) Any other cause affecting responsibility as a surety of such serious and
compelling nature as may be determined to warrant exclusion.
(c) An individual surety excluded
pursuant to this subsection shall be included on the List of Parties Excluded
from Federal Procurement and Nonprocurement Programs. (See 9.404.)
(d) Contracting officers shall not accept the bonds of individual sureties
whose names appear on the List of Parties Excluded from Federal Procurement and Nonprocurement Programs
(see 9.404) unless the acquiring agency’s
head or a designee states in writing the
compelling reasons justifying acceptance.
(e) An exclusion of an individual surety under this subsection will also preclude such party from acting as a contractor in accordance with subpart 9.4.
542
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Federal Acquisition Regulation
28.204–3
28.204 Alternatives in lieu of corporate
or individual sureties.
(a) Any person required to furnish a
bond to the Government may furnish
any of the types of security listed in
28.204–1 through 28.204–3 instead of a
corporate or individual surety for the
bond. When any of those types of security are deposited, a statement shall be
incorporated in the bond form pledging
the security in lieu of execution of the
bond form by corporate or individual
sureties. The contractor shall execute
the bond forms as the principal. Agencies shall establish safeguards to protect against loss of the security and
shall return the security or its equivalent to the contractor when the bond
obligation has ceased.
(b) Upon written request by any contractor securing a performance or payment bond by any of the types of security listed in 28.204–1 through 28.204–3,
the contracting officer may release a
portion of the security only when the
conditions allowing the partial release
of lien in 28.203–5(c) are met. The contractor shall, as a condition of the partial release, furnish an affidavit agreeing that the release of such security
does not relieve the contractor of its
obligations under the bond(s).
(c) The contractor may satisfy a requirement for bond security by furnishing a combination of the types of
security listed in 28.204–1 through
28.204–3 or a combination of bonds supported by these types of security and
additional surety bonds under 28.202 or
28.203. During the period for which a
bond supported by security is required,
the contractor may substitute one type
of security listed in 28.204–1 through
28.204–3 for another, or may substitute,
in whole or combination, additional
surety bonds under 28.202 or 28.203.
[61 FR 31653, June 20, 1996, as amended at 62
FR 44807, Aug. 22, 1997]
28.204–1
United States bonds or notes.
Any person required to furnish a
bond to the Government has the option, instead of furnishing a surety or
sureties on the bond, of depositing certain United States bonds or notes in an
amount equal at their par value to the
penal sum of the bond (the Act of February 24, 1919 (31 U.S.C. 9303) and Treas-
ury Department Circular No. 154 dated
July 1, 1978 (31 CFR part 225)). In addition, a duly executed power of attorney
and agreement authorizing the collection or sale of such United States
bonds or notes in the event of default
of the principal on the bond shall accompany the deposited bonds or notes.
The contracting officer may (a) turn
securities over to the finance or other
authorized agency official, or (b) deposit them with the Treasurer of the
United States, a Federal Reserve Bank
(or branch with requisite facilities), or
other depository designated for that
purpose by the Secretary of the Treasury, under procedures prescribed by the
agency concerned and Treasury Department Circular No. 154 (exception:
The contracting officer shall deposit
all bonds and notes received in the District of Columbia with the Treasurer of
the United States).
[48 FR 42286, Sept. 19, 1983. Redesignated and
amended at 54 FR 48986, 48989, Nov. 28, 1989]
28.204–2 Certified or cashiers checks,
bank drafts, money orders, or currency.
Any person required to furnish a
bond has an option to furnish a certified or cashier’s check, bank draft,
Post Office money order, or currency,
in an amount equal to the penal sum of
the bond, instead of furnishing surety
or sureties on the bonds. Those furnishing checks, drafts, or money orders
shall draw them to the order of the appropriate Federal agency.
[48 FR 42286, Sept. 19, 1983. Redesignated at
54 FR 48986, Nov. 28, 1989]
28.204–3 Irrevocable letter of credit
(ILC).
(a) Any person required to furnish a
bond has the option to furnish a bond
secured by an ILC in an amount equal
to the penal sum required to be secured
(see 28.204). A separate ILC is required
for each bond.
(b) The ILC shall be irrevocable, require presentation of no document
other than a written demand and the
ILC (and letter of confirmation, if any),
expire only as provided in paragraph (f)
of this subsection, and be issued/confirmed by an acceptable federally insured financial institution as provided
in paragraph (g) of this subsection.
543
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28.204–3
48 CFR Ch. 1 (10–1–03 Edition)
(c) To draw on the ILC, the contracting officer shall use the sight
draft set forth in the clause at 52.228–
14, and present it with the ILC (including letter of confirmation, if any) to
the issuing financial institution or the
confirming financial institution (if
any).
(d) If the contractor does not furnish
an acceptable replacement ILC, or
other acceptable substitute, at least 30
days before an ILC’s scheduled expiration, the contracting officer shall immediately draw on the ILC.
(e) If, after the period of performance
of a contract where ILCs are used to
support payment bonds, there are outstanding claims against the payment
bond, the contracting officer shall draw
on the ILC prior to the expiration date
of the ILC to cover these claims.
(f) The period for which financial security is required shall be as follows:
(1) If used as a bid guarantee, the ILC
should expire no earlier than 60 days
after the close of the bid acceptance
period.
(2) If used as an alternative to corporate or individual sureties as security for a performance or payment
bond, the offeror/contractor may submit an ILC with an initial expiration
date estimated to cover the entire period for which financial security is required or an ILC with an initial expiration date that is a minimum period of
one year from the date of issuance. The
ILC shall provide that, unless the
issuer provides the beneficiary written
notice of non-renewal at least 60 days
in advance of the current expiration
date, the ILC is automatically extended without amendment for one
year from the expiration date, or any
future expiration date, until the period
of required coverage is completed and
the contracting officer provides the financial institution with a written
statement waiving the right to payment. The period of required coverage
shall be:
(i) For contracts subject to the Miller
Act, the later of—
(A) One year following the expected
date of final payment;
(B) For performance bonds only,
until completion of any warranty period; or
(C) For payment bonds only, until
resolution of all claims filed against
the payment bond during the one-year
period following final payment.
(ii) For contracts not subject to the
Miller Act, the later of—
(A) 90 days following final payment;
or
(B) For performance bonds only,
until completion of any warranty period.
(g) Only federally insured financial
institutions rated investment grade or
higher shall issue or confirm the ILC.
Unless the financial institution issuing
the ILC had letter of credit business of
at least $25 million in the past year,
ILCs over $5 million must be confirmed
by another acceptable financial institution that had letter of credit business of at least $25 million in the past
year.
(1) The offeror/contractor shall provide the contracting officer a credit
rating from a recognized commercial
rating service as specified in Office of
Federal Procurement Policy Pamphlet
No. 7 (see 28.204–3(h)) that indicates the
financial institution has the required
rating(s) as of the date of issuance of
the ILC.
(2) If the contracting officer learns
that a financial institution’s rating has
dropped below the required level, the
contracting officer shall give the contractor 30 days to substitute an acceptable ILC or shall draw on the ILC using
the sight draft in paragraph (g) of the
clause at 52.228–14.
(h)(1) Additional information on
credit rating services and investment
grade ratings is contained within Office
of Federal Procurement Policy Pamphlet No. 7, Use of Irrevocable Letters
of Credit. This pamphlet may be obtained by calling the Office of Management and Budget’s publications office
at (202) 395–7332.
(2) A copy of the Uniform Customs
and Practice (UCP) for Documentary
Credits, 1993 Revision, International
Chamber of Commerce Publication No.
500, is available from: ICC Publishing,
Inc., 156 Fifth Avenue, New York NY,
10010, Telephone: (212) 206–1150, Telefax:
(212)
633–6025,
E-mail:
[email protected]
[61 FR 31653, June 20, 1996, as amended at 62
FR 44807, Aug. 22, 1997]
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Federal Acquisition Regulation
28.305
28.204–4 Contract clause.
Insert the clause at 52.228–14, Irrevocable Letter of Credit, in solicitations
and contracts for services, supplies, or
construction, when a bid guarantee, or
performance bonds, or performance and
payment bonds are required.
[61 FR 31653, June 20, 1996]
ices are required to maintain medical
liability insurance and indemnify the
Government for liability producing
acts or omissions by the contractor, its
employees and agents (see 37.400).
[48 FR 42286, Sept. 19, 1983, as amended at 54
FR 5056, Jan. 31, 1989; 59 FR 67043, Dec. 28,
1994; 68 FR 28083, May 22, 2003]
28.302 Notice
change.
Subpart 28.3—Insurance
28.301 Policy.
Contractors shall carry insurance
under the following circumstances:
(a)(1) The Government requires any
contractor subject to Cost Accounting
Standard (CAS) 416 (48 CFR 9004.416 (appendix B, FAR loose-leaf edition)) to
obtain insurance, by purchase or selfcoverage, for the perils to which the
contractor is exposed, except when (i)
the Government, by providing in the
contract in accordance with law,
agrees to indemnify the contractor
under specified circumstances or (ii)
the contract specifically relieves the
contractor of liability for loss of or
damage to Government property.
(2) The Government reserves the
right to disapprove the purchase of any
insurance coverage not in the Government’s interest.
(3) Allowability of the insurance program’s cost shall be determined in accordance with the criteria in 31.205–19.
(b) Contractors, whether or not their
contracts are subject to CAS 416, are
required by law and this regulation to
provide insurance for certain types of
perils (e.g., workers’ compensation). Insurance is mandatory also when commingling of property, type of operation, circumstances of ownership, or
condition of the contract make it necessary for the protection of the Government. The minimum amounts of insurance required by this regulation
(see 28.307–2) may be reduced when a
contract is to be performed outside the
United states and its outlying areas.
When more than one agency is involved, the agency responsible for review and approval of a contractor’s insurance program shall coordinate with
other interested agencies before acting
on significant insurance matters.
(c) Contractors awarded nonpersonal
services contracts for health care serv-
of
cancellation
When the Government requires the
contractor to provide insurance coverage, the policies shall contain an endorsement that any cancellation or
material change in the coverage adversely affecting the Government’s interest shall not be effective unless the
insurer or the contractor gives written
notice of cancellation or change as required by the contracting officer. When
the coverage is provided by self-insurance, the contractor shall not change
or decrease the coverage without the
administrative contracting officer’s
prior approval (see 28.308(c)).
28.303 Insurance against loss of or
damage to Government property.
When the Government requires or approves insurance to cover loss of or
damage to Government property (see
45.103, Responsibility and liability for
Government property), it may be provided by specific insurance policies or
by inclusion of the risks in the contractor’s existing policies. The policies
shall disclose the Government’s interest in the property.
28.304
Risk-pooling arrangements.
Agencies may establish risk-pooling
arrangements. These arrangements are
designed to use the services of the insurance industry for safety engineering
and the handling of claims at minimum cost to the Government. The
agency responsible shall appoint a single manager or point of contact for
each arrangement.
28.305 Overseas workers’ compensation and war-hazard insurance.
(a) Public-work contract, as used in
this subpart, means any contract for a
fixed improvement or for any other
project, fixed or not, for the public use
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28.306
48 CFR Ch. 1 (10–1–03 Edition)
of the United States or its allies, involving construction, alteration, removal, or repair, including projects or
operations under service contracts and
projects in connection with the national defense or with war activities,
dredging, harbor improvements, dams,
roadways, and housing, as well as preparatory and ancillary work in connection therewith at the site or on the
project.
(b) The Defense Base Act (42 U.S.C.
1651 et seq.) extends the Longshoremen’s and Harbor Workers’ Compensation Act (33 U.S.C. 901) to various classes of employees working outside the
United States, including those engaged
in performing—
(1) Public-work contracts; or
(2) Contracts approved or financed
under the Foreign Assistance Act of
1961 (Pub. L. 87–195) other than (i) contracts approved or financed by the Development Loan Fund (unless the Secretary of Labor, acting upon the recommendation of a department or agency, determines that such contracts
should be covered) or (ii) contracts exclusively for materials or supplies.
(c) When the Defense Base Act applies (see 42 U.S.C. 1651 et seq.) to these
employees, the benefits of the Longshoremen’s and Harbor Workers’ Compensation Act are extended through operation of the War Hazards Compensation Act (42 U.S.C. 1701 et seq.) to protect the employees against the risk of
war hazards (injury, death, capture, or
detention). When, by means of an insurance policy or a self-insurance program, the contractor provides the
workers’ compensation coverage required by the Defense Base Act, the
contractor’s employees automatically
receive war-hazard risk protection.
(d) When the agency head recommends a waiver to the Secretary of
Labor, the Secretary may waive the
applicability of the Defense Base Act
to any contract, subcontract, work location, or classification of employees.
(e) If the Defense Base Act is waived
for some or all of the contractor’s employees, the benefits of the War Hazards Compensation Act are automatically waived with respect to those employees for whom the Defense Base Act
is waived. For those employees, the
contractor shall provide workers’ com-
pensation coverage against the risk of
work injury or death and assume liability toward the employees and their
beneficiaries for war-hazard injury,
death, capture, or detention. The contract shall provide either that the
costs of this liability or the reasonable
costs of insurance against this liability
shall be allowed as a cost under the
contract.
28.306 Insurance
contracts.
under
fixed-price
(a) General. Although the Government is not ordinarily concerned with
the contractor’s insurance coverage if
the contract is a fixed-price contract,
in special circumstances agencies may
specify insurance requirements under
fixed-price contracts. Examples of such
circumstances include the following:
(1) The contractor is—or has a separate operation—engaged principally in
Government work.
(2) Government property is involved.
(3) The work is to be performed on a
Government installation.
(4) The Government elects to assume
risks for which the contractor ordinarily obtains commercial insurance.
(b) Work on a Government installation.
(1) When the clause at 52.228–5, Insurance—Work on a Government Installation, is required to be included in a
fixed-price contract by 28.310, the coverage specified in 28.307 is the minimum insurance required and shall be
included in the contract Schedule or
elsewhere in the contract. The contracting officer may require additional
coverage and higher limits.
(2) When the clause at 52.228–5, Insurance—Work on a Government Installation, is not required by 28.310 but is included because the contracting officer
considers it to be in the Government’s
interest to do so, any of the types of insurance specified in 28.307 may be omitted or the limits may be lowered, if appropriate.
28.307 Insurance
under
bursement contracts.
cost-reim-
Cost-reimbursement contracts (and
subcontracts, if the terms of the prime
contract are extended to the subcontract) ordinarily require the types
of insurance listed in 28.307–2, with the
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Federal Acquisition Regulation
28.308
minimum amounts of liability indicated. (See 28.308 for self-insurance.)
28.307–1 Group insurance plans.
(a) Prior approval requirement. Under
cost-reimbursement contracts, before
buying insurance under a group insurance plan, the contractor must submit
the plan for approval, in accordance
with agency regulations. Any change
in benefits provided under an approved
plan that can reasonably be expected
to increase significantly the cost to the
Government requires similar approval.
(b) Premium refunds or credits. The
plan shall provide for the Government
to share in any premium refunds or
credits paid or otherwise allowed to the
contractor. In determining the extent
of the Government’s share in any premium refunds or credits, any special
reserves and other refunds to which the
contractor may be entitled in the future shall be taken into account.
28.307–2 Liability.
(a) Workers’ compensation and employer’s liability. Contractors are required
to comply with applicable Federal and
State workers’ compensation and occupational disease statutes. If occupational diseases are not compensable
under those statutes, they shall be covered under the employer’s liability section of the insurance policy, except
when contract operations are so commingled with a contractor’s commercial operations that it would not be
practical to require this coverage. Employer’s liability coverage of at least
$100,000 shall be required, except in
States with exclusive or monopolistic
funds that do not permit workers’ compensation to be written by private carriers. (See 28.305(c) for treatment of
contracts subject to the Defense Base
Act.)
(b) General liability. (1) The contracting officer shall require bodily injury liability insurance coverage written on the comprehensive form of policy of at least $500,000 per occurrence.
(2) Property damage liability insurance shall be required only in special
circumstances as determined by the
agency.
(c) Automobile liability. The contracting officer shall require automobile liability insurance written on
the comprehensive form of policy. The
policy shall provide for bodily injury
and property damage liability covering
the operation of all automobiles used
in connection with performing the contract. Policies covering automobiles
operated in the United States shall
provide coverage of at least $200,000 per
person and $500,000 per occurrence for
bodily injury and $20,000 per occurrence
for property damage. The amount of liability coverage on other policies shall
be commensurate with any legal requirements of the locality and sufficient to meet normal and customary
claims.
(d) Aircraft public and passenger liability. When aircraft are used in connection with performing the contract, the
contracting officer shall require aircraft public and passenger liability insurance. Coverage shall be at least
$200,000 per person and $500,000 per occurrence for bodily injury, other than
passenger liability, and $200,000 per occurrence for property damage. Coverage for passenger liability bodily injury shall be at least $200,000 multiplied by the number of seats or passengers, whichever is greater.
(e) Vessel liability. When contract performance involves use of vessels, the
contracting officer shall require, as determined by the agency, vessel collision liability and protection and indemnity liability insurance.
28.308 Self-insurance.
(a) When it is anticipated that 50 percent or more of the self-insurance costs
to be incurred at a segment of a contractor’s business will be allocable to
negotiated Government contracts, and
the self-insurance costs at the segment
for the contractor’s fiscal year are expected to be $200,000 or more, the contractor shall submit, in writing, information on its proposed self-insurance
program to the administrative contracting officer and obtain that official’s approval of the program. The
submission shall be by segment or segments of the contractor’s business to
which the program applies and shall include—
(1) A complete description of the program, including any resolution of the
board of directors authorizing and
adopting coverage, including types of
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28.309
48 CFR Ch. 1 (10–1–03 Edition)
risks, limits of coverage, assignments
of safety and loss control, and legal
service responsibilities;
(2) If available, the corporate insurance manual and organization chart
detailing fiscal responsibilities for insurance;
(3) The terms regarding insurance
coverage for any Government property;
(4) The contractor’s latest financial
statements;
(5) Any self-insurance feasibility
studies or insurance market surveys
reporting comparative alternatives;
(6) Loss history, premiums history,
and industry ratios;
(7) A formula for establishing reserves, including percentage variations
between losses paid and losses reserved;
(8) Claims administration policy,
practices, and procedures;
(9) The method of calculating the
projected average loss; and
(10) A disclosure of all captive insurance company and re-insurance agreements, including methods of computing
cost.
(b) Programs of self-insurance covering a contractor’s insurable risks, including the deductible portion of purchased insurance, may be approved
when examination of a program indicates that its application is in the Government’s interest. Agencies shall not
approve a program of self-insurance for
workers’ compensation in a jurisdiction where workers’ compensation does
not completely cover the employer’s liability to employees, unless the contractor—
(1) Maintains an approved program of
self-insurance for any employer’s liability not so covered; or
(2) Shows that the combined cost to
the Government of self-insurance for
workers’ compensation and commercial insurance for employer’s liability
will not exceed the cost of covering
both kinds of risk by commercial insurance.
(c) Once the administrative contracting officer has approved a program, the contractor must submit to
that official for approval any major
proposed changes to the program. Any
program approval may be withdrawn if
a contracting officer finds that either
(1) any part of a program does not comply with the requirements of this sub-
part and/or the criteria at 31.205–19 or
(2) conditions or situations existing at
the time of approval that were a basis
for original approval of the program
have changed to the extent that a program change is necessary.
(d) To qualify for a self-insurance
program, a contractor must demonstrate ability to sustain the potential losses involved. In making the determination, the contracting officer
shall consider the following factors:
(1) The soundness of the contractor’s
financial condition, including available
lines of credit.
(2) The geographic dispersion of assets, so that the potential of a single
loss depleting all the assets is unlikely.
(3) The history of previous losses, including frequency of occurrence and
the financial impact of each loss.
(4) The type and magnitude of risk,
such as minor coverage for the deductible portion of purchased insurance or
major coverage for hazardous risks.
(5) The contractor’s compliance with
Federal and State laws and regulations.
(e) Agencies shall not approve a program of self-insurance for catastrophic
risks (e.g., see 50.403, Special procedures for unusually hazardous or nuclear risks). Should performance of
Government contracts create the risk
of catastrophic losses, the Government
may, to the extent authorized by law,
agree to indemnify the contractor or
recognize an appropriate share of premiums for purchased insurance, or
both.
(f) Self-insurance programs to protect a contractor against the costs of
correcting its own defects in materials
or workmanship shall not be approved.
For these purposes, normal rework estimates and warranty costs will not be
considered self-insurance.
[48 FR 42286, Sept. 19, 1983, as amended at 55
FR 3883, Feb. 5, 1990; 66 FR 2131, Jan. 10, 2001]
28.309 Contract clauses for workers’
compensation insurance.
(a) The contracting officer shall insert the clause at 52.228–3, Workers’
Compensation Insurance (Defense Base
Act), in solicitations and contracts
when the Defense Base Act applies (see
28.305) and—
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Federal Acquisition Regulation
Pt. 29
(1) The contract will be a public-work
contract performed outside the United
States; or
(2) The contract will be approved or
financed under the Foreign Assistance
Act of 1961 (Pub. L. 87–195) and is not
excluded by 28.305(b)(2).
(b) The contracting officer shall insert the clause at 52.228–4, Workers’
Compensation and War-Hazard Insurance Overseas, in solicitations and contracts when the contract will be a public-work contract performed outside
the United States and the Secretary of
Labor waives the applicability of the
Defense Base Act (see 28.305(d)).
28.310 Contract clause for work on a
Government installation.
(a) Insert the clause at 52.228–5, Insurance—Work on a Government Installation, in solicitations and contracts if a fixed-price contract is contemplated, the contract amount is expected to exceed the simplified acquisition threshold, and the contract will
require work on a Government installation, unless—
(1) Only a small amount of work is
required on the Government installation (e.g., a few brief visits per month);
or
(2) All work on the Government installation will be performed outside
the United States and its outlying
areas.
(b) The contracting officer may insert the clause at 52.228–5 in solicitations and contracts described in (a)(1)
and (2) above if it is in the Government’s interest to do so.
ices, when a cost-reimbursement contract is contemplated.
[55 FR 52793, Dec. 21, 1990. Redesignated and
amended at 61 FR 2639, Jan. 26, 1996]
28.311–2 Agency solicitation provisions and contract clauses.
Agencies may prescribe their own solicitation provisions and contract
clauses to implement the basic policies
contained in this subpart 28.3.
[55 FR 52793, Dec. 21, 1990. Redesignated at 61
FR 2639, Jan. 26, 1996]
28.312 Contract clause for insurance
of leased motor vehicles.
The contracting officer shall insert
the clause at 52.228–8, Liability and Insurance—Leased Motor Vehicles, in solicitations and contracts for the leasing of motor vehicles (see subpart 8.11).
28.313 Contract clauses for insurance
of transportation or transportationrelated services.
(a) The contracting officer shall insert the clause at 52.228–9, Cargo Insurance, in solicitations and contracts for
transportation or for transportationrelated services, except when freight is
shipped under rates subject to released
or declared value.
(b) The contracting officer shall insert a clause substantially the same as
that at 52.228–10, Vehicular and General
Public Liability Insurance, in solicitations and contracts for transportation
or for transportation-related services
when the contracting officer determines that vehicular liability or general public liability insurance required
by law is not sufficient.
[48 FR 42286, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995; 61 FR 39190, July 26,
1996; 68 FR 28083, May 22, 2003]
28.311 Solicitation provision and contract clause on liability insurance
under
cost-reimbursement
contracts.
28.311–1
PART 29—TAXES
Sec.
29.000
Scope of part.
29.101
Resolving tax problems.
Subpart 29.1—General
Contract clause.
In accordance with agency acquisition regulations, the contracting officer shall insert the clause at 52.228–7,
Insurance—Liability to Third Persons,
in solicitations and contracts, other
than those for construction contracts
and those for architect-engineer serv-
Subpart 29.2—Federal Excise Taxes
29.201
29.202
29.203
General.
General exemptions.
Other Federal tax exemptions.
Subpart 29.3—State and Local Taxes
29.300
Scope of subpart.
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29.000
48 CFR Ch. 1 (10–1–03 Edition)
29.301 [Reserved]
29.302 Application of State and local taxes
to the Government.
29.303 Application of State and local taxes
to Government contractors and subcontractors.
29.304 Matters requiring special consideration.
29.305 State and local tax exemptions.
Subpart 29.4—Contract Clauses
29.401 Domestic contracts.
29.401–1 Indefinite-delivery contracts for
leased equipment.
29.401–2 Construction contracts performed
in North Carolina.
29.401–3 Federal, State, and local taxes.
29.401–4 New Mexico gross receipts and compensating tax.
29.402 Foreign contracts.
29.402–1 Foreign fixed-price contracts.
29.402–2 Foreign cost-reimbursement contracts.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42293, Sept. 19, 1983, unless
otherwise noted.
29.000 Scope of part.
This part prescribes policies and procedures for (a) using tax clauses in contracts (including foreign contracts), (b)
asserting immunity or exemption from
taxes, and (c) obtaining tax refunds. It
explains Federal, State, and local taxes
on certain supplies and services acquired by executive agencies and the
applicability of such taxes to the Federal Government. It is for the general
information of Government personnel
and does not present the full scope of
the tax laws and regulations.
Subpart 29.1—General
29.101 Resolving tax problems.
(a) Contract tax problems are essentially legal in nature and vary widely.
Specific tax questions must be resolved
by reference to the applicable contract
terms and to the pertinent tax laws
and regulations. Therefore, when tax
questions arise, contracting officers
should request assistance from the
agency-designated legal counsel.
(b) To keep treatment within an
agency consistent, contracting officers
or other authorized personnel shall
consult the agency-designated counsel
before negotiating with any taxing au-
thority for the purpose of (1) determining whether or not a tax is valid or
applicable or (2) obtaining exemption
from, or refund of, a tax.
(c) When the constitutional immunity of the Government from State or
local taxation may reasonably be at
issue, contractors should be discouraged from negotiating independently
with taxing authorities if the contract
involved is either (1) a cost-reimbursement contract or (2) a fixed-price contract containing a tax escalation
clause.
(d) Before purchasing goods or services from a foreign source, the contracting officer should consult the
agency-designated counsel (1) for information on foreign tax treaties and
agreements in force and on the implementation of any foreign-tax-relief
programs and (2) to resolve any other
tax questions affecting the prospective
contract.
Subpart 29.2—Federal Excise
Taxes
29.201
General.
(a) Federal excise taxes are levied on
the sale or use of particular supplies or
services. Subtitle D of the Internal
Revenue Code of 1954, Miscellaneous
Excise Taxes, 26 U.S.C. 4041 et seq., and
its implementing regulations, 26 CFR
parts 40 through 299, cover miscellaneous federal excise tax requirements.
Questions arising in this area should be
directed to the agency-designated
counsel. The most common excise
taxes are—
(1) Manufacturers’ excise taxes imposed on certain motor-vehicle articles, tires and inner tubes, gasoline, lubricating oils, coal, fishing equipment,
firearms, shells, and cartridges sold by
manufacturers, producers, or importers; and
(2) Special-fuels excise taxes imposed
at the retail level on diesel fuel and
special motor fuels.
(b) Sometimes the law exempts the
Federal Government from these taxes.
Contracting officers should solicit
prices on a tax-exclusive basis when it
is known that the Government is exempt from these taxes, and on a tax-inclusive basis when no exemption exists.
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29.302
(c) Executive agencies shall take
maximum advantage of available Federal excise tax exemptions.
[48 FR 42293, Sept. 19, 1983, as amended at 55
FR 52793, Dec. 21, 1990]
29.202
General exemptions.
No Federal manufacturers’ or special-fuels excise taxes are imposed in
many contracting situations as, for example, when the supplies are for any of
the following:
(a) The exclusive use of any State or
political subdivision, including the District of Columbia (26 U.S.C. 4041 and
4221).
(b) Shipment for export to a foreign
country or an outlying area of the
United States. Shipment must occur
within 6 months of the time title
passes to the Government. When the
exemption is claimed, the words ‘‘for
export’’ must appear on the contract or
purchase document, and the contracting officer must furnish the seller
proof of export (see 26 CFR 48.4221–3).
(c) Further manufacture, or resale
for further manufacture (this exemption does not include tires and inner
tubes) (26 CFR 48.4221–2).
(d) Use as fuel supplies, ships or sea
stores, or legitimate equipment on vessels of war, including (1) aircraft owned
by the United States and constituting
a part of the armed forces and (2) guided missiles and pilotless aircraft owned
or chartered by the United States.
When this exemption is to be claimed,
the purchase should be made on a taxexclusive basis. The contracting officer
shall furnish the seller an exemption
certificate for Supplies for Vessels of
War (an example is given in 26 CFR
48.4221–4(d)(2); the IRS will accept one
certificate covering all orders under a
single contract for a specified period of
up to 12 calendar quarters) (26 U.S.C.
4041 and 4221).
(e) A nonprofit educational organization (26 U.S.C. 4041 and 4221).
(f) Emergency vehicles (26 U.S.C. 4053
and 4064(b)(1)(c)).
[48 FR 42293, Sept. 19, 1983, as amended at 53
FR 662, Jan. 11, 1988; 68 FR 28083, May 22,
2003]
29.203
Other Federal tax exemptions.
(a) Pursuant to 26 U.S.C. 4293, the
Secretary of the Treasury has exempted the United States from the communications excise tax imposed in 26
U.S.C. 4251, when the supplies and services are for the exclusive use of the
United States. (Secretarial Authorization, June 20, 1947, Internal Revenue
Cumulative Bulletin, 1947–1, 205.)
(b) Pursuant to 26 U.S.C. 4483(b), the
Secretary of the Treasury has exempted the United States from the federal
highway vehicle users tax imposed in
26 U.S.C. 4481. The exemption applies
whether the vehicle is owned or leased
by the United States. (Secretarial Authorization, Internal Revenue Cumulative Bulletin, 1956–2, 1369.)
[53 FR 662, Jan. 11, 1988]
Subpart 29.3—State and Local
Taxes
29.300
Scope of subpart.
This subpart prescribes the policies
and procedures regarding the exemption or immunity of Federal Government purchases and property from
State and local taxation.
29.301
[Reserved]
29.302 Application of State and local
taxes to the Government.
(a) Generally, purchases and leases
made by the Federal Government are
immune from State and local taxation.
Whether any specific purchase or lease
is immune, however, is a legal question
requiring advice and assistance of the
agency-designated counsel.
(b) When it is economically feasible
to do so, executive agencies shall take
maximum advantage of all exemptions
from State and local taxation that may
be available. If appropriate, the contracting officer shall provide a Standard Form 1094, U.S. Tax Exemption
Form (see part 53), or other evidence
listed in 29.305(a) to establish that the
purchase is being made by the Government.
[48 FR 42293, Sept. 19, 1983, as amended at 62
FR 237, Jan. 2, 1997]
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29.303
48 CFR Ch. 1 (10–1–03 Edition)
29.303 Application of State and local
taxes to Government contractors
and subcontractors.
(a) Prime contractors and subcontractors shall not normally be designated as agents of the Government
for the purpose of claiming immunity
from State or local sales or use taxes.
Before any activity contends that a
contractor is an agent of the Government, the matter shall be referred to
the agency head for review. The referral shall include all pertinent data on
which the contention is based, together
with a thorough analysis of all relevant legal precedents.
(b) When purchases are not made by
the Government itself, but by a prime
contractor or by a subcontractor under
a prime contract, the right to an exemption of the transaction from a sales
or use tax may not rest on the Government’s immunity from direct taxation
by States and localities. It may rest instead on provisions of the particular
State or local law involved, or, in some
cases, the transaction may not in fact
be expressly exempt from the tax. The
Government’s interest shall be protected by using the procedures in
29.101.
(c) Frequently, property (including
property acquired under the progress
payments clause of fixed-price contracts or the Government property
clause of cost-reimbursement contracts) owned by the Government is in
the possession of a contractor or subcontractor. Situations may arise in
which States or localities assert the
right to tax Government property directly or to tax the contractor’s or subcontractor’s possession of, interest in,
or use of that property. In such cases,
the contracting officer shall seek review and advice from the agency-designated counsel on the appropriate
course of action.
29.304 Matters requiring special consideration.
The imposition of State and local
taxes may result in special contract
considerations including the following:
(a) With coordination of the agencydesignated counsel, a contract may (1)
state that the contract price includes
or excludes a specified tax or (2) require that the contractor take certain
actions with regard to payment, nonpayment, refund, protest, or other
treatment of a specified tax. Such special treatment may be appropriate
when there is doubt as to the applicability or allocability of the tax, or
when the applicability of the tax is
being litigated.
(b) The applicability of State and
local taxes to purchases by the Federal
Government may depend on the place
and terms of delivery. When the contract price will be substantial, alternative places and terms of delivery
should be considered in light of possible tax consequences.
(c) Indefinite-delivery contracts for
equipment rental may require the contractor to furnish equipment in any of
the States. Since leased equipment remains
the
contractor’s
property,
States and local governments impose a
wide variety of property, use, or other
taxes on equipment leased to the Government. The amount of these taxes
can vary considerably from jurisdiction
to jurisdiction. See 29.401–1 for the prescription of the contract clause to be
included in contracts when delivery
points are not known at time of contracting.
(d) The North Carolina State and
local sales and use tax.
(1) The North Carolina Sales and Use
Tax Act authorizes counties and incorporated cities and towns to obtain each
year from the Commissioner of Revenue of the State of North Carolina a
refund of sales and use taxes indirectly
paid on building materials, supplies,
fixtures, and equipment that become a
part of or are annexed to any building
or structure erected, altered, or repaired for such counties and incorporated cities and towns in North Carolina. In United States v. Clayton, 250 F.
Supp. 827 (1965), it was held that the
United States is entitled to the benefit
of the refund, but must follow the refund procedure of the Act and the regulations to recover what it is due.
(2) The Act provides that, to receive
the refund, claimants must file, within
6 months after the claimant’s fiscal
year closes, a written request substantiated by such records, receipts, and information as the Commissioner of Revenue may require. No refund will be
made on an application not filed within
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Federal Acquisition Regulation
29.305
the time allowed and in such manner
as the Commissioner may require. The
requirements of the Commissioner are
set forth in regulations that provide
that, to substantiate a refund claim for
sales or use taxes paid on purchases of
building materials, supplies, fixtures,
or equipment by a contractor, the Government must secure from the contractor certified statements setting
forth the cost of the property purchased from each vendor and the
amount of sales or use taxes paid. In
the event the contractor makes several
purchases from the same vendor, the
certified statement must indicate the
invoice numbers, the inclusive dates of
the invoices, the total amount of the
invoices, and the sales and use taxes
paid. The statement must also include
the cost of any tangible personal property withdrawn from the contractor’s
warehouse stock and the amount of
sales or use tax paid by the contractor.
Similar certified statements by subcontractors must be obtained by the
general contractor and furnished to the
claimant. Any local sales or use taxes
included in the contractor’s statement
must be shown separately from the
State sales or use taxes.
(3) The clause prescribed at 29.401–2
requires contractors to submit to contracting officers by November 30 of
each year a certified statement disclosing North Carolina State and local
sales and use taxes paid during the 12month period that ended the preceding
September 30. The contracting officer
shall ensure that contractors comply
with this requirement and shall obtain
the annual refund to which the Government may be entitled. The application
for refund must be filed each year before March 31 and in the manner and
form required by the Commissioner of
Revenue. Copies of the form may be obtained from the State of North Carolina, Department of Revenue, P.O. Box
25000, Raleigh, NC 27640.
[48 FR 42293, Sept. 19, 1983, as amended at 62
FR 40237, July 25, 1997]
29.305 State and local tax exemptions.
(a) Evidence of exemption. Evidence
needed to establish exemption from
State or local taxes depends on the
grounds for the exemption claimed, the
parties to the transaction, and the requirements of the taxing jurisdiction.
Such evidence may include the following:
(1) A copy of the contract or relevant
portion.
(2) Copies of purchase orders, shipping documents, credit-card-imprinted
sales slips, paid or acknowledged invoices, or similar documents that identify an agency or instrumentality of
the United States as the buyer.
(3) A U.S. Tax Exemption Form (SF
1094).
(4) A State or local form indicating
that the supplies or services are for the
exclusive use of the United States.
(5) Any other State or locally required document for establishing general or specific exemption.
(6) Shipping documents indicating
that shipments are in interstate or foreign commerce.
(b) Furnishing proof of exemption. If a
reasonable basis to sustain a claimed
exemption exists, the seller will be furnished evidence of exemption, as follows:
(1) Under a contract containing the
clause at 52.229–3, Federal, State, and
Local Taxes, or at 52.229–4, Federal,
State, and Local Taxes (State and
Local Adjustments), in accordance
with the terms of those clauses.
(2) Under a cost-reimbursement contract, if requested by the contractor
and approved by the contracting officer
or at the discretion of the contracting
officer.
(3) Under a contract or purchase
order that contains no tax provision,
if—
(i) Requested by the contractor and
approved by the contracting officer or
at the discretion of the contracting officer; and
(ii) Either the contract price does not
include the tax or, if the transaction or
property is tax exempt, the contractor
consents to a reduction in the contract
price.
[48 FR 42293, Sept. 19, 1983, as amended at 62
FR 237, Jan. 2, 1997; 68 FR 13205, Mar. 18, 2003]
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29.401
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 29.4—Contract Clauses
29.401
Domestic contracts.
29.401–1 Indefinite-delivery
for leased equipment.
contracts
Insert the clause at 52.229–1, State
and Local Taxes, in solicitations and
contracts for leased equipment when—
(a) A fixed-price indefinite-delivery
contract is contemplated;
(b) The contract will be performed
wholly or partly in the United States
or its outlying areas; and
(c) The place or places of delivery are
not known at the time of contracting.
[68 FR 28083, May 22, 2003]
29.401–2 Construction contracts performed in North Carolina.
The contracting officer shall insert
the clause at 52.229–2, North Carolina
State and Local Sales and Use Tax, in
solicitations and contracts for construction to be performed in North
Carolina. If the requirement is for vessel repair to be performed in North
Carolina, the clause shall be used with
its Alternate I.
29.401–3 Federal,
taxes.
State,
and
local
(a) Except as provided in paragraph
(b) of this section, insert the clause at
52.229–3, Federal, State, and Local
Taxes, in solicitations and contracts
if—
(1) The contract is to be performed
wholly or partly in the United States
or its outlying areas;
(2) A fixed-price contract is contemplated; and
(3) The contract is expected to exceed
the simplified acquisition threshold.
(b) In a noncompetitive contract that
meets all the conditions in paragraph
(a) of this section, the contracting officer may insert the clause at 52.229–4,
Federal, State, and Local Taxes (State
and Local Adjustments), instead of the
clause at 52.229–3, if the price would
otherwise include an inappropriate
contingency for potential postaward
change(s) in State or local taxes.
[68 FR 13205, Mar. 18, 2003, as amended at 68
FR 28083, May 22, 2003]
29.401–4 New Mexico gross receipts
and compensating tax.
(a) Definition. Services, as used in this
subsection, is as defined in the Gross
Receipts and Compensating Tax Act of
the State of New Mexico, Sec. 7–9–3(k)
NM SA 1978, and means all activities
engaged in for other persons for a consideration, which activities involve
predominately the performance of a
service as distinguished from selling or
leasing property. Services includes activities performed by a person for its
members of shareholders. In determining what is a service, the intended
use, principal objective or ultimate objective of the contracting parties shall
not be controlling. Services also includes construction activities and all
tangible personal property that will become an ingredient or component part
of a construction project. Such tangible personal property retains its
character as tangible personal property
until it is installed as an ingredient or
component part of a construction
project in New Mexico. However, sales
of tangible personal property that will
become an ingredient or component
part of a construction project to persons engaged in the construction business are sales of tangible personal
property.
(b) Contract clause. The contracting
officer shall insert the clause at 52.229–
10, State of New Mexico Gross Receipts
and Compensating Tax, in solicitations
and contracts issued by the agencies
identified in paragraph (c) of this subsection when all three of the following
conditions exist:
(1) The contractor will be performing
a cost-reimbursement contract.
(2) The contract directs or authorizes
the contractor to acquire tangible personal property as a direct cost under a
contract and title to such property
passes directly to and vests in the
United States upon delivery of the
property by the vendor.
(3) The contract will be for services
to be performed in whole or in part
within the State of New Mexico.
(c) Participating agencies. (1) The
agencies listed below have entered into
an agreement with the State of New
Mexico to eliminate the double taxation of Government cost-reimbursement contracts when contractors and
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Federal Acquisition Regulation
Pt. 30
their subcontractors purchase tangible
personal property to be used in performing services in whole or in part in
the State of New Mexico and for which
title to such property will pass to the
United States upon delivery of the
property to the contractor and its subcontractors by the vendor. Therefore,
the clause applies only to solicitations
and contracts issued by the—
United States Defense Special Weapons
Agency;
United States Department of Agriculture;
United States Department of the Air Force;
United States Department of the Army;
United States Department of Energy;
United States Department of Health and
Human Services;
United States Department of Interior;
United States Department of Labor;
United States Department of the Navy;
United States Department of Transportation;
United States General Services Administration; and
United States National Aeronautics and
Space Administration.
(2) Any other Federal agency which
expects to award cost-reimbursement
contracts to be performed in New Mexico should contact the New Mexico
Taxation and Revenue Department to
execute a similar agreement.
[53 FR 34228, Sept. 2, 1988, as amended at 55
FR 3883, Feb. 5, 1990; 55 FR 38517, Sept. 18,
1990; 62 FR 64930, Dec. 9, 1997. Redesignated
at 68 FR 13205, Mar. 18, 2003]
29.402
Foreign contracts.
29.402–1
Foreign fixed-price contracts.
(a) The contracting officer shall insert the clause at 52.229–6, Taxes—Foreign Fixed-Price Contracts, in solicitations and contracts expected to exceed
the simplified acquisition threshold
when a fixed-price contract is contemplated and the contract is to be
performed wholly or partly in a foreign
country, unless it is contemplated that
the contract will be with a foreign government.
(b) The contracting officer shall insert the clause at 52.229–7, Taxes—
Fixed-Price Contracts With Foreign
Governments, in solicitations and contracts that exceed the simplified acquisition threshold when a fixed-price con-
tract with a foreign government is contemplated.
[48 FR 42293, Sept. 19, 1983, as amended at 55
FR 52793, Dec. 21, 1990; 61 FR 39198, July 26,
1996]
29.402–2 Foreign cost-reimbursement
contracts.
(a) The contracting officer shall insert the clause at 52.229–8, Taxes—Foreign Cost-Reimbursement Contracts, in
solicitations and contracts when a
cost-reimbursement contract is contemplated and the contract is to be
performed wholly or partly in a foreign
country, unless it is contemplated that
the contract will be with a foreign government.
(b) The contracting officer shall insert the clause at 52.229–9, Taxes—CostReimbursement Contracts with Foreign Governments, in solicitations and
contracts when a cost-reimbursement
contract with a foreign government is
contemplated.
PART 30—COST ACCOUNTING
STANDARDS ADMINISTRATION
Sec.
30.000
Scope of part.
Subpart 30.1—General
30.101 Cost Accounting Standards.
30.102 Cost Accounting Standards
publication.
Subpart 30.2—CAS Program Requirements
30.201 Contract requirements.
30.201–1 CAS applicability.
30.201–2 Types of CAS coverage.
30.201–3 Solicitation provisions.
30.201–4 Contract clauses.
30.201–5 Waiver.
30.201–6 Findings.
30.201–7 Cognizant Federal agency responsibilities.
30.202 Disclosure requirements.
30.202–1 General requirements.
30.202–2 Impracticality of submission.
30.202–3 Amendments and revisions.
30.202–4 Privileged and confidential information.
30.202–5 Filing disclosure statements.
30.202–6 Responsibilities.
30.202–7 Determinations.
30.202–8 Subcontractor
disclosure
statements.
Subpart 30.3—CAS Rules and Regulations
[Reserved]
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30.000
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 30.4—Cost Accounting Standards
[Reserved]
Subpart 30.5—Cost Accounting Standards
for Educational Institutions [Reserved]
Subpart 30.6—CAS Administration
30.601 Responsibility.
30.602 Changes to disclosed or established
cost accounting practices.
30.602–1 Equitable adjustments for new or
modified standards.
30.602–2 Noncompliance with CAS requirements.
30.602–3 Voluntary changes.
30.603 Subcontract administration.
SOURCE: 57 FR 39587, Aug. 31, 1992, unless
otherwise noted.
30.000
Scope of part.
This part describes policies and procedures for applying the Cost Accounting Standards Board (CASB) rules and
regulations (48 CFR chapter 99 (FAR
appendix)) to negotiated contracts and
subcontracts. This part does not apply
to sealed bid contracts or to any contract with a small business concern
(see 48 CFR 9903.201–1(b) (FAR appendix) for these and other exemptions).
[57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18916, Apr. 29, 1996; 62 FR 40237, July 25,
1997]
Subpart 30.1—General
30.101
the Cost Accounting Standards Board
at 48 CFR Chapter 99; and
(2) The following preambles:
(i) Part I—Preambles to the Cost Accounting Standards Published by the
Cost Accounting Standards Board.
(ii) Part II—Preambles to the Related
Rules and Regulations Published by
the Cost Accounting Standards Board.
(iii) Part III—Preambles Published
under the FAR System.
(d) The preambles are not regulatory
but are intended to explain why the
Standards and related Rules and Regulations were written, and to provide rationale for positions taken relative to
issues raised in the public comments.
The preambles are printed in chronological order to provide an administrative history.
[57 FR 39587, Aug. 31, 1992, as amended at 62
FR 40237, July 25, 1997; 63 FR 9060, Feb. 23,
1998]
30.102 Cost
Accounting
Board publication.
Standards
Copies of the CASB Standards and
Regulations are printed in title 48 of
the Code of Federal Regulations, chapter 99, and may be obtained by writing
the Superintendent of Documents, U.S.
Government Printing Office, Washington, DC 20402, or by calling the
Washington, DC, ordering desk at area
code (202) 512–1800.
[57 FR 39587, Aug. 31, 1992, as amended at 62
FR 40237, July 25, 1997]
Cost Accounting Standards.
(a) Public Law 100–679 (41 U.S.C. 422)
requires certain contractors and subcontractors to comply with Cost Accounting Standards (CAS) and to disclose in writing and follow consistently
their cost accounting practices.
(b) Contracts that refer to this part
30 for the purpose of applying the policies, procedures, standards and regulations promulgated by the CASB pursuant to Public Law 100–679, shall be
deemed to refer to the CAS, and any
other regulations promulgated by the
CASB (see 48 CFR chapter 99), all of
which are hereby incorporated in this
part 30.
(c) The appendix to the FAR looseleaf edition contains—
(1) Cost Accounting Standards and
Cost Accounting Standards Board
Rules and Regulations Recodified by
Subpart 30.2—CAS Program
Requirements
30.201
Contract requirements.
Title 48 CFR 9903.201–1 (FAR appendix) describes the rules for determining
whether a proposed contract or subcontract is exempt from CAS. Negotiated contracts not exempt in accordance with 48 CFR 9903.201–1(b) shall be
subject to CAS. A CAS-covered contract may be subject to either full or
modified coverage. The rules for determining whether full or modified coverage applies are in 48 CFR 9903.201–2
(FAR appendix).
[57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18916, Apr. 29, 1996; 62 FR 40237, July 25,
1997]
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Federal Acquisition Regulation
30.201–1
30.201–4
CAS applicability.
See 48 CFR 9903.201–1 (FAR appendix).
[61 FR 18916, Apr. 29, 1996 as amended at 62
FR 40237, July 25, 1997]
30.201–2
Types of CAS coverage.
See 48 CFR 9903.201–2 (FAR appendix).
[61 FR 18916, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.201–3
Solicitation provisions.
(a) The contracting officer shall insert the provision at 52.230–1, Cost Accounting Standards Notices and Certification, in solicitations for proposed
contracts subject to CAS as specified in
48 CFR 9903.201 (FAR appendix).
(b) If an award to an educational institution is contemplated prior to July
1, 1997, the contracting officer shall insert the basic provision set forth at
52.230–1 with its Alternate I, unless the
contract is to be performed by a Federally Funded Research and Development
Center (FFRDC) (see 48 CFR 9903.201–
2(c)(5) (FAR appendix)), or the provision at 48 CFR 9903.201–2(c)(6) (FAR appendix) applies.
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.201–4
Contract clauses.
(a) Cost Accounting Standards. (1) The
contracting officer shall insert the
clause at FAR 52.230–2, Cost Accounting Standards, in negotiated contracts,
unless the contract is exempted (see 48
CFR 9903.201–1 (FAR appendix)), the
contract is subject to modified coverage (see 48 CFR 9903.201–2 (FAR appendix)), or the clause prescribed in
paragraph (c) of this subsection is used.
(2) The clause at FAR 52.230–2 requires the contractor to comply with
all CAS specified in 48 CFR part 9904
(FAR appendix), to disclose actual cost
accounting practices (applicable to
CAS-covered contracts only), and to
follow disclosed and established cost
accounting practices consistently.
(b) Disclosure and consistency of cost
accounting practices. (1) Insert the
clause at FAR 52.230–3, Disclosure and
Consistency of Cost Accounting Practices, in negotiated contracts when the
contract amount is over $500,000, but
less than $50 million, and the offeror
certifies it is eligible for and elects to
use modified CAS coverage (see 48 CFR
9903.201–2 (FAR Appendix)), unless the
clause prescribed in paragraph (c) of
this subsection is used.
(2) The clause at FAR 52.230–3 requires the contractor to comply with 48
CFR 9904.401, 9904.402, 9904.405, and
9904.406 (FAR appendix) to disclose (if
it meets certain requirements) actual
cost accounting practices, and to follow consistently its established cost
accounting practices.
(c) Consistency in Cost Accounting
Practices. The contracting officer shall
insert the clause at FAR 52.230–4, Consistency in Cost Accounting Practices,
in negotiated contracts that are exempt from CAS requirements solely on
the basis of the fact that the contract
is to be awarded to a United Kingdom
contractor and is to be performed substantially in the United Kingdom (see
48 CFR 9903.201–1(b)(12) (FAR appendix)).
(d) Administration of Cost Accounting
Standards. (1) The contracting officer
shall insert the clause at FAR 52.230–6,
Administration of Cost Accounting
Standards, in contracts containing any
of the clauses prescribed in paragraphs
(a), (b), or (e) of this subsection.
(2) The clause at FAR 52.230–6 specifies rules for administering CAS requirements and procedures to be followed in cases of failure to comply.
(e) Cost Accounting Standards—Educational Institutions. (1) The contracting
officer shall insert the clause at FAR
52.230–5, Cost Accounting Standards—
Educational Institution, in negotiated
contracts awarded to educational institutions, unless the contract is exempted (see 48 CFR 9903.201–1 (FAR appendix)), the contract is to be performed
by an FFRDC (see 48 CFR 9903.201–
2(c)(5) (FAR appendix)), or the provision at 48 CFR 9903.201–2(c)(6) (FAR appendix) applies.
(2) The clause at FAR 52.230–5 requires the educational institution to
comply with all CAS specified in 48
CFR part 9905 (FAR appendix), to disclose actual cost accounting practices
as required by 48 CFR 9903.202–1(f) (FAR
appendix), and to follow disclosed and
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30.201–5
48 CFR Ch. 1 (10–1–03 Edition)
established cost accounting practices
consistently.
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997; 65 FR 36029, June 6,
2000]
30.201–5
Waiver.
(a) The head of the agency—
(1) May waive the applicability of
CAS for a particular contract or subcontract under the conditions listed in
paragraph (b) of this subsection; and
(2) Must not delegate this waiver authority to any official in the agency
below the senior contract policymaking level.
(b) The head of the agency may grant
a waiver when one of the following conditions exists:
(1) The contract or subcontract value
is less than $15,000,000, and the head of
the agency determines, in writing, that
the segment of the contractor or subcontractor that will perform the contract or subcontract—
(i) Is primarily engaged in the sale of
commercial items; and
(ii) Has no contracts or subcontracts
that are subject to CAS.
(2) The head of the agency determines that exceptional circumstances
exist whereby a waiver of CAS is necessary to meet the needs of the agency.
Exceptional circumstances exist only
when the benefits to be derived from
waiving the CAS outweigh the risk associated with the waiver. The determination
that
exceptional
circumstances exist must—
(i) Be set forth in writing; and
(ii) Include a statement of the specific circumstances that justify granting the waiver.
(c) When one of the conditions in
paragraph (b) of this subsection exists,
the request for waiver should include
the following:
(1) The amount of the proposed
award.
(2) A description of the contract or
subcontract type (e.g., firm-fixed-price,
cost-reimbursement).
(3) Whether the segment(s) that will
perform the contract or subcontract
has CAS-covered contracts or subcontracts.
(4) A description of the item(s) being
procured.
(5) When the contractor or subcontractor will not accept the contract or
subcontract if CAS applies, a statement to that effect.
(6) Whether cost or pricing data will
be obtained, and if so, a discussion of
how the data will be used in negotiating the contract or subcontract
price.
(7) The benefits to the Government of
waiving CAS.
(8) The potential risk to the Government of waiving CAS.
(9) The date by which the waiver is
needed.
(10) Any other information that may
be useful in evaluating the request.
(d) When neither of the conditions in
paragraph (b) of this subsection exists,
the waiver request must be prepared in
accordance with 48 CFR 9903.201–5(e)
(FAR Appendix) and submitted to the
CAS Board.
(e) Each agency must report any
waivers granted under paragraph (a) of
this subsection to the CAS Board, on a
fiscal year basis, not later than 90 days
after the close of the Government’s fiscal year.
[65 FR 36030, June 6, 2000]
30.201–6
Findings.
See 48 CFR 9903.201–6 (FAR appendix).
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.201–7 Cognizant Federal agency responsibilities.
See 48 CFR 9903.201–7 (FAR appendix).
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.202
Disclosure requirements.
30.202–1
General requirements.
See 48 CFR 9903.202–1 (FAR appendix).
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.202–2
Impracticality of submission.
See 48 CFR 9903.202–2 (FAR appendix).
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
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30.202–8
30.202–3 Amendments and revisions.
See 48 CFR 9903.202–3 (FAR appendix).
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.202–4 Privileged and confidential
information.
See 48 CFR 9903.202–4 (FAR appendix).
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.202–5 Filing disclosure statements.
See 48 CFR 9903.202–5 (FAR appendix).
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
30.202–6 Responsibilities.
(a) The contracting officer is responsible for determining when a proposed
contract may require CAS coverage
and for including the appropriate notice in the solicitation. The contracting officer must then ensure that
the offeror has made the required solicitation certifications and that required
Disclosure Statements are submitted.
(Also see 48 CFR 9903.201–3 and 9903.202
(FAR appendix).)
(b) The contracting officer shall not
award a CAS-covered contract until
the ACO has made a written determination that a required Disclosure
Statement is adequate unless, in order
to protect the Government’s interest,
the contracting officer waives the requirement for an adequacy determination before award. In this event, a determination of adequacy shall be required as soon as possible after the
award.
(c) The cognizant auditor is responsible for conducting reviews of Disclosure Statements for adequacy and compliance.
(d) The cognizant ACO is responsible
for determinations of adequacy and
compliance of the Disclosure Statement.
[57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18917, Apr. 29, 1996; 62 FR 40237, July 25,
1997]
30.202–7 Determinations.
(a) Adequacy determination. As prescribed by 48 CFR 9903.202–6 (FAR appendix), the cognizant auditor shall
conduct a review of the Disclosure
Statement to ascertain whether it is
current, accurate, and complete and
shall report the results to the cognizant ACO, who shall determine
whether or not it adequately describes
the offeror’s cost accounting practices.
If the ACO identifies any areas of inadequacy, the ACO shall request a revised
Disclosure Statement. If the Disclosure
Statement is adequate, the ACO shall
notify the offeror in writing, with copies to the cognizant auditor and contracting officer. The notice of adequacy shall state that a disclosed practice shall not, by virtue of such disclosure, be considered an approved practice for pricing proposals or accumulating and reporting contract performance cost data. Generally, the ACO
shall furnish the contractor notification of adequacy or inadequacy within
30 days after the Disclosure Statement
has been received by the ACO.
(b) Compliance determination. After
the notification of adequacy, the cognizant auditor shall conduct a detailed
compliance review to ascertain whether or not the disclosed practices comply with Part 31 and the CAS and shall
advise the ACO of the results. The ACO
shall take action regarding noncompliance with CAS under FAR 30.602–2. The
ACO may require a revised Disclosure
Statement and adjustment of the
prime contract price or cost allowance.
Noncompliance with part 31 shall be
processed separately, in accordance
with normal administrative practices.
[57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18917, Apr. 29, 1996; 62 FR 40237, July 25,
1997]
30.202–8 Subcontractor
statements.
disclosure
(a) When the Government requires
determinations of adequacy or inadequacy, the ACO cognizant of the subcontractor shall provide such determination to the ACO cognizant of the
prime contractor or next higher tier
subcontractor. The ACO cognizant of
higher tier subcontractors or prime
contractors shall not reverse the determination of the ACO cognizant of the
subcontractor.
(b) Any determination that it is impractical to secure a subcontractor’s
Disclosure Statement must be made in
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30.601
48 CFR Ch. 1 (10–1–03 Edition)
accordance with 48 CFR 9903.202–2 (FAR
appendix).
[57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18918, Apr. 29, 1996; 62 FR 40237, July 25,
1997]
Subpart 30.3—CAS Rules and
Regulations [Reserved]
NOTE: See 48 CFR 9903.3 (FAR appendix).
(a) The Government reserves the
right to make appropriate contract adjustments if, in the future, the ACO determines that the cost impact has become material and
(b) The contractor is not excused
from the obligation to comply with the
applicable Standard or rules and regulations involved.
[57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18918, Apr. 29, 1996; 62 FR 40237, July 25,
1997]
Subpart 30.4—Cost Accounting
Standards [Reserved]
NOTE: See 48 CFR part 9904 (FAR appendix).
Subpart 30.5—Cost Accounting
Standards for Educational Institutions [Reserved]
NOTE: See 48 CFR part 9905 (FAR appendix).
Subpart 30.6—CAS Administration
30.601 Responsibility.
(a) The cognizant ACO shall perform
CAS administration for all contracts in
a business unit notwithstanding retention of other administration functions
by the contracting officer.
(b) Within 30 days after the award of
any new contract or subcontract subject to CAS, the contracting officer,
contractor, or subcontractor making
the award shall request the cognizant
ACO to perform administration for
CAS matters (see subpart 42.2).
[57 FR 39587, Aug. 31, 1992, as amended at 59
FR 67043, Dec. 28, 1994]
30.602 Changes to disclosed or established cost accounting practices.
Adjustments to contracts and withholding amounts payable for CAS noncompliance, new standards, or voluntary changes are required only if the
amounts involved are material. In determining materiality, the ACO shall
use the criteria in 48 CFR 9903.305 (FAR
appendix). The ACO may forego action
to require that a cost impact proposal
be submitted or to adjust contracts, if
the ACO determines the amount involved is immaterial. However, in the
case of noncompliance issues, the ACO
shall inform the contractors that:
30.602–1 Equitable adjustments for
new or modified standards.
(a) New or modified standards. (1) The
provision at 52.230–1, Cost Accounting
Standards Notices and Certification,
requires offerors to state whether or
not the award of the contemplated contract would require a change to established cost accounting practices affecting existing contracts and subcontracts. The contracting officer shall
ensure that the contractor’s response
to the notice is made known to the
ACO.
(2) Contracts and subcontracts containing the clause at 52.230–2, Cost Accounting Standards, or FAR 52.230–5,
Cost
Accounting
Standards—Educational Institution, may require equitable adjustments to comply with new
or modified CAS. Such adjustments are
limited to contracts and subcontracts
awarded before the effective date of
each new or modified standard. A new
or modified standard becomes applicable prospectively to these contracts
and subcontracts when a new contract
or subcontract containing the clause at
52.230–2 or 52.230–5 is awarded on or
after the effective date of the new or
modified standard.
(3) Contracting officers shall encourage contractors to submit to the ACO
any change in accounting practice in
anticipation of complying with a new
or modified standard as soon as practical after the new or modified Standard has been promulgated by the
CASB.
(b) Accounting changes. (1) The clause
at FAR 52.230–6, Administration of Cost
Accounting Standards, requires the
contractor to submit a description of
any change in cost accounting practices required to comply with a new or
modified CAS within 60 days (or other
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30.602–2
mutually agreed to date) after award of
a contract requiring the change.
(2) The ACO, with the assistance of
the auditor, shall review the proposed
change concurrently for adequacy and
compliance (see 30.202–7). If the description of the change meets both tests,
the ACO shall notify the contractor
and request submission of a cost impact proposal in accordance with FAR
30.602.
(c) Contract price adjustments. (1) The
ACO shall promptly analyze the cost
impact proposal with the assistance of
the auditor, determine the impact, and
negotiate the contract price adjustment on behalf of all Government
agencies. The ACO shall invite contracting officers to participate in negotiations of adjustments when the price
of any of their contracts may be increased or decreased by $10,000 or more.
At the conclusion of negotiations, the
ACO shall—
(i) Execute supplemental agreements
to contracts of the ACO’s own agency
(and, if additional funds are required,
request them from the appropriate contracting officer);
(ii) Prepare a negotiation memorandum and send copies to cognizant
auditors and contracting officers of
other agencies having prime contracts
affected by the negotiation (those
agencies shall execute supplemental
agreements in the amounts negotiated); and
(iii) Furnish copies of the memorandum indicating the effect on costs
to the ACO of the next higher tier subcontractor or prime contractor, as appropriate, if a subcontract is to be adjusted. This memorandum shall be the
basis for negotiation between the subcontractor and the next higher tier
subcontractor or prime contractor and
for execution of a supplemental agreement to the subcontract.
(2) If the parties fail to agree on the
cost or price adjustment, the ACO may
make a unilateral adjustment, subject
to contractor appeal as provided in the
clause at 52.233–1, Disputes.
(d) Remedies for contractor failure to
make required submissions. (1) If the contractor does not submit the accounting
change description or the general dollar magnitude of the change or cost impact proposal (in the form and manner
specified), the ACO, with the assistance
of the auditor, shall estimate the general dollar magnitude of the cost impact on CAS-covered contracts and
subcontracts. The ACO may then withhold an amount not to exceed 10 percent of each subsequent amount determined payable related to the contractor’s CAS-covered prime contracts, up
to the estimated general dollar magnitude of the cost impact, until the required submission is furnished by the
contractor.
(2) If the contractor has not submitted the cost impact proposal before
the total withheld amount reaches the
estimated general dollar magnitude
and the ACO determines that an adjustment is required (see 30.602), the
ACO shall request the contractor to
agree to the cost or price adjustment.
The contractor shall also be advised
that in the event no agreement on the
cost or price adjustment is reached
within 20 days, the ACO may make a
unilateral adjustment, subject to contractor appeal as provided in the clause
at 52.233–1, Disputes.
[57 FR 39587, Aug. 31, 1992, as amended at 59
FR 67043, Dec. 28, 1994; 61 FR 18918, Apr. 29,
1996]
30.602–2 Noncompliance with CAS requirements.
(a) Determination of noncompliance. (1)
Within 15 days of the receipt of a report of alleged noncompliance from the
cognizant auditor, the ACO shall make
an initial finding of compliance or noncompliance and advise the auditor.
(2) If an initial finding of noncompliance is made, the ACO shall immediately notify the contractor in writing
of the exact nature of the noncompliance and allow the contractor 60 days
within which to agree or to submit reasons why the existing practices are
considered to be in compliance.
(3) If the contractor agrees with the
initial finding of noncompliance, the
ACO shall review the contractor submissions required by paragraph (a) of
the clause at FAR 52.230–6, Administration of Cost Accounting Standards.
(4) If the contractor disagrees with
the initial noncompliance finding, the
ACO shall review the reasons why the
contractor considers the existing practices to be in compliance and make a
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30.602–2
48 CFR Ch. 1 (10–1–03 Edition)
determination of compliance or noncompliance. If the ACO determines
that the contractor’s practices are in
noncompliance, a written explanation
shall be provided as to why the ACO
disagrees with the contractor’s rationale. The ACO shall notify the contractor and the auditor in writing of
the determination. If the ACO makes a
determination of noncompliance, the
procedures in (b) through (d), as appropriate, shall be followed.
(b) Accounting changes. (1) The clause
at FAR 52.230–6, Administration of Cost
Accounting Standards, requires the
contractor to submit a description of
any cost accounting practice change
needed to correct a noncompliance.
(2) The ACO shall review the proposed change concurrently for adequacy and compliance (see 30.202–7). If
the description of the change meets
both tests, the ACO shall notify the
contractor and request submission of a
cost impact proposal in accordance
with FAR 30.602.
(c) Contract price adjustments. (1) The
ACO shall request that the contractor
submit a cost impact proposal within
the time specified in the clause at FAR
52.230–6, Administration of Cost Accounting Standards.
(2) Upon receipt of the cost impact
proposal, the ACO shall then follow the
procedures in 30.602–1(c)(1). In accordance with the clause at 52.230–2, Cost
Accounting Standards, or FAR 52.230–5,
Cost
Accounting
Standards—Educational Institution, the ACO shall include and separately identify, as part
of the computation of the contract
price adjustment(s), applicable interest
on any increased costs paid to the contractor as a result of the noncompliance. Interest shall be computed from
the date of overpayment to the time
the adjustment is effected. If the costs
were incurred and paid evenly over the
fiscal years during which the noncompliance occurred, then the midpoint of the period in which the noncompliance began may be considered
the baseline for the computation of interest. An alternate equitable method
should be used if the costs were not incurred and paid evenly over the fiscal
years during which the noncompliance
occurred. Interest under 52.230–2 should
be computed pursuant to Public Law
100–679.
(d) Remedies for contractor failure to
make required submissions. (1) If the contractor does not submit the accounting
change description or the general dollar magnitude of the change or cost impact proposal (in the form and manner
specified), the ACO, with the assistance
of the cognizant auditor, shall estimate
the general dollar magnitude of the
cost impact on CAS-covered contracts
and subcontracts. The ACO may then
withhold an amount not to exceed 10
percent of each subsequent amount determined payable related to the contractor’s CAS-covered prime contracts,
up to the estimated general dollar
magnitude of the cost impact until the
required submission is furnished by the
contractor.
(2) If the contractor has not submitted the cost impact proposal before
the total withheld amount reaches the
estimated general dollar magnitude
and the ACO determines that an adjustment is required (see 30.602), the
ACO shall notify the contractor and request agreement as to the cost or price
adjustment together with any applicable interest as computed in accordance
with 30.602–2(c)(2). The contractor shall
also be advised that in the event no
agreement on the cost or price adjustment is reached within 20 days, the
ACO may make a unilateral adjustment, subject to contractor appeal, as
provided in the clause at 52.233–1, Disputes.
(3) If the ACO determines that there
is no material increase in costs as a result of the noncompliance, the ACO
shall notify the contractor in writing
that the contractor is in noncompliance, that corrective action should be
taken, and that if such noncompliance
subsequently results in materially increased costs to the Government, the
provisions of the clause at 52.230–2,
Cost Accounting Standards, 52.230–5,
Cost
Accounting
Standards—Educational Institution, and/or the clause
at 52.230–3, Disclosure and Consistency
of Cost Accounting Practices, will be
enforced.
[57 FR 39590, Aug. 31, 1992; 57 FR 43409, Sept.
21, 1992, as amended at 57 FR 47373, Oct. 15,
1992; 59 FR 67043, Dec. 28, 1994; 61 FR 18918,
Apr. 29, 1996]
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Federal Acquisition Regulation
Pt. 31
30.602–3 Voluntary changes.
(a) General. (1) The contractor may
voluntarily change its disclosed or established cost accounting practices.
(2) The contract price may be adjusted for voluntary changes. However,
increased costs resulting from a voluntary change may be allowed only if
the ACO determines that the change is
desirable and not detrimental to the
interest of the Government.
(b) Accounting changes. (1) The clause
at FAR 52.230–6, Administration of Cost
Accounting Standards, requires the
contractor to notify the ACO and submit a description of any voluntary cost
accounting practice change not less
than 60 days (or such other date as may
be mutually agreed to) before implementation of the voluntary change.
(2) The ACO, with the assistance of
the cognizant auditor, shall review the
proposed change concurrently for adequacy and compliance (see 30.202–7). If
the description of the change meets
both tests, the ACO shall notify the
contractor and request submission of a
cost impact proposal in accordance
with FAR 30.602.
(c) Contract price adjustments. (1) With
the assistance of the auditor, the ACO
shall promptly analyze the cost impact
proposal to determine whether or not
the proposed change will result in increased costs being paid by the Government. The ACO shall consider all of the
contractor’s affected CAS-covered contracts and subcontracts, but any cost
changes to higher-tier subcontracts or
contracts of other contractors over and
above the cost of the subcontract adjustment shall not be considered.
(2) The ACO shall then follow the
procedures in 30.602–1(c)(1).
(d) Remedies for contractor failure to
make required submissions. (1) If the contractor does not submit the accounting
change description or the general dollar magnitude of the change or cost impact proposal (in the form and manner
specified), the ACO, with the assistance
of the cognizant auditor, shall estimate
the general dollar magnitude of the
cost impact on CAS-covered contracts
and subcontracts. The ACO may then
withhold an amount not to exceed 10
percent of each subsequent amount determined payable related to the contractor’s CAS-covered prime contracts
up to the estimated general dollar
magnitude of the cost impact, until the
required submission is furnished by the
contractor.
(2) If the contractor has not submitted the cost impact proposal before
the total withheld amount reaches the
estimated general dollar magnitude
and the ACO determines that an adjustment is appropriate (see 30.602), the
ACO shall request the contractor to
agree to the cost or price adjustment.
The contractor shall also be advised
that, in the event no agreement on the
cost or price adjustment is reached
within 20 days, the ACO may make a
unilateral adjustment subject to contractor appeal, as provided in the
clause at 52.233–1, Disputes.
[57 FR 39587, Aug. 31, 1992, as amended at 59
FR 67043, Dec. 28, 1994; 61 FR 18918, Apr. 29,
1996]
30.603
Subcontract administration.
When a negotiated CAS price adjustment or a determination of noncompliance is required at the subcontract
level, the ACO cognizant of the subcontractor shall make the determination
and advise the ACO cognizant of the
prime contractor or next higher tier
subcontractor of the decision. The
ACOs cognizant of higher tier subcontractors or prime contractors shall
not reverse the determination of the
ACO cognizant of the subcontractor.
[57 FR 39590, Aug. 31, 1992; 57 FR 43495, Sept.
21, 1992; 61 FR 18918, Apr. 29, 1996]
PART 31—CONTRACT COST
PRINCIPLES AND PROCEDURES
Sec.
31.000
31.001
31.002
Scope of part.
Definitions.
Availability of accounting guide.
Subpart 31.1—Applicability
31.100 Scope of subpart.
31.101 Objectives.
31.102 Fixed-price contracts.
31.103 Contracts with commercial organizations.
31.104 Contracts with educational institutions.
31.105 Construction and architect-engineer
contracts.
31.106 Facilities contracts.
31.106–1 Applicable cost principles.
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Pt. 31
48 CFR Ch. 1 (10–1–03 Edition)
31.106–2 Exceptions to general rules on allowability and allocability.
31.106–3 Contractor’s commercial items.
31.107 Contracts with State, local, and federally recognized Indian tribal governments.
31.108 Contracts with nonprofit organizations.
31.109 Advance agreements.
31.110 Indirect cost rate certification and
penalties on unallowable costs.
Subpart 31.2—Contracts With Commercial
Organizations
31.201 General.
31.201–1 Composition of total cost.
31.201–2 Determining allowability.
31.201–3 Determining reasonableness.
31.201–4 Determining allocability.
31.201–5 Credits.
31.201–6 Accounting for unallowable costs.
31.201–7 Construction and architect-engineer contracts.
31.202 Direct costs.
31.203 Indirect costs.
31.204 Application of principles and procedures.
31.205 Selected costs.
31.205–1 Public relations and advertising
costs.
31.205–2 [Reserved]
31.205–3 Bad debts.
31.205–4 Bonding costs.
31.205–5 [Reserved]
31.205–6 Compensation for personal services.
31.205–7 Contingencies.
31.205–8 Contributions or donations.
31.205–9 [Reserved]
31.205–10 Cost of money.
31.205–11 Depreciation.
31.205–12 Economic planning costs.
31.205–13 Employee morale, health, welfare,
food service, and dormitory costs and
credits.
31.205–14 Entertainment costs.
31.205–15 Fines, penalties, and mischarging
costs.
31.205–16 Gains and losses on disposition or
impairment of depreciable property or
other capital assets.
31.205–17 Idle facilities and idle capacity
costs.
31.205–18 Independent research and development and bid and proposal costs.
31.205–19 Insurance and indemnification.
31.205–20 Interest and other financial costs.
31.205–21 Labor relations costs.
31.205–22 Lobbying and political activity
costs.
31.205–23 Losses on other contracts.
31.205–24 Maintenance and repair costs.
31.205–25 Manufacturing and production engineering costs.
31.205–26 Material costs.
31.205–27 Organization costs.
31.205–28 Other business expenses.
31.205–29 Plant protection costs.
31.205–30 Patent costs.
31.205–31 Plant reconversion costs.
31.205–32 Precontract costs.
31.205–33 Professional and consultant service costs.
31.205–34 Recruitment costs.
31.205–35 Relocation costs.
31.205–36 Rental costs.
31.205–37 Royalties and other costs for use
of patents.
31.205–38 Selling costs.
31.205–39 Service and warranty costs.
31.205–40 Special tooling and special test
equipment costs.
31.205–41 Taxes.
31.205–42 Termination costs.
31.205–43 Trade, business, technical, and
professional activity costs.
31.205–44 Training and education costs.
31.205–45 [Reserved]
31.205–46 Travel costs.
31.205–47 Costs related to legal and other
proceedings.
31.205–48 Research and development costs.
31.205–49 Goodwill.
31.205–50 [Reserved]
31.205–51 Costs of alcoholic beverages.
31.205–52 Asset valuations resulting from
business combinations.
Subpart 31.3—Contracts With Educational
Institutions
31.301
31.302
31.303
Purpose.
General.
Requirements.
Subparts 31.4–31.5 [Reserved]
Subpart 31.6—Contracts With State, Local,
and Federally Recognized Indian Tribal Governments
31.601
31.602
31.603
Purpose.
General.
Requirements.
Subpart 31.7–Contracts With Nonprofit
Organizations
31.701
31.702
31.703
Purpose.
General.
Requirements.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
EFFECTIVE DATE NOTE: At 68 FR 56688, October 1, 2003, the authority citation for Part
31 was revised, effective Oct. 31, 2003. For the
convenience of the user, the revised text is
set forth below:
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42301, Sept. 19, 1983, unless
otherwise noted.
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31.000
31.001
Scope of part.
This part contains cost principles
and procedures for (a) the pricing of
contracts, subcontracts, and modifications to contracts and subcontracts
whenever cost analysis is performed
(see 15.404–1(c)) and (b) the determination, negotiation, or allowance of costs
when required by a contract clause.
48 FR 42301, Sept. 19, 1983, as amended at 62
FR 51271, Sept. 30, 1997]
31.001
Definitions.
As used in this part—
Accrued benefit cost method means an
actuarial cost method under which
units of benefits are assigned to each
cost accounting period and are valued
as they accrue; i.e., based on the services performed by each employee in the
period involved. The measure of normal cost under this method for each
cost accounting period is the present
value of the units of benefit deemed to
be credited to employees for service in
that period. The measure of the actuarial accrued liability at a plan’s inception date is the present value of the
units of benefit credited to employees
for service prior to that date. (This
method is also known as the unit credit cost method without salary projection.)
Accumulating costs means collecting
cost data in an organized manner, such
as through a system of accounts.
Actual cash value means the cost of
replacing damaged property with other
property of like kind and quality in the
physical condition of the property immediately before the damage.
Actual costs means (except for subpart
31.6) amounts determined on the basis
of costs incurred, as distinguished from
forecasted costs. Actual costs include
standard costs properly adjusted for
applicable variances.
Actuarial accrued liability means pension cost attributable, under the actuarial cost method in use, to years prior
to the current period considered by a
particular actuarial valuation. As of
such date, the actuarial accrued liability represents the excess of the present
value of future benefits and administrative expenses over the present value
of future normal costs for all plan participants and beneficiaries. The excess
of the actuarial accrued liability over
the actuarial value of the assets of a
pension plan is the unfunded actuarial
liability. The excess of the actuarial
value of the assets of a pension plan
over the actuarial accrued liability is
an actuarial surplus and is treated as a
negative unfunded actuarial liability.
Actuarial assumption means an estimate of future conditions affecting
pension cost; e.g., mortality rate, employee turnover, compensation levels,
earnings on pension plan assets, and
changes in values of pension plan assets.
Actuarial cost method means a technique which uses actuarial assumptions to measure the present value of
future pension benefits and pension
plan administrative expenses, and that
assigns the cost of such benefits and
expenses to cost accounting periods.
The actuarial cost method includes the
asset valuation method used to determine the actuarial value of the assets
of a pension plan.
Actuarial gain and loss means the effect on pension cost resulting from differences between actuarial assumptions and actual experience.
Actuarial valuation means the determination, as of a specified date, of the
normal cost, actuarial accrued liability, actuarial value of the assets of a
pension plan, and other relevant values
for the pension plan.
Allocate means to assign an item of
cost, or a group of items of cost, to one
or more cost objectives. This term includes both direct assignment of cost
and the reassignment of a share from
an indirect cost pool.
Compensated personal absence means
any absence from work for reasons
such as illness, vacation, holidays, jury
duty, military training, or personal activities for which an employer pays
compensation directly to an employee
in accordance with a plan or custom of
the employer.
Compensation for personal services
means all remuneration paid currently
or accrued, in whatever form and
whether paid immediately or deferred,
for services rendered by employees to
the contractor.
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31.001
48 CFR Ch. 1 (10–1–03 Edition)
Cost input means the cost, except
general and administrative (G&A) expenses, which for contract costing purposes is allocable to the production of
goods and services during a cost accounting period.
Cost objective means (except for subpart 31.6) a function, organizational
subdivision, contract, or other work
unit for which cost data are desired
and for which provision is made to accumulate and measure the cost of processes,
products,
jobs,
capitalized
projects, etc.
Deferred compensation means an
award made by an employer to compensate an employee in a future cost
accounting period or periods for services rendered in one or more cost accounting periods before the date of the
receipt of compensation by the employee. This definition shall not include the amount of year end accruals
for salaries, wages, or bonuses that are
to be paid within a reasonable period of
time after the end of a cost accounting
period.
Defined-benefit pension plan means a
pension plan in which the benefits to
be paid, or the basis for determining
such benefits, are established in advance and the contributions are intended to provide the stated benefits.
Defined-contribution
pension
plan
means a pension plan in which the contributions to be made are established
in advance and the benefits are determined thereby.
Directly associated cost means any
cost which is generated solely as a result of the incurrence of another cost,
and which would not have been incurred had the other cost not been incurred.
Estimating costs means the process of
forecasting a future result in terms of
cost, based upon information available
at the time.
Expressly unallowable cost means a
particular item or type of cost which,
under the express provisions of an applicable law, regulation, or contract, is
specifically named and stated to be unallowable.
Final cost objective means (except for
subparts 31.3 and 31.6) a cost objective
that has allocated to it both direct and
indirect costs and, in the contractors
accumulation system, is one of the
final accumulation points.
Fiscal year means the accounting period for which annual financial statements are regularly prepared, generally a period of 12 months, 52 weeks,
or 53 weeks.
Funded pension cost means the portion of pension cost for a current or
prior cost accounting period that has
been paid to a funding agency.
Home office means an office responsible for directing or managing two or
more, but not necessarily all, segments
of an organization. It typically establishes policy for, and provides guidance
to, the segments in their operations. It
usually performs management, supervisory, or administrative functions,
and may also perform service functions
in support of the operations of the various segments. An organization which
has intermediate levels, such as
groups, may have several home offices
which report to a common home office.
An intermediate organization may be
both a segment and a home office.
Immediate-gain actuarial cost method
means any of the several actuarial cost
methods under which actuarial gains
and losses are included as part of the
unfunded actuarial liability of the pension plan, rather than as part of the
normal cost of the plan.
Independent research and development
(IR&D) cost means the cost of effort
which is neither sponsored by a grant,
nor required in performing a contract,
and which falls within any of the following four areas: (a) basic research,
(b) applied research, (c) development,
and (d) systems and other concept formulation studies.
Indirect cost pools means (except for
subparts 31.3 and 31.6) groupings of incurred costs identified with two or
more cost objectives but not identified
specifically with any final cost objective.
Insurance
administration
expenses
means the contractor’s costs of administering an insurance program; e.g., the
costs of operating an insurance or riskmanagement department, processing
claims, actuarial fees, and service fees
paid to insurance companies, trustees,
or technical consultants.
Intangible capital asset means an asset
that has no physical substance, has
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more than minimal value, and is expected to be held by an enterprise for
continued use or possession beyond the
current accounting period for the benefits it yields.
Job means a homogeneous cluster of
work tasks, the completion of which
serves an enduring purpose for the organization. Taken as a whole, the collection of tasks, duties, and responsibilities constitutes the assignment
for one or more individuals whose work
is of the same nature and is performed
at the same skill/ responsibility level—
as opposed to a position, which is a collection of tasks assigned to a specific
individual. Within a job, there may be
pay categories which are dependent on
the degree of supervision required by
the employee while performing assigned tasks which are performed by
all persons with the same job.
Job class of employees means employees performing in positions within the
same job.
Labor cost at standard means a
preestablished measure of the labor
element of cost, computed by multiplying labor-rate standard by labortime standard.
Labor market means a place where individuals exchange their labor for compensation. Labor markets are identified and defined by a combination of
the following factors:
(1) Geography,
(2) Education and/or technical background required,
(3) Experience required by the job,
(4) Licensing or certification requirements,
(5) Occupational membership, and
(6) Industry.
Labor-rate
standard
means
a
preestablished measure, expressed in
monetary terms, of the price of labor.
Labor-time
standard
means
a
preestablished measure, expressed in
temporal terms, of the quantity of
labor.
Material cost at standard means a
preestablished measure of the material
elements of cost, computed by multiplying material-price standard by material-quantity standard.
Material-price
standard
means
a
preestablished measure, expressed in
monetary terms, of the price of material.
Material-quantity standard means a
preestablished measure, expressed in
physical terms, of the quantity of material.
Moving average cost means an inventory costing method under which an
average unit cost is computed after
each acquisition by adding the cost of
the newly acquired units to the cost of
the units of inventory on hand and dividing this figure by the new total
number of units.
Nonqualified pension plan means any
pension plan other than a qualified
pension plan as defined in this part.
Normal cost means the annual cost attributable, under the actuarial cost
method in use, to current and future
years as of a particular valuation date
excluding any payment in respect of an
unfunded actuarial liability.
Original complement of low cost equipment means a group of items acquired
for the initial outfitting of a tangible
capital asset or an operational unit, or
a new addition to either. The items in
the group individually cost less than
the minimum amount established by
the contractor for capitalization for
the classes of assets acquired but in the
aggregate they represent a material investment. The group, as a complement,
is expected to be held for continued
service beyond the current period. Initial outfitting of the unit is completed
when the unit is ready and available
for normal operations.
Pay-as-you-go cost method means a
method of recognizing pension cost
only when benefits are paid to retired
employees or their beneficiaries.
Pension plan means a deferred compensation plan established and maintained by one or more employers to
provide systematically for the payment
of benefits to plan participants after
their retirements, provided that the
benefits are paid for life or are payable
for life at the option of the employees.
Additional benefits such as permanent
and total disability and death payments, and survivorship payments to
beneficiaries of deceased employees,
may be an integral part of a pension
plan.
Pension plan participant means any
employee or former employee of an employer or any member or former member of an employee organization, who is
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31.002
48 CFR Ch. 1 (10–1–03 Edition)
or may become eligible to receive a
benefit from a pension plan which covers employees of such employer or
members of such organization who
have satisfied the plan’s participation
requirements, or whose beneficiaries
are receiving or may be eligible to receive any such benefit. A participant
whose employment status with the employer has not been terminated is an
active participant of the employer’s
pension plan.
Profit center means (except for subparts 31.3 and 31.6) the smallest organizationally independent segment of a
company charged by management with
profit and loss responsibilities.
Projected benefit cost method means either—
(1) Any of the several actuarial cost
methods that distribute the estimated
total cost of all of the employees’ prospective benefits over a period of years,
usually their working careers; or
(2) A modification of the accrued benefit cost method that considers projected compensation levels.
Proposal means any offer or other
submission used as a basis for pricing a
contract, contract modification, or termination settlement or for securing
payments thereunder.
Qualified pension plan means a pension plan comprising a definite written
program communicated to and for the
exclusive benefit of employees that
meets the criteria deemed essential by
the Internal Revenue Service as set
forth in the Internal Revenue Code for
preferential tax treatment regarding
contributions, investments, and distributions. Any other plan is a nonqualified pension plan.
Self-insurance charge means a cost
which represents the projected average
loss under a self-insurance plan.
Service life means the period of usefulness of a tangible capital asset (or
group of assets) to its current owner.
The period may be expressed in units of
time or output. The estimated service
life of a tangible capital asset (or group
of assets) is a current forecast of its
service life and is the period over which
depreciation cost is to be assigned.
Spread-gain actuarial cost method
means any of the several projected benefit actuarial cost methods under
which actuarial gains and losses are in-
cluded as part of the current and future
normal costs of the pension plan.
Standard cost means any cost computed with the use of preestablished
measures.
Tangible capital asset means an asset
that has physical substance, more than
minimal value, and is expected to be
held by an enterprise for continued use
or possession beyond the current accounting period for the services it
yields.
Termination of employment gain or loss
means an actuarial gain or loss resulting from the difference between the assumed and actual rates at which pension plan participants separate from
employment for reasons other than retirement, disability, or death.
Variance means the difference between a preestablished measure and an
actual measure.
Weighted average cost means an inventory costing method under which an
average unit cost is computed periodically by dividing the sum of the cost of
beginning inventory plus the cost of
acquisitions by the total number of
units included in these two categories.
[48 FR 42301, Sept. 17, 1983, as amended at 54
FR 13024, Mar. 29, 1989; 61 FR 39217, July 26,
1996; 61 FR 69288, Dec. 31, 1996; 63 FR 58596,
Oct. 30, 1998; 66 FR 2131, Jan. 10, 2001; 68 FR
28091, May 22, 2003; 68 FR 43866, July 24, 2003]
31.002 Availability
guide.
of
accounting
Contractors needing assistance in developing or improving their accounting
systems and procedures may request a
copy of the Defense Contract Audit
Agency Pamphlet No. 7641.90, Information for Contractors. The pamphlet is
available via the Internet at http://
www.dcaa.mil.
[67 FR 6120, Feb. 8, 2002]
Subpart 31.1—Applicability
31.100
Scope of subpart.
This subpart describes the applicability of the cost principles and procedures in succeeding subparts of this
part to various types of contracts and
subcontracts. It also describes the need
for advance agreements.
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Federal Acquisition Regulation
31.101
31.104
Objectives.
In recognition of differing organizational characteristics, the cost principles and procedures in the succeeding
subparts are grouped basically by organizational type; e.g., commercial concerns and educational institutions. The
overall objective is to provide that, to
the extent practicable, all organizations of similar types doing similar
work will follow the same cost principles and procedures. To achieve this
uniformity, individual deviations concerning cost principles require advance
approval of the agency head or designee. Class deviations for the civilian
agencies require advance approval of
the Civilian Agency Acquisition Council. Class deviations for the National
Aeronautics and Space Administration
require advance approval of the Assistant Administrator for Procurement.
Class deviations for the Department of
Defense require advance approval of
the Director of Defense Procurement,
Office of the Under Secretary of Defense for Acquisition, Technology, and
Logistics.
[48 FR 42301, Sept. 19, 1983, as amended at 56
FR 67133, Dec. 27, 1991; 61 FR 31655, June 20,
1996; 65 FR 24325, Apr. 25, 2000; 67 FR 13068,
Mar. 20, 2002]
31.102
Fixed-price contracts.
The applicable subparts of part 31
shall be used in the pricing of fixedprice contracts, subcontracts, and
modifications to contracts and subcontracts whenever (a) cost analysis is
performed, or (b) a fixed-price contract
clause requires the determination or
negotiation of costs. However, application of cost principles to fixed-price
contracts and subcontracts shall not be
construed as a requirement to negotiate agreements on individual elements of cost in arriving at agreement
on the total price. The final price accepted by the parties reflects agreement only on the total price. Further,
notwithstanding the mandatory use of
cost principles, the objective will continue to be to negotiate prices that are
fair and reasonable, cost and other factors considered.
31.103 Contracts with commercial organizations.
This category includes all contracts
and contract modifications for supplies, services, or experimental, developmental, or research work negotiated
with organizations other than educational institutions (see 31.104), construction and architect-engineer contracts (see 31.105), State and local governments (see 31.107) and nonprofit organizations (see 31.108) on the basis of
cost.
(a) The cost principles and procedures in subpart 31.2 and agency supplements shall be used in pricing negotiated supply, service, experimental,
developmental, and research contracts
and contract modifications with commercial organizations whenever cost
analysis is performed as required by
15.404–1(c).
(b) In addition, the contracting officer shall incorporate the cost principles and procedures in subpart 31.2
and agency supplements by reference
in contracts with commercial organizations as the basis for—
(1) Determining reimbursable costs
under (i) cost-reimbursement contracts
and cost-reimbursement subcontracts
under these contracts performed by
commercial organizations and (ii) the
cost-reimbursement portion of timeand-materials contracts except when
material is priced on a basis other than
at cost (see 16.601(b)(3));
(2) Negotiating indirect cost rates
(see subpart 42.7);
(3) Proposing, negotiating, or determining costs under terminated contracts (see 49.103 and 49.113);
(4) Price revision of fixed-price incentive contracts (see 16.204 and 16.403);
(5) Price redetermination of price redetermination contracts (see 16.205 and
16.206); and
(6) Pricing changes and other contract modifications.
[48 FR 42301, Sept. 19, 1983, as amended at 62
FR 51271, Sept. 30, 1997]
31.104 Contracts with educational institutions.
This category includes all contracts
and contract modifications for research
and development, training, and other
work performed by educational institutions.
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31.105
48 CFR Ch. 1 (10–1–03 Edition)
(a) The contracting officer shall incorporate the cost principles and procedures in subpart 31.3 by reference in
cost-reimbursement contracts with
educational institutions as the basis
for—
(1) Determining reimbursable costs
under the contracts and cost-reimbursement subcontracts thereunder
performed by educational institutions;
(2) Negotiating indirect cost rates;
and
(3) Settling costs of cost-reimbursement terminated contracts (see subpart 49.3 and 49.109–7).
(b) The cost principles in this subpart
are to be used as a guide in evaluating
costs in connection with negotiating
fixed-price contracts and termination
settlements.
31.105 Construction and architect-engineer contracts.
(a) This category includes all contracts and contract modifications negotiated on the basis of cost with organizations other than educational institutions (see 31.104), State and local
governments (see 31.107), and nonprofit
organizations except those exempted
under OMB Circular A–122 (see 31–108)
for construction management or construction, alteration or repair of buildings, bridges, roads, or other kinds of
real property. It also includes architect-engineer contracts related to construction projects. It does not include
contracts for vessels, aircraft, or other
kinds of personal property.
(b) Except as otherwise provided in
(d) below, the cost principles and procedures in subpart 31.2 shall be used in
the pricing of contracts and contract
modifications in this category if cost
analysis is performed as required by
15.404–1(c).
(c) In addition, the contracting officer shall incorporate the cost principles and procedures in subpart 31.2
(as modified by (d) below) by reference
in contracts in this category as the
basis for—
(1) Determining reimbursable costs
under cost-reimbursement contracts,
including
cost-reimbursement
subcontracts thereunder;
(2) Negotiating indirect cost rates;
(3) Proposing, negotiating, or determining costs under terminated contracts;
(4) Price revision of fixed-price incentive contracts; and
(5) Pricing changes and other contract modifications.
(d) Except as otherwise provided in
this paragraph (d), the allowability of
costs for construction and architectengineer contracts shall be determined
in accordance with subpart 31.2.
(1) Because of widely varying factors
such as the nature, size, duration, and
location of the construction project,
advance agreements as set forth in
31.109, for such items as home office
overhead, partners’ compensation, employment of consultants, and equipment usage costs, are particularly important in construction and architectengineer contracts. When appropriate
they serve to express the parties’ understanding and avoid possible subsequent disputes or disallowances.
(2) Construction equipment, as used in
this section, means equipment (including marine equipment) in sound workable condition, either owned or controlled by the contractor or the subcontractor at any tier, or obtained
from a commercial rental source, and
furnished for use under Government
contracts.
(i) Allowable ownership and operating costs shall be determined as follows:
(A) Actual cost data shall be used
when such data can be determined for
both ownership and operating costs for
each piece of equipment, or groups of
similar serial or series equipment,
from the contractor’s accounting
records. When such costs cannot be so
determined, the contracting agency
may specify the use of a particular
schedule of predetermined rates or any
part thereof to determine ownership
and operating costs of construction
equipment (see subdivisions (d)(2)(i)(B)
and (C) of this section). However, costs
otherwise unallowable under this part
shall not become allowable through the
use of any schedule (see 31.109(c)). For
example, schedules need to be adjusted
for Government contract costing purposes if they are based on replacement
cost, include unallowable interest
costs, or use improper cost of money
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31.106–1
rates or computations. Contracting officers should review the computations
and factors included within the specified schedule and ensure that unallowable or unacceptably computed factors
are not allowed in cost submissions.
(B) Predetermined schedules of construction equipment use rates (e.g., the
Construction Equipment Ownership
and Operating Expense Schedule published by the U.S. Army Corps of Engineers, industry sponsored construction
equipment cost guides, or commercially published schedules of construction equipment use cost) provide average ownership and operating rates for
construction equipment. The allowance
for ownership costs should include the
cost of depreciation and may include
facilities capital cost of money. The allowance for operating costs may include costs for such items as fuel, filters, oil, and grease; servicing, repairs,
and maintenance; and tire wear and repair. Costs of labor, mobilization, demobilization, overhead, and profit are
generally not reflected in schedules,
and separate consideration may be necessary.
(C) When a schedule of predetermined
use rates for construction equipment is
used to determine direct costs, all
costs of equipment that are included in
the cost allowances provided by the
schedule shall be identified and eliminated from the contractor’s other direct and indirect costs charged to the
contract. If the contractor’s accounting system provides for site or home office overhead allocations, all costs
which are included in the equipment
allowances may need to be included in
any cost input base before computing
the contractor’s overhead rate. In periods of suspension of work pursuant to a
contract clause, the allowance for
equipment ownership shall not exceed
an amount for standby cost as determined by the schedule or contract provision.
(ii) Reasonable costs of renting construction equipment are allowable (but
see paragraph (C) below).
(A) Costs, such as maintenance and
minor or running repairs incident to
operating such rented equipment, that
are not included in the rental rate are
allowable.
(B) Costs incident to major repair
and overhaul of rental equipment are
unallowable.
(C) The allowability of charges for
construction equipment rented from
any division, subsidiary, or organization under common control, will be determined in accordance with 31.205–
36(b)(3).
(3) Costs incurred at the job site incident to performing the work, such as
the
cost
of
superintendence,
timekeeping and clerical work, engineering, utility costs, supplies, material handling, restoration and cleanup,
etc., are allowable as direct or indirect
costs, provided the accounting practice
used is in accordance with the contractor’s established and consistently followed cost accounting practices for all
work.
(4) Rental and any other costs, less
any applicable credits incurred in acquiring the temporary use of land,
structures, and facilities are allowable.
Costs, less any applicable credits, incurred in constructing or fabricating
structures and facilities of a temporary
nature are allowable.
[48 FR 42301, Sept. 19, 1983, as amended at 50
FR 23607, June 4, 1985; 52 FR 19804, May 27,
1987; 62 FR 51271, Sept. 30, 1997]
31.106
Facilities contracts.
31.106–1 Applicable cost principles.
The cost principles and procedures
applicable to the evaluation and determination of costs under facilities contracts (as defined in 45.301), and subcontracts thereunder, will be governed
by the type of entity to which a facilities contract is awarded. Except as otherwise provided in 31.106–2 below, subpart 31.2 applies to facilities contracts
awarded to commercial organizations;
subpart 31.3 applies to facilities contracts awarded to educational institutions; and 31.105 applies to facilities
contracts awarded to construction contractors. Whichever cost principles are
appropriate will be used in the pricing
of facilities contracts and contract
modifications if cost analysis is performed as required by 15.404–1(c). In addition, the contracting officer shall incorporate the cost principles and procedures appropriate in the circumstances
(e.g., subpart 31.2; subpart 31.3; or
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31.106–2
48 CFR Ch. 1 (10–1–03 Edition)
31.105) by reference in facilities contracts as the basis for—
(a) Determining reimbursable costs
under facilities contracts, including
cost-reimbursement
subcontracts
thereunder;
(b) Negotiating indirect cost rates;
and
(c) Determining costs of terminated
contracts when the contractor elects to
voucher out costs (see subpart 49.3), and
for settlement by determination (see
49.109–7).
[48 FR 42301, Sept. 19, 1983, as amended at 62
FR 51271, Sept. 30, 1997]
31.106–2 Exceptions to general rules
on allowability and allocability.
(a) A contractor’s established accounting system and procedures are
normally directed to the equitable allocation of costs to the types of products which the contractor produces or
services rendered in the course of normal operating activities. The acquisition of, or work on, facilities for the
Government normally does not involve
the manufacturing processes, plant departmental operations, cost patterns of
work, administrative and managerial
control, or clerical effort usual to production of the contractor’s normal
products or services.
(b) Advance agreements (see 31.109)
should be made between the contractor
and the contracting officer as to indirect cost items to be applied to the facilities acquisition. A contractor’s normal accounting practice for allocating
indirect costs to the acquisition of contractor facilities may range from
charging all these costs to this acquisition to not charging any. When necessary to produce an equitable result,
the contractor’s usual method of allocating indirect cost shall be varied, and
appropriate adjustment shall be made
to the pools of indirect cost and the
bases of their distribution.
(c) The purchase of completed facilities (or services in connection with the
facilities) from outside sources does
not involve the contractor’s direct
labor or indirect plant maintenance
personnel. Accordingly, indirect manufacturing and plant overhead costs,
which are primarily incurred or generated by reason of direct labor or
maintenance labor operations, are not
allocable to the acquisition of such facilities.
(d) Contracts providing for the installation of new facilities or the rehabilitation of existing facilities may involve the use of the contractor’s plant
maintenance labor, as distinguished
from direct labor engaged in the production of the company’s normal products. In such instances, only those
types of indirect manufacturing and
plant operating costs that are related
to or incurred by reason of the expenditures of the classes of labor used for
the performance of the facilities work
may be allocated to the facilities contract. Thus, a facilities contract which
involves the use of plant maintenance
labor only would not be subject to an
allocation of such cost items as direct
productive labor supervision, depreciation, and maintenance expense applicable to productive machinery and equipment, or raw material and finished
goods storage costs.
(e) Where a facilities contract calls
for the construction, production, or rehabilitation of equipment or other
items that are involved in the regular
course of the contractor’s business by
the use of the contractor’s direct labor
and manufacturing processes, the indirect costs normally allocated to all
that work may be allocated to the facilities contract.
31.106–3 Contractor’s
commercial
items.
If facilities constituting the contractor’s usual commercial items (or only
minor modifications thereof) are acquired by the Government under the
contract, the Government shall not
pay any amount in excess of the contractor’s most favored customer price
or the price of other suppliers for like
quantities of the same or substantially
the same items, whichever is lower.
[48 FR 42301, Sept. 19, 1983, as amended at 60
FR 48248, Sept. 18, 1995]
31.107 Contracts with State, local, and
federally recognized Indian tribal
governments.
(a) Subpart 31.6 provides principles
and standards for determining costs applicable to contracts with State, local,
and federally recognized Indian tribal
governments. They provide the basis
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31.109
for a uniform approach to the problem
of determining costs and to promote efficiency and better relationships between State, local, and federally recognized Indian tribal governments, and
Federal Government entities. They
apply to all programs that involve contracts with State, local, and federally
recognized Indian tribal governments,
except contracts with—
(1) Publicly financed educational institutions subject to subpart 31.3; or
(2) Publicly owned hospitals and
other providers of medical care subject
to requirements promulgated by the
sponsoring Government agencies.
(b) The Office of Management and
Budget will approve any other exceptions in particular cases when adequate
justification is presented.
[48 FR 42301, Sept. 19, 1983, as amended at 52
FR 30076, Aug. 12, 1987]
31.108 Contracts with nonprofit organizations.
Subpart 31.7 provides principles and
standards for determining costs applicable to contracts with nonprofit organizations other than educational institutions, State and local governments,
and those nonprofit organizations exempted under OMB Circular No. A–122.
31.109
Advance agreements.
(a) The extent of allowability of the
costs covered in this part applies
broadly to many accounting systems in
varying contract situations. Thus, the
reasonableness, the allocability and
the allowability under the specific cost
principles at subparts 31.2, 31.3, 31.6,
and 31.7 of certain costs may be difficult to determine. To avoid possible
subsequent disallowance or dispute
based
on
unreasonableness,
unallocability or unallowability under
the specific cost principles at subparts
31.2, 31.3, 31.6, and 31.7, contracting officers and contractors should seek advance agreement on the treatment of
special or unusual costs. However, an
advance agreement is not an absolute
requirement and the absence of an advance agreement on any cost will not,
in itself, affect the reasonableness,
allocability or the allowability under
the specific cost principles at subparts
31.2, 31.3, 31.6, and 31.7 of that cost.
(b) Advance agreements may be negotiated either before or during a contract but should be negotiated before
incurrence of the costs involved. The
agreements must be in writing, executed by both contracting parties, and
incorporated into applicable current
and future contracts. An advance
agreement shall contain a statement of
its applicability and duration.
(c) The contracting officer is not authorized by this 31.109 to agree to a
treatment of costs inconsistent with
this part. For example, an advance
agreement may not provide that, notwithstanding 31.205–20, interest is allowable.
(d) Advance agreements may be negotiated with a particular contractor for
a single contract, a group of contracts,
or all the contracts of a contracting office, an agency, or several agencies.
(e) The cognizant administrative contracting officer (ACO), or other contracting officer established in part 42,
shall negotiate advance agreements except that an advance agreement affecting only one contract, or class of contracts from a single contracting office,
shall be negotiated by a contracting officer in the contracting office, or an
ACO when delegated by the contracting
officer. When the negotiation authority
is delegated, the ACO shall coordinate
the proposed agreement with the contracting officer before executing the
advance agreement.
(f) Before negotiating an advance
agreement, the Government negotiator
shall—
(1) Determine if other contracting offices inside the agency or in other
agencies have a significant unliquidated dollar balance in contracts with
the same contractor;
(2) Inform any such office or agency
of the matters under consideration for
negotiation; and
(3) As appropriate, invite the office or
agency and the responsible audit agency to participate in prenegotiation discussions and/or in the subsequent negotiations.
(g) Upon completion of the negotiation, the sponsor shall prepare and distribute to other interested agencies
and offices, including the audit agency,
copies of the executed agreement and a
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31.110
48 CFR Ch. 1 (10–1–03 Edition)
memorandum providing the information specified in 15.406–3, as applicable.
(h) Examples of costs for which advance agreements may be particularly
important are—
(1) Compensation for personal services, including but not limited to allowances for off-site pay, incentive
pay, location allowances, hardship pay,
cost of living differential, and termination of defined benefit pension plans;
(2) Use charges for fully depreciated
assets;
(3) Deferred maintenance costs;
(4) Precontract costs;
(5) Independent research and development and bid and proposal costs;
(6) Royalties and other costs for use
of patents;
(7) Selling and distribution costs;
(8) Travel and relocation costs, as related to special or mass personnel
movements, as related to travel via
contractor-owned, -leased, or -chartered aircraft, or as related to maximum per diem rates;
(9) Costs of idle facilities and idle capacity;
(10) Severance pay to employees on
support service contracts;
(11) Plant reconversion;
(12) Professional services (e.g., legal,
accounting, and engineering);
(13) General and administrative costs
(e.g., corporate, division, or branch allocations) attributable to the general
management, supervision, and conduct
of the contractor’s business as a whole.
These costs are particularly significant
in construction, job-site, architect-engineer, facilities, and Governmentowned contractor operated (GOCO)
plant contracts (see 31.203(f));
(14) Costs of construction plant and
equipment (see 31.105(d)).
(15) Costs of public relations and advertising; and
(16) Training and education costs (see
31.205–44(h)).
[48 FR 42301, Sept. 19, 1983, as amended at 51
FR 12298, Apr. 9, 1986; 51 FR 27489, July 31,
1986; 52 FR 9038, Mar. 20, 1987; 52 FR 27806,
July 24, 1987; 54 FR 34755, Aug. 21, 1989; 59 FR
67045, Dec. 28, 1994; 61 FR 69288, Dec. 31, 1996;
62 FR 51271, Sept. 30, 1997; 63 FR 9061, Feb. 23,
1998]
31.110 Indirect cost rate certification
and penalties on unallowable costs.
(a) Certain contracts require certification of the indirect cost rates proposed for final payment purposes. See
42.703–2 for administrative procedures
regarding the certification provisions
and the related contract clause prescription.
(b) If unallowable costs are included
in final indirect cost settlement proposals, penalties may be assessed. See
42.709 for administrative procedures regarding the penalty assessment provisions and the related contract clause
prescription.
[60 FR 42658, Aug. 16, 1995, as amended at 62
FR 237, Jan. 2, 1997]
Subpart 31.2—Contracts With
Commercial Organizations
31.201
General.
31.201–1
Composition of total cost.
(a) The total cost of a contract is the
sum of the direct and indirect costs allocable to the contract, incurred or to
be incurred, less any allocable credits,
plus any allocable cost of money pursuant to 31.205–10. In ascertaining what
constitutes a cost, any generally accepted method of determining or estimating costs that is equitable and is
consistently applied may be used, including standard costs properly adjusted for applicable variances. See
31.201–2(b) and (c) for Cost Accounting
Standards (CAS) requirements.
(b) While the total cost of a contract
includes all costs properly allocable to
the contract, the allowable costs to the
Government are limited to those allocable costs which are allowable pursuant to part 31 and applicable agency
supplements.
[48 FR 42301, Sept. 19, 1983, as amended at 59
FR 67045, Dec. 28, 1994]
31.201–2
Determining allowability.
(a) The factors to be considered in determining whether a cost is allowable
include the following:
(1) Reasonableness.
(2) Allocability.
(3) Standards promulgated by the
CAS Board, if applicable; otherwise,
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31.201–5
generally accepted accounting principles and practices appropriate to the
particular circumstances.
(4) Terms of the contract.
(5) Any limitations set forth in this
subpart.
(b) Certain cost principles in this
subpart incorporate the measurement,
assignment, and allocability rules of
selected CAS and limit the allowability
of costs to the amounts determined
using the criteria in those selected
standards. Only those CAS or portions
of standards specifically made applicable by the cost principles in this subpart are mandatory unless the contract
is CAS-covered (see 48 CFR 9903). Business units that are not otherwise subject to these standards under a CAS
clause are subject to the selected
standards only for the purpose of determining allowability of costs on Government contracts. Including the selected
standards in the cost principles does
not subject the business unit to any
other CAS rules and regulations. The
applicability of the CAS rules and regulations is determined by the CAS
clause, if any, in the contract and the
requirements of the standards themselves.
(c) When contractor accounting practices are inconsistent with this subpart
31.2, costs resulting from such inconsistent practices shall not be allowed
in excess of the amount that would
have resulted from using practices consistent with this subpart.
(d) A contractor is responsible for accounting for costs appropriately and
for maintaining records, including supporting documentation, adequate to
demonstrate that costs claimed have
been incurred, are allocable to the contract, and comply with applicable cost
principles in this subpart and agency
supplements. The contracting officer
may disallow all or part of a claimed
cost which is inadequately supported.
[48 FR 42301, Sept. 19, 1983, as amended at 57
FR 39590, Aug. 31, 1992; 61 FR 31656, June 20,
1996]
31.201–3 Determining reasonableness.
(a) A cost is reasonable if, in its nature and amount, it does not exceed
that which would be incurred by a prudent person in the conduct of competitive business. Reasonableness of spe-
cific costs must be examined with particular care in connection with firms
or their separate divisions that may
not be subject to effective competitive
restraints. No presumption of reasonableness shall be attached to the incurrence of costs by a contractor. If an
initial review of the facts results in a
challenge of a specific cost by the contracting officer or the contracting officer’s representative, the burden of
proof shall be upon the contractor to
establish that such cost is reasonable.
(b) What is reasonable depends upon
a variety of considerations and circumstances, including—
(1) Whether it is the type of cost generally recognized as ordinary and necessary for the conduct of the contractor’s business or the contract performance;
(2) Generally accepted sound business
practices, arm’s length bargaining, and
Federal and State laws and regulations;
(3) The contractor’s responsibilities
to the Government, other customers,
the owners of the business, employees,
and the public at large; and
(4) Any significant deviations from
the contractor’s established practices.
[52 FR 19804, May 27, 1987]
31.201–4 Determining allocability.
A cost is allocable if it is assignable
or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship. Subject to the foregoing, a
cost is allocable to a Government contract if it—
(a) Is incurred specifically for the
contract;
(b) Benefits both the contract and
other work, and can be distributed to
them in reasonable proportion to the
benefits received; or
(c) Is necessary to the overall operation of the business, although a direct
relationship to any particular cost objective cannot be shown.
31.201–5 Credits.
The applicable portion of any income, rebate, allowance, or other credit relating to any allowable cost and
received by or accruing to the contractor shall be credited to the Government either as a cost reduction or by
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31.201–6
48 CFR Ch. 1 (10–1–03 Edition)
cash refund. See 31.205–6(j)(4) for rules
governing refund or credit to the Government associated with pension adjustments and asset reversions.
[48 FR 42301, Sept. 19, 1983, as amended at 54
FR 34755, Aug. 21, 1989; 63 FR 58597, Oct. 30,
1998]
31.201–6 Accounting for unallowable
costs.
(a) Costs that are expressly unallowable or mutually agreed to be unallowable, including mutually agreed to be
unallowable directly associated costs,
shall be identified and excluded from
any billing, claim, or proposal applicable to a Government contract. A directly associated cost is any cost which
is generated solely as a result of incurring another cost, and which would not
have been incurred had the other cost
not been incurred. When an unallowable cost is incurred, its directly associated costs are also unallowable.
(b) Costs which specifically become
designated as unallowable or as unallowable directly associated costs of unallowable costs as a result of a written
decision furnished by a contracting officer shall be identified if included in
or used in computing any billing,
claim, or proposal applicable to a Government contract. This identification
requirement applies also to any costs
incurred for the same purpose under
like circumstances as the costs specifically identified as unallowable under
either this paragraph or paragraph (a)
above.
(c) The practices for accounting for
and presentation of unallowable costs
will be those as described in 48 CFR
9904.405–50, Accounting for Unallowable
Costs.
(d) If a directly associated cost is included in a cost pool which is allocated
over a base that includes the unallowable cost with which it is associated,
the directly associated cost shall remain in the cost pool. Since the unallowable costs will attract their allocable share of costs from the cost pool,
no further action is required to assure
disallowance of the directly associated
costs. In all other cases, the directly
associated costs, if material in amount,
must be purged from the cost pool as
unallowable costs.
(e)(1) In determining the materiality
of a directly associated cost, consideration should be given to the significance of (i) the actual dollar amount,
(ii) the cumulative effect of all directly
associated costs in a cost pool, or (iii)
the ultimate effect on the cost of Government contracts.
(2) Salary expenses of employees who
participate in activities that generate
unallowable costs shall be treated as
directly associated costs to the extent
of the time spent on the proscribed activity, provided the costs are material
in accordance with subparagraph (e)(1)
above (except when such salary expenses are, themselves, unallowable).
The time spent in proscribed activities
should be compared to total time spent
on company activities to determine if
the costs are material. Time spent by
employees outside the normal working
hours should not be considered except
when it is evident that an employee engages so frequently in company activities during periods outside normal
working hours as to indicate that such
activities are a part of the employee’s
regular duties.
(3) When a selected item of cost
under 31.205 provides that directly associated costs be unallowable, it is intended that such directly associated
costs be unallowable only if determined to be material in amount in accordance with the criteria provided in
paragraphs (e)(1) and (e)(2) above, except in those situations where allowance of any of the directly associated
costs involved would be considered to
be contrary to public policy.
[48 FR 42301, Sept. 19, 1983, as amended at 59
FR 67045, Dec. 28, 1994]
31.201–7 Construction and architectengineer contracts.
Specific principles and procedures for
evaluating and determining costs in
connection with contracts and subcontracts for construction, and architect-engineer contracts related to construction projects, are in 31.105. The
applicability of these principles and
procedures is set forth in 31.000 and
31.100.
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31.203
31.202 Direct costs.
(a) A direct cost is any cost that can
be identified specifically with a particular final cost objective. No final
cost objective shall have allocated to it
as a direct cost any cost, if other costs
incurred for the same purpose in like
circumstances have been included in
any indirect cost pool to be allocated
to that or any other final cost objective. Costs identified specifically with
the contract are direct costs of the
contract and are to be charged directly
to the contract. All costs specifically
identified with other final cost objectives of the contractor are direct costs
of those cost objectives and are not to
be charged to the contract directly or
indirectly.
(b) For reasons of practicality, any
direct cost of minor dollar amount may
be treated as an indirect cost if the accounting treatment—
(1) Is consistently applied to all final
cost objectives; and
(2) Produces substantially the same
results as treating the cost as a direct
cost.
31.203 Indirect costs.
(a) An indirect cost is any cost not
directly identified with a single, final
cost objective, but identified with two
or more final cost objectives or an intermediate cost objective. It is not subject to treatment as a direct cost.
After direct costs have been determined and charged directly to the contract or other work, indirect costs are
those remaining to be allocated to the
several cost objectives. An indirect
cost shall not be allocated to a final
cost objective if other costs incurred
for the same purpose in like circumstances have been included as a direct cost of that or any other final cost
objective.
(b) Indirect costs shall be accumulated by logical cost groupings with
due consideration of the reasons for incurring such costs. Each grouping
should be determined so as to permit
distribution of the grouping on the
basis of the benefits accruing to the
several cost objectives. Commonly,
manufacturing overhead, selling expenses, and general and administrative
(G&A) expenses are separately grouped.
Similarly, the particular case may re-
quire subdivision of these groupings,
e.g., building occupancy costs might be
separable from those of personnel administration within the manufacturing
overhead group. This necessitates selecting a distribution base common to
all cost objectives to which the grouping is to be allocated. The base should
be selected so as to permit allocation
of the grouping on the basis of the benefits accruing to the several cost objectives. When substantially the same results can be achieved through less precise methods, the number and composition of cost groupings should be governed by practical considerations and
should not unduly complicate the allocation.
(c) Once an appropriate base for distributing indirect costs has been accepted, it shall not be fragmented by
removing individual elements. All
items properly includable in an indirect cost base should bear a pro rata
share of indirect costs irrespective of
their acceptance as Government contract costs. For example, when a cost
input base is used for the distribution
of G&A costs, all items that would
properly be part of the cost input base,
whether allowable or unallowable,
shall be included in the base and bear
their pro rata share of G&A costs.
(d) The contractor’s method of allocating indirect costs shall be in accordance with standards promulgated by
the CAS Board, if applicable to the
contract; otherwise, the method shall
be in accordance with generally accepted accounting principles which are consistently applied. The method may require examination when—
(1) Substantial differences occur between the cost patterns of work under
the contract and the contractor’s other
work;
(2) Significant changes occur in the
nature of the business, the extent of
subcontracting, fixed-asset improvement programs, inventories, the volume of sales and production, manufacturing processes, the contractor’s products, or other relevant circumstances;
or
(3) Indirect cost groupings developed
for a contractor’s primary location are
applied to offsite locations. Separate
cost groupings for costs allocable to
offsite locations may be necessary to
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31.204
48 CFR Ch. 1 (10–1–03 Edition)
permit equitable distribution of costs
on the basis of the benefits accruing to
the several cost objectives.
(e) A base period for allocating indirect costs is the cost accounting period
during which such costs are incurred
and accumulated for distribution to
work performed in that period. The criteria and guidance in 48 CFR 9904.406
for selecting the cost accounting periods to be used in allocating indirect
costs are incorporated herein for application to contracts subject to full CAS
coverage. For contracts subject to
modified CAS coverage and for nonCAS-covered contracts, the base period
for allocating indirect costs will normally be the contractor’s fiscal year.
But a shorter period may be appropriate (1) for contracts in which performance involves only a minor portion
of the fiscal year, or (2) when it is general practice in the industry to use a
shorter period. When a contract is performed over an extended period, as
many base periods shall be used as are
required to represent the period of contract performance.
(f) Special care should be exercised in
applying the principles of paragraphs
(b), (c), and (d) above when Government-owned
contractor-operated
(GOCO) plants are involved. The distribution of corporate, division, or
branch office G&A expenses to such
plants operating with little or no dependence on corporate administrative
activities may require more precise
cost groupings, detailed accounts
screening, and carefully developed distribution bases.
[48 FR 42301, Sept. 19, 1983, as amended at 57
FR 39590, Aug. 31, 1992]
31.204 Application of principles and
procedures.
(a) Costs shall be allowed to the extent they are reasonable, allocable, and
determined to be allowable under
31.201, 31.202, 31.203, and 31.205. These
criteria apply to all of the selected
items that follow, even if particular
guidance is provided for certain items
for emphasis or clarity.
(b) Costs incurred as reimbursements
or payments to a subcontractor under
a cost-reimbursement, fixed-price incentive, or price redeterminable type
subcontract of any tier above the first
firm-fixed-price subcontract or fixedprice subcontract with economic price
adjustment provisions are allowable to
the extent that allowance is consistent
with the appropriate subpart of this
part 31 applicable to the subcontract
involved. Costs incurred as payments
under firm-fixed-price subcontracts or
fixed-price subcontracts with economic
price adjustment provisions or modifications thereto, when cost analysis
was performed under 15.404–1(c), shall
be allowable only to the extent that
the price was negotiated in accordance
with 31.102.
(c) Section 31.205 does not cover
every element of cost. Failure to include any item of cost does not imply
that it is either allowable or unallowable. The determination of allowability
shall be based on the principles and
standards in this subpart and the treatment of similar or related selected
items. When more than one subsection
in 31.205 is relevant to a contractor
cost, the cost shall be apportioned
among the applicable subsections, and
the determination of allowability of
each portion shall be based on the guidance contained in the applicable subsection. When a cost, to which more
than one subsection in 31.205 is relevant, cannot be apportioned, the determination of allowability shall be
based on the guidance contained in the
subsection that most specifically deals
with, or best captures the essential nature of, the cost at issue.
[48 FR 42301, Sept. 19, 1983, as amended at 53
FR 17858, May 18, 1988; 62 FR 51271, Sept. 30,
1997]
31.205
Selected costs.
31.205–1 Public relations and advertising costs.
(a) Public relations means all functions and activities dedicated to—
(1) Maintaining, protecting, and enhancing the image of a concern or its
products; or
(2) Maintaining or promoting reciprocal understanding and favorable relations with the public at large, or any
segment of the public. The term public
relations includes activities associated
with areas such as advertising, customer relations, etc.
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31.205–1
(b) Advertising means the use of
media to promote the sale of products
or services and to accomplish the activities referred to in paragraph (d) of
this subsection, regardless of the medium employed, when the advertiser
has control over the form and content
of what will appear, the media in which
it will appear, and when it will appear.
Advertising media include but are not
limited to conventions, exhibits, free
goods, samples, magazines, newspapers,
trade papers, direct mail, dealer cards,
window displays, outdoor advertising,
radio, and television.
(c) Public relations and advertising
costs include the costs of media time
and space, purchased services performed by outside organizations, as
well as the applicable portion of salaries, travel, and fringe benefits of employees engaged in the functions and
activities identified in paragraphs (a)
and (b) of this subsection.
(d) The only allowable advertising
costs are those that are—
(1) Specifically required by contract,
or that arise from requirements of Government contracts, and that are exclusively for—
(i) Acquiring scarce items for contract performance; or
(ii) Disposing of scrap or surplus materials acquired for contract performance;
(2) Costs of activities to promote
sales of products normally sold to the
U.S. Government, including trade
shows, which contain a significant effort to promote exports from the
United States. Such costs are allowable, notwithstanding paragraphs (f)(1),
(f)(3), (f)(4)(ii), and (f)(5) of this subsection. However, such costs do not include the costs of memorabilia (e.g.,
models, gifts, and souvenirs), alcoholic
beverages, entertainment, and physical
facilities that are used primarily for
entertainment rather than product
promotion; or
(3) Allowable in accordance with
31.205–34.
(e) Allowable public relations costs
include the following:
(1) Costs specifically required by contract.
(2) Costs of—
(i) Responding to inquiries on company policies and activities;
(ii) Communicating with the public,
press, stockholders, creditors, and customers; and
(iii) Conducting general liaison with
news media and Government public relations officers, to the extent that such
activities are limited to communication and liaison necessary to keep the
public informed on matters of public
concern such as notice of contract
awards, plant closings or openings, employee layoffs or rehires, financial information, etc.
(3) Costs of participation in community service activities (e.g., blood bank
drives, charity drives, savings bond
drives, disaster assistance, etc.).
(4) Costs of plant tours and open
houses (but see subparagraph (f)(5) of
this subsection).
(5) Costs of keel laying, ship launching, commissioning, and roll-out ceremonies, to the extent specifically provided for by contract.
(f) Unallowable public relations and
advertising costs include the following:
(1) All public relations and advertising costs, other than those specified
in paragraphs (d) and (e) of this subsection, whose primary purpose is to
promote the sale of products or services by stimulating interest in a product or product line (except for those
costs made allowable under 31.205–
38(b)(5)), or by disseminating messages
calling favorable attention to the contractor for purposes of enhancing the
company image to sell the company’s
products or services.
(2) All costs of trade shows and other
special events which do not contain a
significant effort to promote the export
sales of products normally sold to the
U.S. Government.
(3) Costs of sponsoring meetings, conventions, symposia, seminars, and
other special events when the principal
purpose of the event is other than dissemination of technical information or
stimulation of production.
(4) Costs of ceremonies such as (i)
corporate celebrations and (ii) new
product announcements.
(5) Costs of promotional material,
motion pictures, videotapes, brochures,
handouts, magazines, and other media
that are designed to call favorable attention to the contractor and its activities.
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31.205–2
48 CFR Ch. 1 (10–1–03 Edition)
(6) Costs of souvenirs, models, imprinted clothing, buttons, and other
mementos provided to customers or the
public.
(7) Costs of memberships in civic and
community organizations.
[51 FR 12298, Apr. 9, 1986, as amended at 53
FR 12130, Apr. 12, 1988; 53 FR 13274, Apr. 22,
1988; 54 FR 34755, Aug. 21, 1989; 56 FR 15153,
Apr. 15, 1991; 60 FR 42660, Aug. 16, 1995; 61 FR
67423, Dec. 20, 1996; 62 FR 12704, Mar. 17, 1997;
64 FR 10547, Mar. 4, 1999; 68 FR 43872, July 24,
2003]
31.205–2
[Reserved]
31.205–3 Bad debts.
Bad debts, including actual or estimated losses arising from uncollectible
accounts receivable due from customers and other claims, and any directly associated costs such as collection costs, and legal costs are unallowable.
31.205–4 Bonding costs.
(a) Bonding costs arise when the Government requires assurance against financial loss to itself or others by reason of the act or default of the contractor. They arise also in instances
where the contractor requires similar
assurance. Included are such bonds as
bid, performance, payment, advance
payment, infringement, and fidelity
bonds.
(b) Costs of bonding required pursuant to the terms of the contract are allowable.
(c) Costs of bonding required by the
contractor in the general conduct of its
business are allowable to the extent
that such bonding is in accordance
with sound business practice and the
rates and premiums are reasonable
under the circumstances.
31.205–5
[Reserved]
31.205–6 Compensation for personal
services.
(a) General. Compensation for personal services is allowable subject to
the following general criteria and additional requirements contained in other
parts of this cost principle:
(1) Compensation for personal services must be for work performed by the
employee in the current year and must
not represent a retroactive adjustment
of prior years’ salaries or wages (but
see paragraphs (g), (h), (j), (k), (m), and
(o) of this subsection).
(2) The total compensation for individual employees or job classes of employees must be reasonable for the
work performed; however, specific restrictions on individual compensation
elements apply when prescribed.
(3) The compensation must be based
upon and conform to the terms and
conditions of the contractor’s established compensation plan or practice
followed so consistently as to imply, in
effect, an agreement to make the payment.
(4) No presumption of allowability
will exist where the contractor introduces major revisions of existing compensation plans or new plans and the
contractor has not provided the cognizant ACO, either before implementation or within a reasonable period after
it, an opportunity to review the allowability of the changes.
(5) Costs that are unallowable under
other paragraphs of this Subpart 31.2
are not allowable under this subsection
31.205–6 solely on the basis that they
constitute compensation for personal
services.
(6)(i) Compensation costs for certain
individuals give rise to the need for
special consideration. Such individuals
include:
(A) Owners of closely held corporations, members of limited liability
companies, partners, sole proprietors,
or members of their immediate families; and
(B) Persons who are contractually
committed to acquire a substantial financial interest in the contractor’s enterprise.
(ii) For these individuals, compensation must—
(A) Be reasonable for the personal
services rendered; and
(B) Not be a distribution of profits
(which is not an allowable contract
cost).
(iii) For owners of closely held companies, compensation in excess of the
costs that are deductible as compensation under the Internal Revenue Code
(26 U.S.C.) and regulations under it is
unallowable.
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31.205–6
(b) Reasonableness—(1) Compensation
pursuant to labor-management agreements. If costs of compensation established under ‘‘arm’s length’’ labor-management agreements negotiated under
the terms of the Federal Labor Relations Act or similar state statutes are
otherwise allowable, the costs are reasonable unless, as applied to work in
performing Government contracts, the
costs are unwarranted by the character
and circumstances of the work or discriminatory against the Government.
The application of the provisions of a
labor-management agreement designed
to apply to a given set of circumstances and conditions of employment (e.g., work involving extremely
hazardous activities or work not requiring recurrent use of overtime) is
unwarranted when applied to a Government contract involving significantly
different circumstances and conditions
of employment (e.g., work involving
less hazardous activities or work continually requiring use of overtime). It
is discriminatory against the Government if it results in employee compensation (in whatever form or name)
in excess of that being paid for similar
non-Government work under comparable circumstances.
(2) Compensation not covered by labormanagement agreements. Compensation
for each employee or job class of employees must be reasonable for the
work performed. Compensation is reasonable if the aggregate of each measurable and allowable element sums to a
reasonable total. In determining the
reasonableness of total compensation,
consider only allowable individual elements of compensation. In addition to
the provisions of 31.201–3, in testing the
reasonableness of compensation for
particular employees or job classes of
employees, consider factors determined
to be relevant by the contracting officer. Factors that may be relevant include, but are not limited to, conformity with compensation practices of
other firms—
(i) Of the same size;
(ii) In the same industry;
(iii) In the same geographic area; and
(iv) Engaged in similar non-Government work under comparable circumstances.
(c) [Reserved]
(d) Form of payment. (1) Compensation
for personal services includes compensation paid or to be paid in the future to employees in the form of—
(i) Cash;
(ii) Corporate securities, such as
stocks, bonds, and other financial instruments (see paragraph (d)(2) of this
subsection regarding valuation); or
(iii) Other assets, products, or services.
(2) When compensation is paid with
securities of the contractor or of an affiliate, the following additional restrictions apply:
(i) Valuation placed on the securities
is the fair market value on the first
date the number of shares awarded is
known, determined upon the most objective basis available.
(ii) Accruals for the cost of securities
before issuing the securities to the employees are subject to adjustment according to the possibilities that the
employees will not receive the securities and that their interest in the accruals will be forfeited.
(e) Income tax differential pay. (1) Differential allowances for additional income taxes resulting from foreign assignments are allowable.
(2) Differential allowances for additional income taxes resulting from domestic assignments are unallowable.
(However, payments for increased employee income or Federal Insurance
Contributions Act taxes incident to allowable reimbursed relocation costs
are allowable under 31.205–35(a)(10).)
(f) Bonuses and incentive compensation.
(1) Bonuses and incentive compensation are allowable provided the—
(i) Awards are paid or accrued under
an agreement entered into in good
faith between the contractor and the
employees before the services are rendered or pursuant to an established
plan or policy followed by the contractor so consistently as to imply, in
effect, an agreement to make such payment; and
(ii) Basis for the award is supported.
(2) When the bonus and incentive
compensation payments are deferred,
the costs are subject to the requirements of paragraphs (f)(1) and (k) of
this subsection.
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48 CFR Ch. 1 (10–1–03 Edition)
(g) Severance pay. (1) Severance pay is
a payment in addition to regular salaries and wages by contractors to workers whose employment is being involuntarily terminated. Payments for
early retirement incentive plans are
covered in paragraph (j)(7) of this subsection.
(2) Severance pay is allowable only to
the extent that, in each case, it is required by—
(i) Law;
(ii) Employer-employee agreement;
(iii) Established policy that constitutes, in effect, an implied agreement on the contractor’s part; or
(iv) Circumstances of the particular
employment.
(3) Payments made in the event of
employment with a replacement contractor where continuity of employment with credit for prior length of
service is preserved under substantially
equal conditions of employment, or
continued employment by the contractor at another facility, subsidiary,
affiliate, or parent company of the contractor are not severance pay and are
unallowable.
(4) Actual normal turnover severance
payments shall be allocated to all work
performed in the contractor’s plant.
However, if the contractor uses the accrual method to account for normal
turnover severance payments, that
method will be acceptable if the
amount of the accrual is—
(i) Reasonable in light of payments
actually made for normal severances
over a representative past period; and
(ii) Allocated to all work performed
in the contractor’s plant.
(5) Abnormal or mass severance pay
is of such a conjectural nature that accruals for this purpose are not allowable. However, the Government recognizes its obligation to participate, to
the extent of its fair share, in any specific payment. Thus, the Government
will consider allowability on a case-bycase basis.
(6) Under 10 U.S.C. 2324(e)(1)(M) and
41 U.S.C. 256(e)(1)(M), the costs of severance payments to foreign nationals
employed under a service contract performed outside the United States are
unallowable to the extent that such
payments exceed amounts typically
paid to employees providing similar
services in the same industry in the
United States. Further, under 10 U.S.C.
2324(e)(1)(N) and 41 U.S.C. 256(e)(1)(N),
all such costs of severance payments
that are otherwise allowable are unallowable if the termination of employment of the foreign national is the result of the closing of, or the curtailment of activities at, a United States
facility in that country at the request
of the government of that country; this
does not apply if the closing of a facility or curtailment of activities is made
pursuant to a status-of-forces or other
country-to-country agreement entered
into with the government of that country before November 29, 1989. 10 U.S.C.
2324(e)(3) and 41 U.S.C. 256(e)(2) permit
the head of the agency to waive these
cost allowability limitations under certain circumstances (see 37.113 and the
solicitation provision at 52.237–8).
(h) Backpay. Backpay is a retroactive
adjustment of prior years’ salaries or
wages. Backpay is unallowable except
as follows:
(1) Payments to employees resulting
from underpaid work actually performed are allowable, if required by a
negotiated settlement, order, or court
decree.
(2) Payments to union employees for
the difference in their past and current
wage rates for working without a contract or labor agreement during labor
management negotiation are allowable.
(3) Payments to nonunion employees
based upon results of union agreement
negotiation are allowable only if—
(i) A formal agreement or understanding exists between management
and the employees concerning these
payments; or
(ii) An established policy or practice
exists and is followed by the contractor
so consistently as to imply, in effect,
an agreement to make such payments.
(i) Compensation based on changes in
the prices of corporate securities or
corporate security ownership, such as
stock options, stock appreciation
rights, phantom stock plans, and junior stock conversions.
(1) Any compensation which is calculated, or valued, based on changes in
the price of corporate securities is unallowable.
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Federal Acquisition Regulation
31.205–6
(2) Any compensation represented by
dividend payments or which is calculated based on dividend payments is
unallowable.
(3) If a contractor pays an employee
in lieu of the employee receiving or exercising a right, option, or benefit
which would have been unallowable
under this paragraph (i), such payments are also unallowable.
(j) Pension costs. (1) A pension plan, as
defined in 31.001, is a deferred compensation plan. Additional benefits
such as permanent and total disability
and death payments and survivorship
payments to beneficiaries of deceased
employees may be treated as pension
costs, provided the benefits are an integral part of the pension plan and meet
all the criteria pertaining to pension
costs.
(2) Pension plans are normally segregated into two types of plans: defined-benefit or defined-contribution
pension plans. The cost of all definedbenefit pension plans shall be measured, allocated, and accounted for in
compliance with the provisions of 48
CFR 9904.412, Cost accounting standard
for composition and measurement of
pension cost, and 48 CFR 9904.413, Adjustment and allocation of pension
cost. The costs of all defined-contribution pension plans shall be measured,
allocated, and accounted for in accordance with the provisions of 48 CFR
9904.412 and 48 CFR 9904.413. Pension
costs are allowable subject to the referenced standards and the cost limitations and exclusions set forth in paragraphs (j)(2)(i) and (j)(3) through (8) of
this subsection.
(i) Except for nonqualified pension
plans using the pay-as-you-go cost
method, to be allowable in the current
year, pension costs must be funded by
the time set for filing of the Federal
income tax return or any extension
thereof. Pension costs assigned to the
current year, but not funded by the tax
return time, shall not be allowable in
any subsequent year. For nonqualified
pension plans using the pay-as-you-go
cost method, to be allowable in the
current year, pension costs must be allocable in accordance with 48 CFR
9904.412–50(d)(3).
(ii) Pension payments must be reasonable in amount and must be paid
pursuant to—an agreement entered
into in good faith between the contractor and employees before the work
or services are performed; and the
terms and conditions of the established
plan. The cost of changes in pension
plans that are discriminatory to the
Government or are not intended to be
applied consistently for all employees
under similar circumstances in the future are not allowable.
(iii) Except as provided for early retirement benefits in paragraph (j)(7) of
this subsection, one-time-only pension
supplements not available to all participants of the basic plan are not allowable as pension costs unless the
supplemental benefits represent a separate pension plan and the benefits are
payable for life at the option of the employee.
(iv) Increases in payments to previously retired plan participants covering cost-of-living adjustments are allowable if paid in accordance with a
policy or practice consistently followed.
(3) Defined-benefit pension plans. This
paragraph covers pension plans in
which the benefits to be paid or the
basis for determining such benefits are
established in advance and the contributions are intended to provide the
stated benefits. The cost limitations
and exclusions pertaining to definedbenefit plans are as follows:
(i)(A) Except for nonqualified pension
plans, pension costs (see 48 CFR
9904.412–40(a)(1)) assigned to the current accounting period, but not funded
during it, shall not be allowable in subsequent years (except that a payment
made to a fund by the time set for filing the Federal income tax return or
any extension thereof is considered to
have been made during such taxable
year). However, any portion of pension
cost computed for a cost accounting
period, that exceeds the amount required to be funded pursuant to a waiver granted under the provisions of the
Employee’s Retirement Income Security Act of 1974 (ERISA), will be allowable in those future accounting periods
in which the funding of such excess
amounts occurs (see 48 CFR 9904.412–
50(c)(5)).
(B) For nonqualified pension plans,
except those using the pay-as-you-go
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31.205–6
48 CFR Ch. 1 (10–1–03 Edition)
cost method, allowable costs are limited to the amount allocable in accordance with 48 CFR 9904.412–50(d)(2).
(C) For nonqualified pension plans
using the pay-as-you-go cost method,
allowable costs are limited to the
amounts allocable in accordance with
48 CFR 9904.412–50(d)(3).
(ii) Any amount funded in excess of
the pension cost assigned to a cost accounting period is not allowable and
shall be accounted for as set forth at 48
CFR 9904.412–50(a)(4), and shall be allowable in the future period to which it
is assigned, to the extent it is allocable, reasonable, and not otherwise
unallowable.
(iii) Increased pension costs caused
by delay in funding beyond 30 days
after each quarter of the year to which
they are assignable are unallowable. If
a composite rate is used for allocating
pension costs between the segments of
a company and if, because of differences in the timing of the funding
by the segments, an inequity exists, allowable pension costs for each segment
will be limited to that particular segment’s calculation of pension costs as
provided for in 48 CFR 9904.413–50(c).
Determinations of unallowable costs
shall be made in accordance with the
actuarial cost method used in calculating pension costs.
(iv) Allowability of the cost of indemnifying the Pension Benefit Guaranty Corporation (PBGC) under ERISA
Section 4062 or 4064 arising from terminating an employee deferred compensation plan will be considered on a caseby-case basis, provided that if insurance was required by the PBGC under
ERISA Section 4023, it was so obtained
and the indemnification payment is
not recoverable under the insurance.
Consideration under the foregoing circumstances will be primarily for the
purpose of appraising the extent to
which the indemnification payment is
allocable to Government work. If a
beneficial or other equitable relationship exists, the Government will participate, despite the requirements of
31.205–19(a)(3) and (b), in the indemnification payment to the extent of its
fair share.
(v) Increased pension costs resulting
from the withdrawal of assets from a
pension fund and transfer to another
employee benefit plan fund, or transfer
of assets to another account within the
same fund, are unallowable except to
the extent authorized by an advance
agreement. If the withdrawal of assets
from a pension fund is a plan termination under ERISA, the provisions of
paragraph (j)(4) of this subsection
apply. The advance agreement shall—
(A) State the amount of the Government’s equitable share in the gross
amount withdrawn or transferred; and
(B) Provide that the Government receive a credit equal to the amount of
the Government’s equitable share of
the gross withdrawal or transfer.
(4) Pension adjustments and asset reversions. (i) For segment closings, pension
plan terminations, or curtailment of
benefits, the adjustment amount shall
be the amount measured, assigned, and
allocated in accordance with 48 CFR
9904.413–50(c)(12) for contracts and subcontracts that are subject to Cost Accounting Standards (CAS) Board rules
and regulations (48 CFR Chapter 99).
For contracts and subcontracts that
are not subject to CAS, the adjustment
amount shall be the amount measured,
assigned, and allocated in accordance
with 48 CFR 9904.413–50(c)(12), except
the numerator of the fraction at 48
CFR 9904.413–50(c)(12)(vi) shall be the
sum of the pension plan costs allocated
to all non-CAS-covered contracts and
subcontracts that are subject to Subpart 31.2 or for which cost or pricing
data were submitted.
(ii) For all other situations where assets revert to the contractor, or such
assets are constructively received by it
for any reason, the contractor shall, at
the Government’s option, make a refund or give a credit to the Government for its equitable share of the
gross amount withdrawn. The Government’s equitable share shall reflect the
Government’s participation in pension
costs through those contracts for
which cost or pricing data were submitted or that are subject to Subpart
31.2. Excise taxes on pension plan asset
reversions or withdrawals under this
paragraph (j)(4)(ii) are unallowable in
accordance with 31.205-41(b)(6).
(5) Defined-contribution pension plans.
This paragraph covers those pension
plans in which the contributions are
established in advance and the level of
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Federal Acquisition Regulation
31.205–6
benefits is determined by the contributions made. It also covers profit sharing, savings plans, and other such
plans, provided the plans fall within
the definition of a pension plan in paragraph (j)(1) of this subsection.
(i) Allowable pension cost is limited
to the net contribution required to be
made for a cost accounting period after
taking into account dividends and
other credits, where applicable. However, any portion of pension cost computed for a cost accounting period that
exceeds the amount required to be
funded pursuant to a waiver granted
under the provisions of ERISA will be
allowable in those future accounting
periods in which the funding of such
excess amounts occurs (see 48 CFR
9904.412–50(c)(5)).
(ii) The provisions of paragraphs
(j)(3) (ii) and (iv) of this subsection
apply to defined-contribution plans.
(6) Pension plans using the pay-as-yougo cost method. The cost of pension
plans using the pay-as-you-go cost
method shall be measured, allocated,
and accounted for in accordance with
48 CFR 9904.412 and 9904.413. Pension
costs for a pension plan using the payas-you-go cost method shall be allowable to the extent they are allocable,
reasonable, and not otherwise unallowable.
(7) Early retirement incentive plans. An
early retirement incentive plan is a
plan under which employees receive a
bonus or incentive, over and above the
requirement of the basic pension plan,
to retire early. These plans normally
are not applicable to all participants of
the basic plan and do not represent life
income settlements, and as such would
not qualify as pension costs. However,
for contract costing purposes, early retirement incentive payments are allowable subject to the pension cost criteria contained in paragraphs (j)(3)(i)
through (iv) provided—
(i) The costs are accounted for and
allocated in accordance with the contractor’s system of accounting for pension costs.
(ii) The payments are made in accordance with the terms and conditions
of the contractor’s plan;
(iii) The plan is applied only to active employees. The cost of extending
the plan to employees who retired or
were terminated before the adoption of
the plan is unallowable; and
(iv) The total of the incentive payments to any employee may not exceed
the amount of the employee’s annual
salary for the previous fiscal year before the employee’s retirement.
(8) Employee stock ownership plans
(ESOP). (i) An ESOP is an individual
stock bonus plan designed specifically
to invest in the stock of the employer
corporation. The contractor’s contributions to an Employee Stock Ownership
Trust (ESOT) may be in the form of
cash, stock, or property. Costs of
ESOP’s are allowable subject to the
following conditions:
(A) Contributions by the contractor
in any one year may not exceed 15 percent (25 percent when a money purchase plan is included) of salaries and
wages of employees participating in
the plan in any particular year.
(B) The contribution rate (ratio of
contribution to salaries and wages of
participating employees) may not exceed the last approved contribution
rate except when approved by the contracting officer based upon justification provided by the contractor. When
no contribution was made in the previous year for an existing ESOP, or
when a new ESOP is first established,
and the contractor proposes to make a
contribution in the current year, the
contribution rate shall be subject to
the contracting officer’s approval.
(C) When a plan or agreement exists
wherein the liability for the contribution can be compelled for a specific
year, the expense associated with that
liability is assignable only to that period. Any portion of the contribution
not funded by the time set for filing of
the Federal income tax return for that
year or any extension thereof shall not
be allowable in subsequent years.
(D) When a plan or agreement exists
wherein the liability for the contribution cannot be compelled, the amount
contributed for any year is assignable
to that year provided the amount is
funded by the time set for filing of the
Federal income tax return for that
year.
(E) When the contribution is in the
form of stock, the value of the stock
contribution shall be limited to the
fair market value of the stock on the
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31.205–6
48 CFR Ch. 1 (10–1–03 Edition)
date that title is effectively transferred to the trust. Cash contributions
shall be allowable only when the contractor furnishes evidence satisfactory
to the contracting officer demonstrating that stock purchases by the
ESOT are or will be at a fair market
price; e.g., makes arrangements with
the trust permitting the contracting
officer to examine purchases of stock
by the trust to determine that prices
paid are at fair market value. When excessive prices are paid, the amount of
the excess will be credited to the same
indirect cost pools that were charged
for the ESOP contributions in the year
in which the stock purchase occurs.
However, when the trust purchases the
stock with borrowed funds which will
be repaid over a period of years by cash
contributions from the contractor to
the trust, the excess price over fair
market value shall be credited to the
indirect cost pools pro rata over the period of years during which the contractor contributes the cash used by
the trust to repay the loan. When the
fair market value of unissued stock or
stock of a closely held corporation is
not readily determinable, the valuation
will be made on a case-by-case basis
taking into consideration the guidelines for valuation used by the IRS.
(ii) Amounts contributed to an ESOP
arising from either (A) an additional
investment tax credit (see 1975 Tax Reduction Act—TRASOP’s); or (B) a payroll-based tax credit (see Economic Recovery Tax Act of 1981) are unallowable.
(iii) The requirements of subdivision
(j)(3)(ii) above are applicable to Employee Stock Ownership Plans.
(k) Deferred compensation other than
pensions. (1) Deferred compensation is
an award given by an employer to compensate an employee in a future cost
accounting period or periods for services rendered in one or more cost accounting periods before the date of receipt of compensation by the employee.
Deferred compensation does not include the amount of year-end accruals
for salaries, wages, or bonuses that are
paid within a reasonable period of time
after the end of a cost accounting period. Subject to 31.205–6(a), deferred
awards are allowable when they are
based on current or future services.
Awards made in periods subsequent to
the period when the work being remunerated was performed are not allowable.
(2) The costs of deferred awards shall
be measured, allocated, and accounted
for in compliance with the provisions
of 48 CFR 9904.415, Accounting for the
Cost of Deferred Compensation.
(3) Deferred compensation payments
to employees under awards made before
the effective date of 48 CFR 9904.415 are
allowable to the extent they would
have been allowable under prior acquisition regulations.
(l) Compensation incidental to business
acquisitions. The following costs are unallowable:
(1) Payments to employees under
agreements in which they receive special compensation, in excess of the contractor’s normal severance pay practice, if their employment terminates
following a change in the management
control over, or ownership of, the contractor or a substantial portion of its
assets.
(2) Payments to employees under
plans introduced in connection with a
change (whether actual or prospective)
in the management control over, or
ownership of, the contractor or a substantial portion of its assets in which
those employees receive special compensation, which is contingent upon
the employee remaining with the contractor for a specified period of time.
(m) Fringe benefits. (1) Fringe benefits
are allowances and services provided by
the contractor to its employees as
compensation in addition to regular
wages and salaries. Fringe benefits include, but are not limited to, the cost
of vacations, sick leave, holidays, military leave, employee insurance, and
supplemental unemployment benefit
plans. Except as provided otherwise in
subpart 31.2, the costs of fringe benefit
are allowable to the extent that they
are reasonable and are required by law,
employer-employee agreement, or an
established policy of the contractor.
(2) That portion of the cost of company-furnished automobiles that relates to personal use by employees (including transportation to and from
work) is unallowable regardless of
whether the cost is reported as taxable
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income to the employees (see 31.205–
46(f)).
(n) Employee rebate and purchase discount plans. Rebates and purchase discounts, in whatever form, granted to
employees on products or services produced by the contractor or affiliates
are unallowable.
(o) Postretirement benefits other than
pensions (PRB). (1) PRB covers all benefits, other than cash benefits and life
insurance benefits paid by pension
plans, provided to employees, their
beneficiaries, and covered dependents
during the period following the employees’ retirement. Benefits encompassed include, but are not limited to,
postretirement health care; life insurance provided outside a pension plan;
and other welfare benefits such as tuition assistance, day care, legal services, and housing subsidies provided
after retirement.
(2) To be allowable, PRB costs must
be reasonable and incurred pursuant to
law, employer-employee agreement, or
an established policy of the contractor.
In addition, to be allowable, PRB costs
must also be calculated in accordance
with paragraphs (o)(2)(i), (ii), or (iii) of
this section.
(i) Cash basis. Cost recognized as benefits when they are actually provided,
must be paid to an insurer, provider, or
other recipient for current year benefits or premiums.
(ii) Terminal funding. If a contractor
elects a terminal-funded plan, it does
not accrue PRB costs during the working lives of employees. Instead, it accrues and pays the entire PRB liability
to an insurer or trustee in a lump sum
upon the termination of employees (or
upon conversion to such a terminalfunded plan) to establish and maintain
a fund or reserve for the sole purpose of
providing PRB to retirees. The lump
sum is allowable if amortized over a
period of 15 years.
(iii) Accrual basis. Accrual costing
other than terminal funding must be
measured and assigned according to
Generally Accepted Accounting Principles and be paid to an insurer or
trustee to establish and maintain a
fund or reserve for the sole purpose of
providing PRB to retirees. The accrual
must also be calculated in accordance
with generally accepted actuarial prin-
ciples and practices as promulgated by
the Actuarial Standards Board.
(3) To be allowable, costs must be
funded by the time set for filing the
Federal income tax return or any extension thereof. PRB costs assigned to
the current year, but not funded or
otherwise liquidated by the tax return
time, shall not be allowable in any subsequent year.
(4) Increased PRB costs caused by
delay in funding beyond 30 days after
each quarter of the year to which they
are assignable are unallowable.
(5) Costs of postretirement benefits
in paragraph (o)(2)(iii) of this section
attributable to past service (‘‘transition obligation’’) as defined in Financial Accounting Standards Board
Statement 106, paragraph 110, are allowable subject to the following limitation: The allowable amount of such
costs assignable to a contractor fiscal
year cannot exceed the amount of such
costs which would be assigned to that
contractor fiscal year under the delayed recognition methodology described in paragraphs 112 and 113 of
Statement 106.
(6) The Government shall receive an
equitable share of any amount of previously funded PRB costs which revert
or inure to the contractor. Such equitable share shall reflect the Government’s previous participation in PRB
costs through those contracts for
which cost or pricing data were required or which were subject to subpart
31.2.
(p) Limitation on allowability of compensation for certain contractor personnel.
(Note that pursuant to Section 804 of Pub. L.
105–261, the definition of ‘‘senior executive’’
in (p)(2)(ii) has been changed for compensation costs incurred after January 1, 1999.)
(1) Costs incurred after January 1,
1998, for compensation of a senior executive in excess of the benchmark compensation amount determined applicable for the contractor fiscal year by the
Administrator, Office of Federal Procurement Policy (OFPP), under Section 39 of the OFPP Act (41 U.S.C. 435)
are unallowable (10 U.S.C. 2324(e)(1)(P)
and 41 U.S.C. 256(e)(1)(P)). This limitation is the sole statutory limitation on
allowable senior executive compensation costs incurred after January 1,
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31.205–7
48 CFR Ch. 1 (10–1–03 Edition)
1998, under new or previously existing
contracts. This limitation applies
whether or not the affected contracts
were previously subject to a statutory
limitation on such costs.
(2) As used in this paragraph—
(i) Compensation means the total
amount of wages, salary, bonuses, deferred compensation (see paragraph (k)
of this subsection), and employer contributions to defined contribution pension plans (see paragraphs (j)(5) and
(j)(8) of this subsection), for the fiscal
year, whether paid, earned, or otherwise accruing, as recorded in the contractor’s cost accounting records for
the fiscal year.
(ii) Senior executive means—
(A) Prior to January 2, 1999—
(1) The Chief Executive Officer (CEO)
or any individual acting in a similar
capacity at the contractor’s headquarters;
(2) The four most highly compensated
employees in management positions at
the contractor’s headquarters, other
than the CEO; and
(3) If the contractor has intermediate
home offices or segments that report
directly to the contractor’s headquarters, the five most highly compensated employees in management positions at each such intermediate home
office or segment.
(B) Effective January 2, 1999, the five
most highly compensated employees in
management positions at each home
office and each segment of the contractor, whether or not the home office
or segment reports directly to the contractor’s headquarters.
(iii) Fiscal year means the fiscal year
established by the contractor for accounting purposes.
(iv) Contractor’s headquarters means
the highest organizational level from
which executive compensation costs
are allocated to Government contracts.
31.205–7
[48 FR 42301, Sept. 19, 1983]
Contributions or donations, including
cash, property and services, regardless
of recipient, are unallowable, except as
provided in 31.205–1(e)(3).
EDITORIAL NOTE: For FEDERAL REGISTER citations affection section 31.205–6, see the List
of CFR Sections Affected which appears in
the Finding Aids section of the printed volume and on GPO Access.
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct.
1, 2003, § 31.205–6 was amended in paragraph
(m)(2) by removing the words ‘‘(see 31.205–
46(f))’’ and adding the words ‘‘(see 31.205–
46(d))’’ in its place, effective Oct. 31, 2002.
Contingencies.
(a) Contingency, as used in this subpart, means a possible future event or
condition
arising
from
presently
known or unknown causes, the outcome of which is indeterminable at the
present time.
(b) Costs for contingencies are generally unallowable for historical costing purposes because such costing deals
with costs incurred and recorded on the
contractor’s books. However, in some
cases, as for example, terminations, a
contingency factor may be recognized
when it is applicable to a past period to
give recognition to minor unsettled
factors in the interest of expediting
settlement.
(c) In connection with estimates of
future costs, contingencies fall into
two categories:
(1) Those that may arise from presently known and existing conditions,
the effects of which are foreseeable
within reasonable limits of accuracy;
e.g., anticipated costs of rejects and defective work. Contingencies of this category are to be included in the estimates of future costs so as to provide
the best estimate of performance cost.
(2) Those that may arise from presently known or unknown conditions,
the effect of which cannot be measured
so precisely as to provide equitable results to the contractor and to the Government; e.g., results of pending litigation. Contingencies of this category are
to be excluded from cost estimates
under the several items of cost, but
should be disclosed separately (including the basis upon which the contingency is computed) to facilitate the negotiation of appropriate contractual
coverage. (See, for example, 31.205–6(g),
31.205–19, and 31.205–24.)
31.205–8
Contributions or donations.
[51 FR 12300, Apr. 9, 1986]
31.205–9
31.205–10
[Reserved]
Cost of money.
(a) General. Cost of money—
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31.205–11
(1) Is an imputed cost that is not a
form of interest on borrowings (see
31.205–20);
(2) Is an ‘‘incurred cost’’ for cost-reimbursement purposes under applicable
cost-reimbursement contracts and for
progress payment purposes under fixedprice contracts; and
(3) Refers to—
(i) Facilities capital cost of money
(48 CFR 9904.414); and
(ii) Cost of money as an element of
the cost of capital assets under construction (48 CFR 9904.417).
(b) Cost of money is allowable, provided—
(1) It is measured, assigned, and allocated to contracts in accordance with
48 CFR 9904.414 or measured and added
to the cost of capital assets under construction in accordance with 48 CFR
9904.417, as applicable;
(2) The requirements of 31.205–52,
which limit the allowability of cost of
money, are followed; and
(3) The estimated facilities capital
cost of money is specifically identified
and proposed in cost proposals relating
to the contract under which the cost is
to be claimed.
(c) Actual interest cost in lieu of the
calculated imputed cost of money is
unallowable.
[68 FR 28091, May 22, 2003]
31.205–11 Depreciation.
(a) Depreciation is a charge to current operations which distributes the
cost of a tangible capital asset, less estimated residual value, over the estimated useful life of the asset in a systematic and logical manner. It does not
involve a process of valuation. Useful
life refers to the prospective period of
economic usefulness in a particular
contractor’s operations as distinguished from physical life; it is evidenced by the actual or estimated retirement and replacement practice of
the contractor.
(b) Contractors having contracts subject to 48 CFR 9904.409, Depreciation of
Tangible Capital Assets, must adhere
to the requirement of that standard for
all fully CAS-covered contracts and
may elect to adopt the standard for all
other contracts. All requirements of 48
CFR 9904.409 are applicable if the election is made, and its requirements su-
persede any conflicting requirements
of this cost principle. Once electing to
adopt 48 CFR 9904.409 for all contracts,
contractors must continue to follow it
until notification of final acceptance of
all deliverable items on all open negotiated Government contracts. Paragraphs (c) through (e) below apply to
contracts to which 48 CFR 9904.409 is
not applied.
(c) Normal depreciation on a contractor’s plant, equipment, and other capital facilities is an allowable contract
cost, if the contractor is able to demonstrate that it is reasonable and allocable (but see paragraph (i) below).
(d) Depreciation shall be considered
reasonable if the contractor follows
policies and procedures that are—
(1) Consistent with those followed in
the same cost center for business other
than Government;
(2) Reflected in the contractor’s
books of accounts and financial statements; and
(3) Both used and acceptable for Federal income tax purposes.
(e) When the depreciation reflected
on a contractor’s books of accounts
and financial statements differs from
that used and acceptable for Federal
income tax purposes, reimbursement
shall be based on the asset cost amortized over the estimated useful life of
the property using depreciation methods (straight line, sum of the years’
digits, etc.) acceptable for income tax
purposes. Allowable depreciation shall
not exceed the amounts used for book
and statement purposes and shall be
determined in a manner consistent
with the depreciation policies and procedures followed in the same cost center on non-Government business (but
see paragraph (o) of this subsection).
(f) Depreciation for reimbursement
purposes in the case of tax-exempt organizations shall be determined on the
basis described in paragraph (e) immediately above.
(g) Special considerations are required for assets acquired before the effective date of this cost principle if, on
that date, the undepreciated balance of
these assets resulting from depreciation policies and procedures used previously for Government contracts and
subcontracts is different from the
undepreciated balance on the books
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31.205–11
48 CFR Ch. 1 (10–1–03 Edition)
and
financial
statements.
The
undepreciated balance for contract
cost purposes shall be depreciated over
the remaining life using the methods
and lives followed for book purposes.
The aggregate depreciation of any
asset allowable after the effective date
of this 31.205–11 shall not exceed the
cost basis of the asset less any depreciation allowed or allowable under
prior acquisition regulations.
(h) Depreciation should usually be allocated to the contract and other work
as an indirect cost. The amount of depreciation allowed in any accounting
period may, consistent with the basic
objectives in paragraph (a) above, vary
with volume of production or use of
multishift operations.
(i) In the case of emergency facilities
covered by certificates of necessity, a
contractor may elect to use normal depreciation without requesting a determination of true depreciation, or may
elect to use either normal or true depreciation after a determination of true depreciation has been made by an Emergency Facilities Depreciation Board
(EFDB). The method elected must be
followed consistently thoughout the
life of the emergency facility. When an
election is made to use normal depreciation, the criteria in paragraphs (c),
(d), (e), and (f) above shall apply for
both the emergency period and the
post-emergency period. When an election is made to use true depreciation,
the amount allowable as depreciation—
(1) With respect to the emergency period (five years), shall be computed in
accordance with the determination of
the EFDB and allocated rateably over
the full five year emergency period;
provided no other allowance is made
which would duplicate the factors, such
as extraordinary obsolescence, covered
by the Board’s determination; and
(2) After the end of the emergency period, shall be computed by distributing
the remaining undepreciated portion of
the cost of the emergency facility over
the balance of its useful life provided
the remaining undepreciated portion of
such cost shall not include any amount
of unrecovered true depreciation.
(j) No depreciation, rental, or use
charge shall be allowed on property acquired at no cost from the Government
by the contractor or by any division,
subsidiary, or affiliate of the contractor under common control.
(k) The depreciation on any item
which meets the criteria for allowance
at a price under 31.205–26(e) may be
based on that price, provided the same
policies and procedures are used for
costing all business of the using division, subsidiary, or organization under
common control.
(l) No depreciation or rental shall be
allowed on property fully depreciated
by the contractor or by any division,
subsidiary, or affiliate of the contractor under common control. However, a reasonable charge for using
fully depreciated property may be
agreed upon and allowed (but see
31.109(h)(2)). In determining the charge,
consideration shall be given to cost,
total estimated useful life at the time
of negotiations, effect of any increased
maintenance charges or decreased efficiency due to age, and the amount of
depreciation previously charged to
Government contracts or subcontracts.
(m) 48 CFR 9904.404, Capitalization of
Tangible Assets, applies to assets acquired by a capital lease as defined in
Statement of Financial Accounting
Standard No. 13 (FAS–13), Accounting
for Leases, issued by the Financial Accounting Standards Board (FASB).
Compliance with 48 CFR 9904.404 and
FAS–13 requires that such leased assets
(capital leases) be treated as purchased
assets; i.e., be capitalized and the capitalized value of such assets be distributed over their useful lives as depreciation charges, or over the leased life as
amortization charges as appropriate.
Assets whose leases are classified as
capital leases under FAS–13 are subject
to the requirements of 31.205–11 while
assets acquired under leases classified
as operating leases are subject to the
requirements on rental costs in 31.205–
36. The standards of financial accounting and reporting prescribed by FAS–13
are incorporated into this principle and
shall govern its application, except as
provided in subparagraphs (1), (2), and
(3) below.
(1) Rental costs under a sale and
leaseback arrangement shall be allowable up to the amount that would have
been allowed had the contractor retained title to the property.
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Federal Acquisition Regulation
31.205–13
(2) Capital leases, as defined in FAS–
13, for all real and personal property,
between any related parties are subject
to the requirements of this subparagraph 31.205–11(m). If it is determined
that the terms of the lease have been
significantly affected by the fact that
the lessee and lessor are related, depreciation charges shall not be allowed in
excess of those which would have occurred if the lease contained terms
consistent with those found in a lease
between unrelated parties.
(3) Assets acquired under leases that
the contractor must capitalize under
FAS–13 shall not be treated as purchased assets for contract purposes if
the leases are covered by 31.205–36(b)(4).
(n) Whether or not the contract is
otherwise subject to CAS, the requirements of 31.205–52, which limit the allowability of depreciation, shall be observed.
(o) In the event of a write-down from
carrying value to fair value as a result
of impairments caused by events or
changes in circumstances, allowable
depreciation of the impaired assets
shall be limited to the amounts that
would have been allowed had the assets
not been written down (see 31.205–
16(g)). However, this does not preclude
a change in depreciation resulting from
other causes such as permissible
changes in estimates of service life,
consumption of services, or residual
value.
[48 FR 42301, Sept. 19, 1983, as amended at 55
FR 25530, June 21, 1990; 57 FR 39591, Aug. 31,
1992; 60 FR 64255, Dec. 14, 1995; 61 FR 67424,
Dec. 20, 1996]
31.205–12
Economic planning costs.
(a) This category includes costs of
general long-range management planning that is concerned with the future
overall development of the contractor’s
business and that may take into account the eventual possibility of economic dislocations or fundamental alterations in those markets in which
the contractor currently does business.
Economic planning costs do not include organization or reorganization
costs covered by 31.205–27.
(b) Economic planning costs are allowable as indirect costs to be properly
allocated.
(c) Research and development and engineering costs designed to lead to new
products for sale to the general public
are not allowable under this principle.
[48 FR 42301, Sept. 19, 1983, as amended at 68
FR 43872, July 24, 2003]
EFFECTIVE DATE NOTE: At 68 FR 56688, Oct.
1, 2003, § 31.205–12 was revised, effective Oct.
31, 2003. For the convenience of the user, the
revised text is set forth below:
31.205–12 Economic planning costs.
Economic planning costs are the costs of
general long-range management planning
that is concerned with the future overall development of the contractor’s business and
that may take into account the eventual
possibility of economic dislocations or fundamental alterations in those markets in
which the contractor currently does business. Economic planning costs are allowable.
Economic planning costs do not include organization or reorganization costs covered
by 31.205–27. See 31.205–38 for market planning costs other than economic planning
costs.
31.205–13 Employee morale, health,
welfare, food service, and dormitory costs and credits.
(a) Aggregate costs incurred on activities designed to improve working
conditions, employer-employee relations, employee morale, and employee
performance (less income generated by
these activities) are allowable, except
as limited by paragraphs (b), (c), and
(d) of this subsection. Some examples
of allowable activities are house publications, health clinics, wellness/fitness
centers, employee counseling services,
and food and dormitory services, which
include operating or furnishing facilities for cafeterias, dining rooms, canteens, lunch wagons, vending machines, living accommodations, or
similar types of services for the contractor’s employees at or near the contractor’s facilities.
(b) Costs of gifts are unallowable.
(Gifts do not include awards for performance made pursuant to 31.205–6(f)
or awards made in recognition of employee achievements pursuant to an established contractor plan or policy.)
(c) Costs of recreation are unallowable, except for the costs of employees’
participation in company sponsored
sports teams or employee organizations designed to improve company
loyalty, team work, or physical fitness.
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31.205–13
48 CFR Ch. 1 (10–1–03 Edition)
(d) Losses from operating food and
dormitory services may be included as
costs only if the contractor’s objective
is to operate such services on a breakeven basis. Losses sustained because
food services or lodging accommodations are furnished without charge or
at prices or rates which obviously
would not be conducive to the accomplishment of the above objective are
not allowable. A loss may be allowed,
however, to the extent that the contractor can demonstrate that unusual
circumstances exist (e.g., where the
contractor must provide food or dormitory services at remote locations
where adequate commercial facilities
are not reasonably available; or where
charged but unproductive labor costs
would be excessive but for the services
provided or where cessation or reduction of food or dormitory operations
will not otherwise yield net cost savings) such that even with efficient
management, operating the services on
a break-even basis would require charging inordinately high prices, or prices
or rates higher than those charged by
commercial establishments offering
the same services in the same geographical areas. Costs of food and dormitory services shall include an allocable share of indirect expenses pertaining to these activities.
(e) When the contractor has an arrangement authorizing an employee association to provide or operate a service, such as vending machines in the
contractor’s plant, and retain the profits, such profits shall be treated in the
same manner as if the contractor were
providing the service (but see paragraph (f) of this subsection).
(f) Contributions by the contractor to
an employee organization, including
funds from vending machine receipts or
similar sources, may be included as
costs incurred under paragraph (a) of
this subsection only to the extent that
the contractor demonstrates that an
equivalent amount of the costs incurred by the employee organization
would be allowable if directly incurred
by the contractor.
[60 FR 42662, Aug. 16, 1995]
EFFECTIVE DATE NOTE: At 68 FR 56688, Oct.
1, 2003, § 31.205–13 was amended by revising
paragraphs (a), (d), and (f), effective Oct. 31,
2003. For the convenience of the user, the revised text is set forth below:
31.205–13 Employee morale, health, welfare,
food service, and dormitory costs and
credits.
(a) Aggregate costs incurred on activities
designed to improve working conditions, employer-employee relations, employee morale,
and employee performance (less income generated by these activities) are allowable,
subject to the limitations contained in this
subsection. Some examples of allowable activities are—
(1) House publications;
(2) Health clinics;
(3) Wellness/fitness centers;
(4) Employee counseling services; and
(5) Food and dormitory services for the
contractor’s employees at or near the contractor’s facilities. These services include—
(i) Operating or furnishing facilities for
cafeterias, dining rooms, canteens, lunch
wagons, vending machines, living accommodations; and
(ii) Similar types of services.
*
*
*
*
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*
(d)(1) The allowability of food and dormitory losses are determined by the following factors:
(i) Losses from operating food and dormitory services are allowable only if the
contractor’s objective is to operate such
services on a break-even basis.
(ii) Losses sustained because food services
or lodging accommodations are furnished
without charge or at prices or rates which
obviously would not be conducive to the accomplishment of the objective in paragraph
(d)(1)(i) of this subsection are not allowable,
except as described in paragraph (d)(1)(iii) of
this subsection.
(iii) A loss may be allowed to the extent
that the contractor can demonstrate that
unusual circumstances exist such that even
with efficient management, operating the
services on a break-even basis would require
charging inordinately high prices, or prices
or rates higher than those charged by commercial establishments offering the same
services in the same geographical areas. The
following are examples of unusual circumstances:
(A) The contractor must provide food or
dormitory services at remote locations
where adequate commercial facilities are not
reasonably available.
(B) The contractor’s charged (but unproductive) labor costs would be excessive if the
services were not available.
(C) If cessation or reduction of food or dormitory operations will not otherwise yield
net cost savings.
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31.205–16
(2) Costs of food and dormitory services
shall include an allocable share of indirect
expenses pertaining to these activities.
*
*
*
*
*
(f) Contributions by the contractor to an
employee organization, including funds from
vending machine receipts or similar sources,
are allowable only to the extent that the
contractor demonstrates that an equivalent
amount of the costs incurred by the employee organization would be allowable if directly incurred by the contractor.
31.205–14
Entertainment costs.
Costs of amusement, diversions, social activities, and any directly associated costs such as tickets to shows or
sports events, meals, lodging, rentals,
transportation, and gratuities are unallowable. Costs made specifically unallowable under this cost principle are
not allowable under any other cost
principle. Costs of membership in social, dining, or country clubs or other
organizations having the same purposes are also unallowable, regardless
of whether the cost is reported as taxable income to the employees.
[60 FR 42663, Aug. 16, 1995]
31.205–15 Fines,
penalties,
mischarging costs.
and
(a) Costs of fines and penalties resulting from violations of, or failure of the
contractor to comply with, Federal,
State, local, or foreign laws and regulations, are unallowable except when incurred as a result of compliance with
specific terms and conditions of the
contract or written instructions from
the contracting officer.
(b) Costs incurred in connection with,
or related to, the mischarging of costs
on Government contracts are unallowable when the costs are caused by, or
result from, alteration or destruction
of records, or other false or improper
charging or recording of costs. Such
costs include those incurred to measure or otherwise determine the magnitude of the improper charging, and
costs incurred to remedy or correct the
mischarging, such as costs to rescreen
and reconstruct records.
[51 FR 12301, Apr. 9, 1986, as amended at 54
FR 13024, Mar. 29, 1989; 55 FR 52793, Dec. 21,
1990]
31.205–16 Gains and losses on disposition or impairment of depreciable
property or other capital assets.
(a) Gains and losses from the sale, retirement, or other disposition (but see
31.205–19) of depreciable property shall
be included in the year in which they
occur as credits or charges to the cost
grouping(s) in which the depreciation
or amortization applicable to those assets was included (but see paragraph
(d) of this subsection). However, no
gain or loss shall be recognized as a result of the transfer of assets in a business combination (see 31.205–52).
(b) Gains and losses on disposition of
tangible capital assets, including those
acquired under capital leases (see
31.205–11(m), shall be considered as adjustments of depreciation costs previously recognized. The gain or loss for
each asset disposed of is the difference
between the net amount realized, including insurance proceeds from involuntary
conversions,
and
its
undepreciated balance. The gain recognized for contract costing purposes
shall be limited to the difference between the acquisition cost (or for assets acquired under a capital lease, the
value at which the leased asset is capitalized)
of
the
asset
and
its
undepreciated balance (except see subdivisions (c)(2)(i) or (ii) below).
(c) Special considerations apply to an
involuntary conversion which occurs
when a contractor’s property is destroyed by events over which the owner
has no control, such as fire, windstorm,
flood, accident, theft, etc., and an insurance award is recovered. The following govern involuntary conversions:
(1) When there is a cash award and
the converted asset is not replaced,
gain or loss shall be recognized in the
period of disposition. The gain recognized for contract costing purposes
shall be limited to the difference between the acquisition cost of the asset
and its undepreciated balance.
(2) When the converted asset is replaced, the contractor shall either—
(i) Adjust the depreciable basis of the
new asset by the amount of the total
realized gain or loss; or
(ii) Recognize the gain or loss in the
period of disposition, in which case the
Government shall participate to the
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31.205–17
48 CFR Ch. 1 (10–1–03 Edition)
same extent as outlined in subparagraph (c)(1) above.
(d) Gains and losses on the disposition of depreciable property shall not
be recognized as a separate charge or
credit when—
(1) Gains and losses are processed
through the depreciation reserve account and reflected in the depreciation
allowable under 31.205–11; or
(2) The property is exchanged as part
of the purchase price of a similar item,
and the gain or loss is taken into consideration in the depreciation cost
basis of the new item.
(e) Gains and losses arising from
mass or extraordinary sales, retirements, or other disposition other than
through business combinations shall be
considered on a case-by-case basis.
(f) Gains and losses of any nature
arising from the sale or exchange of
capital assets other than depreciable
property shall be excluded in computing contract costs.
(g) With respect to long-lived tangible and identifiable intangible assets
held for use, no loss shall be allowed
for a write-down from carrying value
to fair value as a result of impairments
caused by events or changes in circumstances (e.g., environmental damage, idle facilities arising from a declining business base, etc.). If depreciable property or other capital assets
have been written down from carrying
value to fair value due to impairments,
gains or losses upon disposition shall
be the amounts that would have been
allowed had the assets not been written
down.
[48 FR 42301, Sept. 19, 1983, as amended at 55
FR 25530, June 21, 1990; 60 FR 64255, Dec. 14,
1995; 61 FR 67424, Dec. 20, 1996]
31.205–17 Idle facilities and idle capacity costs.
(a) Definitions. As used in this subsection—
Costs of idle facilities or idle capacity
means costs such as maintenance, repair, housing, rent, and other related
costs; e.g., property taxes, insurance,
and depreciation.
Facilities means plant or any portion
thereof (including land integral to the
operation), equipment, individually or
collectively, or any other tangible capital asset, wherever located, and
whether owned or leased by the contractor.
Idle capacity means the unused capacity of partially used facilities. It is the
difference between that which a facility could achieve under 100 percent operating time on a one-shift basis, less
operating interruptions resulting from
time lost for repairs, setups, unsatisfactory materials, and other normal
delays, and the extent to which the facility was actually used to meet demands during the accounting period. A
multiple-shift basis may be used in the
calculation instead of a one-shift basis
if it can be shown that this amount of
usage could normally be expected for
the type of facility involved.
Idle facilities means completely unused facilities that are excess to the
contractor’s current needs.
(b) The costs of idle facilities are unallowable unless the facilities—
(1) Are necessary to meet fluctuations in workload; or
(2) Were necessary when acquired and
are now idle because of changes in requirements, production economies, reorganization, termination, or other
causes which could not have been reasonably foreseen. (Costs of idle facilities are allowable for a reasonable period, ordinarily not to exceed 1 year,
depending upon the initiative taken to
use, lease, or dispose of the idle facilities (but see 31.205–42)).
(c) Costs of idle capacity are costs of
doing business and are a factor in the
normal fluctuations of usage or overhead rates from period to period. Such
costs are allowable provided the capacity is necessary or was originally reasonable and is not subject to reduction
or elimination by subletting, renting,
or sale, in accordance with sound business, economics, or security practices.
Widespread idle capacity throughout
an entire plant or among a group of assets having substantially the same
function may be idle facilities.
(d) Any costs to be paid directly by
the Government for idle facilities or
idle capacity reserved for defense mobilization production shall be the subject
of a separate agreement.
[48 FR 42301, Sept. 19, 1983, as amended at 66
FR 2131, Jan. 10, 2001; 67 FR 6120, Feb. 8, 2002]
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31.205–18
31.205–18 Independent research and
development and bid and proposal
costs.
(a) Definitions. As used in this subsection—
Applied research means that effort
which (1) normally follows basic research, but may not be severable from
the related basic research, (2) attempts
to determine and exploit the potential
of scientific discoveries or improvements in technology, materials, processes, methods, devices, or techniques,
and (3) attempts to advance the state
of the art. Applied research does not
include efforts whose principal aim is
design, development, or test of specific
items or services to be considered for
sale; these efforts are within the definition of the term development, defined in
this subsection.
Basic research, (See 2.101).
Bid and proposal (B&P) costs means
the costs incurred in preparing, submitting, and supporting bids and proposals (whether or not solicited) on potential Government or non-Government contracts. The term does not include the costs of effort sponsored by a
grant or cooperative agreement, or required in the performance of a contract.
Company means all divisions, subsidiaries, and affiliates of the contractor
under common control.
Development means the systematic
use, under whatever name, of scientific
and technical knowledge in the design,
development, test, or evaluation of a
potential new product or service (or of
an improvement in an existing product
or service) for the purpose of meeting
specific performance requirements or
objectives. Development includes the
functions of design engineering, prototyping, and engineering testing. Development excludes: (1) Subcontracted
technical effort which is for the sole
purpose of developing an additional
source for an existing product, or (2)
development effort for manufacturing
or production materials, systems, processes, methods, equipment, tools, and
techniques not intended for sale.
Independent research and development
(IR&D) means a contractor’s IR&D cost
that consists of projects falling within
the four following areas: (1) Basis research, (2) applied research, (3) develop-
ment, and (4) systems and other concept formulation studies. The term
does not include the costs of effort
sponsored by a grant or required in the
performance of a contract. IR&D effort
shall not include technical effort expended in developing and preparing
technical data specifically to support
submitting a bid or proposal.
Systems and other concept formulation
studies means analyses and study efforts either related to specific IR&D efforts or directed toward identifying desirable new systems, equipment or
components, or modifications and improvements to existing systems, equipment, or components.
(b) Composition and allocation of costs.
The requirements of 48 CFR 9904.420,
Accounting for independent research
and development costs and bid and proposal costs, are incorporated in their
entirety and shall apply as follows—
(1) Fully-CAS-covered contracts. Contracts that are fully-CAS-covered shall
be subject to all requirements of 48
CFR 9904.420.
(2) Modified CAS-covered and non-CAScovered contracts. Contracts that are
not CAS-covered or that contain terms
or conditions requiring modified CAS
coverage shall be subject to all requirements of 48 CFR 9904.420 except 48 CFR
9904.420–50(e)(2) and 48 CFR 9904.420–
50(f)(2), which are not then applicable.
However, non-CAS-covered or modified
CAS-covered contracts awarded at a
time the contractor has CAS-covered
contracts requiring compliance with 48
CFR 9904.420, shall be subject to all the
requirements of 48 CFR 9904.420. When
the requirements of 48 CFR 9904.420–
50(e)(2) and 48 CFR 9904.420–50(f)(2) are
not applicable, the following apply:
(i) IR&D and B&P costs shall be allocated to final cost objectives on the
same basis of allocation used for the
G&A expense grouping of the profit
center (see 31.001) in which the costs
are incurred. However, when IR&D and
B&P costs clearly benefit other profit
centers or benefit the entire company,
those costs shall be allocated through
the G&A of the other profit centers or
through the corporate G&A, as appropriate.
(ii) If allocations of IR&D or B&P
through the G&A base do not provide
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31.205–19
48 CFR Ch. 1 (10–1–03 Edition)
equitable cost allocation, the contracting officer may approve use of a
different base.
(c) Allowability. Except as provided in
paragraphs (d) and (e) of this subsection, or as provided in agency regulations, costs for IR&D and B&P are allowable as indirect expenses on contracts to the extent that those costs
are allocable and reasonable.
(d) Deferred IR&D costs. (1) IR&D
costs that were incurred in previous accounting periods are unallowable, except when a contractor has developed a
specific product at its own risk in anticipation of recovering the development costs in the sale price of the
product provided that—
(i) The total amount of IR&D costs
applicable to the product can be identified;
(ii) The proration of such costs to
sales of the product is reasonable;
(iii) The contractor had no Government business during the time that the
costs were incurred or did not allocate
IR&D costs to Government contracts
except to prorate the cost of developing
a specific product to the sales of that
product; and
(iv) No costs of current IR&D programs are allocated to Government
work except to prorate the costs of developing a specific product to the sales
of that product.
(2) When deferred costs are recognized, the contract (except firm-fixedprice and fixed-price with economic
price adjustment) will include a specific provision setting forth the
amount of deferred IR&D costs that are
allocable to the contract. The negotiation memorandum will state the circumstances pertaining to the case and
the reason for accepting the deferred
costs.
(e) Cooperative arrangements. (1) IR&D
costs may be incurred by contractors
working jointly with one or more nonFederal entities pursuant to a cooperative arrangement (for example, joint
ventures,
limited
partnerships,
teaming arrangements, and collaboration and consortium arrangements).
IR&D costs also may include costs contributed by contractors in performing
cooperative research and development
agreements, or similar arrangements,
entered into under—
(i) Section 12 of the StevensonWydler Technology Transfer Act of 1980
(15 U.S.C. 3710(a));
(ii) Sections 203(c) (5) and (6) of the
National Aeronautics and Space Act of
1958, as amended (42 U.S.C. 2473(c) (5)
and (6));
(iii) 10 U.S.C. 2371 for the Defense Advanced Research Projects Agency; or
(iv) Other equivalent authority.
(2) IR&D costs incurred by a contractor pursuant to these types of cooperative arrangements should be considered as allowable IR&D costs if the
work performed would have been allowed as contractor IR&D had there
been no cooperative arrangement.
(3) Costs incurred in preparing, submitting, and supporting offers on potential cooperative arrangements are
allowable to the extent they are allocable, reasonable, and not otherwise
unallowable.
[57 FR 44265, Sept. 24, 1992, as amended at 59
FR 11379, Mar. 10, 1994; 62 FR 12705, Mar. 17,
1997; 62 FR 51271, Sept. 30, 1997; 62 FR 64932,
Dec. 9, 1997; 66 FR 2131, Jan. 10, 2001]
31.205–19 Insurance and indemnification.
(a) Insurance by purchase or by selfinsuring includes coverage the contractor is required to carry, or to have
approved, under the terms of the contract and any other coverage the contractor maintains in connection with
the general conduct of its business.
Any contractor desiring to establish a
program of self-insurance applicable to
contracts that are not subject to 48
CFR 9904.416, Accounting for Insurance
Costs, shall comply with the self-insurance requirements of that standard as
well as with part 28 of this Regulation.
However, approval of a contractor’s insurance program in accordance with
part 28 does not constitute a determination as to the allowability of the
program’s cost. The amount of insurance costs which may be allowed is
subject to the cost limitations and exclusions in the following subparagraphs.
(1) Costs of insurance required or approved, and maintained by the contractor pursuant to the contract, are
allowable.
(2) Costs of insurance maintained by
the contractor in connection with the
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31.205–19
general conduct of its business are allowable, subject to the following limitations:
(i) Types and extent of coverage shall
follow sound business practice, and the
rates and premiums must be reasonable.
(ii) Costs allowed for business interruption or other similar insurance
must be limited to exclude coverage of
profit.
(iii) The cost of property insurance
premiums for insurance coverage in excess of the acquisition cost of the insured assets is allowable only when the
contractor has a formal written policy
assuring that in the event the insured
property is involuntarily converted,
the new asset shall be valued at the
book value of the replaced asset plus or
minus adjustments for differences between insurance proceeds and actual
replacement cost. If the contractor
does not have such a formal written
policy, the cost of premiums for insurance coverage in excess of the acquisition cost of the insured asset is unallowable.
(iv) Costs of insurance for the risk of
loss of or damage to Government property are allowable only to the extent
that the contractor is liable for such
loss or damage and such insurance does
not cover loss or damage that results
from willful misconduct or lack of good
faith on the part of any of the contractor’s directors or officers or other
equivalent representatives.
(v) Contractors operating under a
program of self-insurance must obtain
approval of the program when required
by 28.308(a).
(vi) Costs of insurance on the lives of
officers, partners, or proprietors are allowable only to the extent that the insurance represents additional compensation (see 31.205–6).
(3) Actual losses are unallowable unless expressly provided for in the contract, except—
(i) Losses incurred under the nominal
deductible provisions of purchased insurance, in keeping with sound business practice, are allowable for contracts not subject to 48 CFR 9904.416
and when the contractor did not establish a self-insurance program. Such
contracts are not subject to the self-insurance requirements of 48 CFR
9904.416. For contracts subject to 48
CFR 9904.416, and for those made subject to the self-insurance requirements
of that Standard as a result of the contractor’s having established a self-insurance program (see paragraph (a)
above), actual losses may be used as a
basis for charges under a self-insurance
program when the actual amount of
losses will not differ significantly from
the projected average losses for the accounting period (see 48 CFR 9904.416–
50(a)(2)(ii)). In those instances where an
actual loss has occurred and the
present value of the liability is determined under the provisions of 48 CFR
9904.416–50(a)(3)(ii), the allowable cost
shall be limited to an amount computed using as a discount rate the interest rate determined by the Secretary of the Treasury pursuant to 50
U.S.C. App. 1215(b)(2) in effect at the
time the loss is recognized. However,
the full amount of a lump-sum settlement to be paid within a year of the
date of settlement is allowable.
(ii) Minor losses, such as spoilage,
breakage, and disappearance of small
hand tools that occur in the ordinary
course of doing business and that are
not covered by insurance are allowable.
(4) The cost of insurance to protect
the contractor against the costs of correcting its own defects in materials or
workmanship is unallowable. However,
insurance costs to cover fortuitous or
casualty losses resulting from defects
in materials or workmanship are allowable as a normal business expense.
(5) Premiums for retroactive or
backdated insurance written to cover
occurred and known losses are unallowable.
(b) If purchased insurance is available, the charge for any self-insurance
coverage plus insurance administration
expenses shall not exceed the cost of
comparable purchased insurance plus
associated insurance administration
expenses.
(c) Insurance provided by captive insurers (insurers owned by or under the
control of the contractor) is considered
self-insurance, and charges for it must
comply with the self-insurance provisions of 48 CFR 9904.416. However, if the
captive insurer also sells insurance to
the general public in substantial quantities and it can be demonstrated that
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31.205–20
48 CFR Ch. 1 (10–1–03 Edition)
the charge to the contractor is based
on competitive market forces, the insurance will be considered purchased
insurance.
(d) The allowability of premiums for
insurance purchased from fronting insurance companies (insurance companies not related to the contractor but
who reinsure with a captive insurer of
the contractor) shall not exceed the
amount (plus reasonable fronting company charges for services rendered)
which the contractor would have been
allowed had it insured directly with
the captive insurer.
(e) Self-insurance charges for risks of
catastrophic losses are not allowable
(see 28.308(e)).
(f) The Government is obligated to
indemnify the contractor only to the
extent authorized by law, as expressly
provided for in the contract, except as
provided in paragraph (a)(3) above.
(g) Late premium payment charges
related to employee deferred compensation plan insurance incurred pursuant to section 4007 (29 U.S.C. 1307) or
section 4023 (29 U.S.C. 1323) of the Employee Retirement Income Security
Act of 1974 are unallowable.
[48 FR 42301, Sept. 19, 1983, as amended at 50
FR 23607, June 4, 1985; 51 FR 31426, Sept. 3,
1986; 57 FR 39591, Aug. 31, 1992]
31.205–20 Interest and other financial
costs.
Interest on borrowings (however represented), bond discounts, costs of financing and refinancing capital (net
worth plus long-term liabilities), legal
and professional fees paid in connection with preparing prospectuses, and
costs of preparing and issuing stock
rights are unallowable (but see 31.205–
28). However, interest assessed by State
or local taxing authorities under the
conditions specified in 31.205–41(a)(3) is
allowable.
[64 FR 51844, Sept. 24, 1999]
31.205–21
Labor relations costs.
Costs incurred in maintaining satisfactory relations between the contractor and its employees, including
costs of shop stewards, labor management committees, employee publica-
tions, and other related activities, are
allowable.
[48 FR 42301, Sept. 19, 1983, as amended at 65
FR 80265, Dec. 20, 2000; 66 FR 66990, Dec. 27,
2001]
31.205–22 Lobbying and political activity costs.
(a) Costs associated with the following activities are unallowable:
(1) Attempts to influence the outcomes of any Federal, State, or local
election, referendum, initiative, or
similar procedure, through in kind or
cash contributions, endorsements, publicity, or similar activities;
(2) Establishing, administering, contributing to, or paying the expenses of
a political party, campaign, political
action committee, or other organization established for the purpose of influencing the outcomes of elections;
(3) Any attempt to influence (i) the
introduction of Federal, state, or local
legislation, or (ii) the enactment or
modification of any pending Federal,
state, or local legislation through communication with any member or employee of the Congress or state legislature (including efforts to influence
state or local officials to engage in
similar lobbying activity), or with any
government official or employee in
connection with a decision to sign or
veto enrolled legislation;
(4) Any attempt to influence (i) the
introduction of Federal, state, or local
legislation, or (ii) the enactment or
modification of any pending Federal,
state, or local legislation by preparing,
distributing or using publicity or propaganda, or by urging members of the
general public or any segment thereof
to contribute to or participate in any
mass demonstration, march, rally, fund
raising drive, lobbying campaign or
letter writing or telephone campaign;
(5) Legislative liaison activities, including attendance at legislative sessions or committee hearings, gathering
information regarding legislation, and
analyzing the effect of legislation,
when such activities are carried on in
support of or in knowing preparation
for an effort to engage in unallowable
activities; or
(6) Costs incurred in attempting to
improperly influence (see 3.401), either
directly or indirectly, an employee or
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Federal Acquisition Regulation
31.205–25
officer of the Executive branch of the
Federal Government to give consideration to or act regarding a regulatory
or contract matter.
(b) The following activities are excepted from the coverage of (a) above:
(1) Providing a technical and factual
presentation of information on a topic
directly related to the performance of
a contract through hearing testimony,
statements or letters to the Congress
or a state legislature, or subdivision,
member, or cognizant staff member
thereof, in response to a documented
request (including a Congressional
Record notice requesting testimony or
statements for the record at a regularly scheduled hearing) made by the
recipient member, legislative body or
subdivision, or a cognizant staff member thereof; provided such information
is readily obtainable and can be readily
put in deliverable form; and further
provided that costs under this section
for transportation, lodging or meals
are unallowable unless incurred for the
purpose of offering testimony at a regularly scheduled Congressional hearing
pursuant to a written request for such
presentation made by the Chairman or
Ranking Minority Member of the Committee or Subcommittee conducting
such hearing.
(2) Any lobbying made unallowable
by paragraph (a)(3) of this subsection
to influence state or local legislation
in order to directly reduce contract
cost, or to avoid material impairment
of the contractor’s authority to perform the contract.
(3) Any activity specifically authorized by statute to be undertaken with
funds from the contract.
(c) When a contractor seeks reimbursement for indirect costs, total lobbying costs shall be separately identified in the indirect cost rate proposal,
and thereafter treated as other unallowable activity costs.
(d) Contractors shall maintain adequate records to demonstrate that the
certification of costs as being allowable or unallowable (see 42.703–2) pursuant to this subsection complies with
the requirements of this subsection.
(e) Existing procedures should be utilized to resolve in advance any significant questions or disagreements con-
cerning the interpretation or application of this subsection.
[49 FR 18278, Apr. 27, 1984, as amended at 51
FR 12301, Apr. 9, 1986; 52 FR 19804, May 27,
1987; 60 FR 42660, Aug. 16, 1995; 61 FR 31657,
June 20, 1996; 61 FR 67425, Dec. 20, 1996; 62 FR
237, Jan. 2, 1997]
31.205–23
Losses on other contracts.
An excess of costs over income under
any other contract (including the contractor’s contributed portion under
cost-sharing contracts) is unallowable.
31.205–24 Maintenance
costs.
and
(a) Costs necessary for the upkeep of
property (including Government property, unless otherwise provided for)
that neither add to the permanent
value of the property nor appreciably
prolong its intended life, but keep it in
an efficient operating condition, are to
be treated as follows (but see 31.205–11):
(1) Normal maintenance and repair
costs are allowable.
(2) Extraordinary maintenance and
repair costs are allowable, provided
those costs are allocated to the applicable periods for purposes of determining contract costs (but see 31.109).
(b) Expenditures for plant and equipment, including rehabilitation which
should be capitalized and subject to depreciation, according to generally accepted accounting principles as applied
under the contractor’s established policy or, when applicable, according to 48
CFR 9904.404, Capitalization of Tangible Assets, are allowable only on a
depreciation basis.
[48 FR 42301, Sept. 19, 1983, as amended at 57
FR 39591, Aug. 31, 1992]
31.205–25 Manufacturing and production engineering costs.
(a) The costs of manufacturing and
production engineering effort as described in (1) through (4) below are all
allowable:
(1) Developing and deploying new or
improved materials, systems, processes, methods, equipment, tools and
techniques that are or are expected to
be used in producing products or services;
(2) Developing and deploying pilot
production lines;
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31.205–26
48 CFR Ch. 1 (10–1–03 Edition)
(3) Improving current production
functions, such as plant layout, production scheduling and control, methods and job analysis, equipment capabilities and capacities, inspection techniques, and tooling analysis (including
tooling design and application improvements); and
(4) Material and manufacturing
producibility analysis for production
suitability and to optimize manufacturing processes, methods, and techniques.
(b) This cost principle does not cover:
(1) Basic and applied research effort
(as defined in 31.205–18(a)) related to
new technology, materials, systems,
processes, methods, equipment, tools
and techniques. Such technical effort is
governed by 31.205–18, Independent research and development costs and bid
and proposal costs; and
(2) Development effort for manufacturing or production materials, systems, processes, methods, equipment,
tools and techniques that are intended
for sale is also governed by 31.205–18.
(c) Where manufacturing or production development costs are capitalized
or required to be capitalized under the
contractor’s capitalization policies, allowable cost will be determined in accordance with the requirements of
31.205–11, Depreciation.
31.205–26 Material costs.
(a) Material costs include the costs of
such items as raw materials, parts,
sub-assemblies, components, and manufacturing supplies, whether purchased
or manufactured by the contractor,
and may include such collateral items
as
inbound
transportation
and
intransit insurance. In computing material costs, consideration shall be
given to reasonable overruns, spoilage,
or defective work (unless otherwise
provided in any contract provision relating to inspecting and correcting defective work). These costs are allowable, subject to the requirements of
paragraphs (b) through (e) below.
(b) Costs of material shall be adjusted for income and other credits, including available trade discounts, refunds, rebates, allowances, and cash
discounts, and credits for scrap, salvage, and material returned to vendors.
Such income and other credits shall ei-
ther be credited directly to the cost of
the material or be allocated as a credit
to indirect costs. When the contractor
can demonstrate that failure to take
cash discounts was reasonable, lost discounts need not be credited.
(c) Reasonable adjustments arising
from differences between periodic physical inventories and book inventories
may be included in arriving at costs;
provided, such adjustments relate to
the period of contract performance.
(d) When materials are purchased
specifically for and are identifiable
solely with performance under a contract, the actual purchase cost of those
materials should be charged to the contract. If material is issued from stores,
any generally recognized method of
pricing such material is acceptable if
that method is consistently applied
and the results are equitable. When estimates of future material costs are required, current market price or anticipated acquisition cost may be used, but
the basis of pricing must be disclosed.
(e) Allowance for all materials, supplies, and services that are sold or
transferred between any divisions, subdivisions, subsidiaries, or affiliates of
the contractor under a common control
shall be on the basis of cost incurred in
accordance with this subpart. However,
allowance may be at price when it is
the established practice of the transferring organization to price interorganizational transfers at other than
cost for commercial work of the contractor or any division, subsidiary, or
affiliate of the contractor under a common control, and when the item being
transferred qualifies for an exception
under 15.403–1(b) and the contracting
officer has not determined the price to
be unreasonable.
(f) When a commercial item under
paragraph (e) of this subsection is
transferred at a price based on a catalog or market price, the price should be
adjusted to reflect the quantities being
acquired and may be adjusted to reflect
the actual cost of any modifications
necessary because of contract requirements.
[48 FR 42301, Sept. 19, 1983, as amended at 60
FR 48218, Sept. 18, 1995; 62 FR 259, Jan. 2,
1997; 62 FR 51271, Sept. 30, 1997]
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31.205–27
31.205–31
(g) Other similar costs.
Organization costs.
(a) Except as provided in paragraph
(b) of this section, expenditures in connection with (1) planning or executing
the organization or reorganization of
the corporate structure of a business,
including mergers and acquisitions, (2)
resisting or planning to resist the reorganization of the corporate structure
of a business or a change in the controlling interest in the ownership of a
business, and (3) raising capital (net
worth plus long-term liabilities), are
unallowable. Such expenditures include
but are not limited to incorporation
fees and costs of attorneys, accountants, brokers, promoters and organizers, management consultants and
investment counselors, whether or not
employees of the contractor. Unallowable reorganization costs include the
cost of any change in the contractor’s
financial structure, excluding administrative costs of short-term borrowings
for working capital, resulting in alterations in the rights and interests of security holders, whether or not additional capital is raised.
(b) The cost of activities primarily
intended to provide compensation will
not be considered organizational costs
subject to this subsection, but will be
governed by 31.205–6. These activities
include acquiring stock for (1) executive bonuses, (2) employee savings
plans, and (3) employee stock ownership plans.
[48 FR 42301, Sept. 19, 1983, as amended at 53
FR 10830, Apr. 1, 1988]
31.205–28
Other business expenses.
The following types of recurring
costs are allowable
(a) Registry and transfer charges resulting from changes in ownership of
securities issued by the contractor.
(b) Cost of shareholders’ meetings.
(c) Normal proxy solicitations.
(d) Preparing and publishing reports
to shareholders.
(e) Preparing and submitting required reports and forms to taxing and
other regulatory bodies.
(f) Incidental costs of directors’ and
committee meetings.
[48 FR 42301, Sept. 19, 1983, as amended at 68
FR 28092, May 22, 2003]
31.205–29 Plant protection costs.
Costs of items such as (a) wages, uniforms, and equipment of personnel engaged in plant protection, (b) depreciation on plant protection capital assets,
and (c) necessary expenses to comply
with military requirements, are allowable.
31.205–30 Patent costs.
(a) The following patent costs are allowable to the extent that they are incurred as requirements of a Government contract (but see 31.205–33):
(1) Costs of preparing invention disclosures, reports, and other documents.
(2) Costs for searching the art to the
extent necessary to make the invention disclosures.
(3) Other costs in connection with the
filing and prosecution of a United
States patent application where title
or royalty-free license is to be conveyed to the Government.
(b) General counseling services relating to patent matters, such as advice
on patent laws, regulations, clauses,
and employee agreements, are allowable (but see 31.205–33).
(c) Other than those for general counseling services, patent costs not required by the contract are unallowable.
(See also 31.205–37.)
31.205–31 Plant reconversion costs.
Plant reconversion costs are those
incurred in restoring or rehabilitating
the contractor’s facilities to approximately the same condition existing immediately before the start of the Government contract, fair wear and tear
excepted. Reconversion costs are unallowable except for the cost of removing
Government property and the restoration or rehabilitation costs caused by
such removal. However, in special circumstances where equity so dictates,
additional costs may be allowed to the
extent agreed upon before costs are incurred. Care should be exercised to
avoid duplication through allowance as
contingencies, additional profit or fee,
or in other contracts.
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31.205–32
31.205–32
48 CFR Ch. 1 (10–1–03 Edition)
Precontract costs.
Precontract costs means costs incurred
before the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract
award when such incurrence is necessary to comply with the proposed
contract delivery schedule. These costs
are allowable to the extent that they
would have been allowable if incurred
after the date of the contract (see
31.109).
[48 FR 42301, Sept. 19, 1983, as amended at 66
FR 2131, Jan. 10, 2001]
31.205–33 Professional and consultant
service costs.
(a) Definition. Professional and consultant services, as used in this subsection, means those services rendered
by persons who are members of a particular profession or possess a special
skill and who are not officers or employees of the contractor. Examples include those services acquired by contractors or subcontractors in order to
enhance their legal, economic, financial, or technical positions. Professional and consultant services are generally acquired to obtain information,
advice, opinions, alternatives, conclusions, recommendations, training, or
direct assistance, such as studies, analyses, evaluations, liaison with Government officials, or other forms of representation.
(b) Costs of professional and consultant services are allowable subject to
this paragraph and paragraphs (c)
through (f) of this subsection when reasonable in relation to the services rendered and when not contingent upon
recovery of the costs from the Government (but see 31.205–30 and 31.205–47).
(c) Costs of professional and consultant services performed under any of
the following circumstances are unallowable:
(1) Services to improperly obtain,
distribute, or use information or data
protected by law or regulation (e.g.,
52.215–1(e), Restriction on Disclosure
and Use of Data).
(2) Services that are intended to improperly influence the contents of solicitations, the evaluation of proposals
or quotations, or the selection of
sources for contract award, whether
award is by the Government, or by a
prime contractor or subcontractor.
(3) Any other services obtained, performed, or otherwise resulting in violation of any statute or regulation prohibiting improper business practices or
conflicts of interest.
(4) Services performed which are not
consistent with the purpose and scope
of the services contracted for or otherwise agreed to.
(d) In determining the allowability of
costs (including retainer fees) in a particular case, no single factor or any
special combination of factors is necessarily determinative. However, the
contracting officer shall consider the
following factors, among others:
(1) The nature and scope of the service rendered in relation to the service
required.
(2) The necessity of contracting for
the service, considering the contractor’s capability in the particular area.
(3) The past pattern of acquiring such
services and their costs, particularly in
the years prior to the award of Government contracts.
(4) The impact of Government contracts on the contractor’s business.
(5) Whether the proportion of Government work to the contractor’s total
business is such as to influence the
contractor in favor of incurring the
cost, particularly when the services
rendered are not of a continuing nature
and have little relationship to work
under Government contracts.
(6) Whether the service can be performed more economically by employment rather than by contracting.
(7) The qualifications of the individual or concern rendering the service
and the customary fee charged, especially on non-Government contracts.
(8) Adequacy of the contractual
agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, termination provisions).
(e) Retainer fees, to be allowable,
must be supported by evidence that—
(1) The services covered by the retainer agreement are necessary and
customary;
(2) The level of past services justifies
the amount of the retainer fees (if no
services were rendered, fees are not
automatically unallowable);
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(3) The retainer fee is reasonable in
comparison with maintaining an inhouse capability to perform the covered services, when factors such as cost
and level of expertise are considered;
and
(4) The actual services performed are
documented in accordance with paragraph (f) of this subsection.
(f) Fees for services rendered are allowable only when supported by evidence of the nature and scope of the
service furnished (see also 31.205–38(c)).
However, retainer agreements generally are not based on specific statements of work. Evidence necessary to
determine that work performed is proper and does not violate law or regulation shall include—
(1) Details of all agreements (e.g.,
work requirements, rate of compensation, and nature and amount of other
expenses, if any) with the individuals
or organizations providing the services
and details of actual services performed;
(2) Invoices or billings submitted by
consultants, including sufficient detail
as to the time expended and nature of
the actual services provided; and
(3) Consultants’ work products and
related documents, such as trip reports
indicating persons visited and subjects
discussed, minutes of meetings, and
collateral memoranda and reports.
[55 FR 52793, Dec. 21, 1990; 57 FR 60610, Dec.
21, 1992; 62 FR 51271, Sept. 30, 1997, as amended at 66 FR 2131; 68 FR 43872, July 24, 2003]
31.205–34
Recruitment costs.
(a) Subject to paragraph (b) of this
subsection, the following costs are allowable:
(1) Costs of help-wanted advertising.
(2) Costs of operating an employment
office needed to secure and maintain
an adequate labor force.
(3) Costs of operating an aptitude and
educational testing program.
(4) Travel costs of employees engaged
in recuiting personnel.
(5) Travel costs of applicants for
interviews.
(6) Costs for employment agencies,
not in excess of standard commercial
rates.
(b) Help-wanted advertising costs are
unallowable if the advertising—
(1) Does not describe specific positions or classes of positions; or
(2) Includes material that is not relevant for recruitment purposes, such as
extensive illustrations or descriptions
of the company’s products or capabilities.
[48 FR 42301, Sept. 19, 1983, as amended at 64
FR 10547, Mar. 4, 1999]
31.205–35
Relocation costs.
(a) Relocation costs are costs incident to the permanent change of assigned work location (for a period of 12
months or more) of an existing employee or upon recruitment of a new
employee. The following types of relocation costs are allowable as noted,
subject to the limitations in paragraphs (b) and (f) of this subsection:
(1) Costs of travel of the employee
and members of the employee’s immediate family (see 31.205–46) and transportation of the household and personal effects to the new location.
(2) Costs of finding a new home, such
as advance trips by the employee or
the spouse, or both, to locate living
quarters, and temporary lodging during
the transition period for the employee
and members of the employee’s immediate family.
(3) Closing costs incident to the disposition of the actual residence owned
by the employee when notified of the
transfer (e.g., brokerage fees, legal fees,
appraisal fees, points, and finance
charges), except that these costs, when
added to the costs described in paragraph (a)(4) of this subsection, shall
not exceed 14 percent of the sales price
of the property sold.
(4) Continuing costs of ownership of
the vacant former actual residence
being sold, such as maintenance of
building and grounds (exclusive of fixing up expenses), utilities, taxes, property insurance, and mortgage interest,
after the settlement date or lease date
of a new permanent residence, except
that these costs, when added to the
costs described in paragraph (a)(3) of
this subsection, shall not exceed 14 percent of the sales price of the property
sold.
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(5) Other necessary and reasonable
expenses normally incident to relocation, such as disconnecting and connecting household appliances; automobile registration; driver’s license
and use taxes; cutting and fitting rugs,
draperies, and curtains; forfeited utility fees and deposits; and purchase of
insurance against damage to or loss of
personal property while in transit.
(6) Costs incident to acquiring a
home in the new work location, except
that—
(i) These costs are not allowable for
existing employees or newly recruited
employees who were not homeowners
before the relocation; and
(ii) The total costs shall not exceed 5
percent of the purchase price of the
new home.
(7) Mortgage interest differential
payments, except that these costs are
not allowable for existing or newly recruited employees who, before the relocation, were not homeowners and the
total payments are limited to an
amount determined as follows:
(i) The difference between the mortgage interest rates of the old and new
residences times the current balance of
the old mortgage times 3 years.
(ii) When mortgage differential payments are made on a lump-sum basis
and the employee leaves or is transferred again in less than 3 years, the
amount initially recognized shall be
proportionately adjusted to reflect
payments only for the actual time of
the relocation.
(8) Rental differential payments covering situations where relocated employees retain ownership of a vacated
home in the old location and rent at
the new location. The rented quarters
at the new location must be comparable to those vacated, and the allowable differential payments may not
exceed the actual rental costs for the
new home, less the fair market rent for
the vacated home times 3 years.
(9) Costs of canceling an unexpired
lease.
(10) Payments for increased employee
income or Federal Insurance Contributions Act (26 U.S.C. chapter 21) taxes
incident to allowable reimbursed relocation costs.
(11) Payments for spouse employment
assistance.
(b) The costs described in paragraph
(a) of this subsection must also meet
the following criteria to be considered
allowable:
(1) The move must be for the benefit
of the employer.
(2) Reimbursement must be in accordance with an established policy or
practice that is consistently followed
by the employer and is designed to motivate employees to relocate promptly
and economically.
(3) The costs must not be otherwise
unallowable under subpart 31.2.
(4) Amounts to be reimbursed shall
not exceed the employee’s actual expenses, except that for miscellaneous
costs of the type discussed in paragraph (a)(5) of this subsection, a flat
amount, not to exceed $5,000, may be
allowed in lieu of actual costs.
(c) The following types of costs are
unallowable:
(1) Loss on the sale of a home.
(2) Costs incident to acquiring a
home in the new location as follows:
(i) Real estate brokers’ fees and commissions.
(ii) Costs of litigation.
(iii) Real and personal property insurance against damage or loss of property.
(iv) Mortgage life insurance.
(v) Owner’s title policy insurance
when such insurance was not previously carried by the employee on the
old residence. (However, the cost of a
mortgage title policy is allowable.)
(vi) Property taxes and operating or
maintenance costs.
(3) Continuing mortgage principal
payments on a residence being sold.
(4) Costs incident to furnishing equity or nonequity loans to employees
or making arrangements with lenders
for employees to obtain lower-thanmarket rate mortgage loans.
(d) If relocation costs for an employee have been allowed either as an
allocable indirect or direct cost, and
the employee resigns within 12 months
for reasons within the employee’s control, the contractor shall refund or
credit the relocation costs to the Government.
(e) Subject to the requirements of
paragraphs (a) through (d) above, the
costs of family movements and of personnel movements of a special or mass
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nature are allowable. The cost, however, should be assigned on the basis of
work (contracts) or time period benefited.
(f) Relocation costs (both outgoing
and return) of employees who are hired
for performance on specific contracts
or long-term field projects are allowable if—
(1) The term of employment is 12
months or more;
(2) The employment agreement specifically limits the duration of employment to the time spent on the contract
or field project for which the employee
is hired;
(3) The employment agreement provides for return relocation to the employee’s permanent and principal home
immediately prior to the outgoing relocation, or other location of equal or
lesser cost; and
(4) The relocation costs are determined under the rules of paragraphs (a)
through (d) above. However, the costs
to return employees, who are released
from employment upon completion of
field assignments pursuant to their employment agreements, are not subject
to the refund or credit requirement of
paragraph (d).
[48 FR 42301, Sept. 19, 1983, as amended at 52
FR 9038, Mar. 20, 1987; 67 FR 43519, June 27,
2002]
31.205–36 Rental costs.
(a) This subsection is applicable to
the cost of renting or leasing real or
personal property acquired under ‘‘operating leases’’ as defined in Statement
of Financial Accounting Standards No.
13 (FAS–13), Accounting for Leases.
Compliance with 31.205–11(m) requires
that assets acquired by means of capital leases, as defined in FAS–13, shall
be treated as purchased assets; i.e., be
capitalized and the capitalized value of
such assets be distributed over their
useful lives as depreciation charges, or
over the lease term as amortization
charges, as appropriate (but see subparagraph (b)(4) below).
(b) The following costs are allowable:
(1) Rental costs under operating
leases, to the extent that the rates are
reasonable at the time of the lease decision, after consideration of (i) rental
costs of comparable property, if any;
(ii) market conditions in the area; (iii)
the type, life expectancy, condition,
and value of the property leased; (iv)
alternatives available; and (v) other
provisions of the agreement.
(2) Rental costs under a sale and
leaseback arrangement only up to the
amount the contractor would be allowed if the contractor retained title.
(3) Charges in the nature of rent for
property between any divisions, subsidiaries, or organization under common control, to the extent that they do
not exceed the normal costs of ownership, such as depreciation, taxes, insurance, facilities capital cost of money,
and maintenance (excluding interest or
other unallowable costs pursuant to
part 31), provided that no part of such
costs shall duplicate any other allowed
cost. Rental cost of personal property
leased from any division, subsidiary, or
affiliate of the contractor under common control, that has an established
practice of leasing the same or similar
property to unaffiliated lessees shall be
allowed in accordance with subparagraph (b)(1) above.
(4) Rental costs under leases entered
into before March 1, 1970 for the remaining term of the lease (excluding
options not exercised before March 1,
1970) to the extent they would have
been allowable under Defense Acquisition Regulation (Formerly ASPR) 15–
205.34 or Federal Procurement Regulations section 1–15.205–34 in effect January 1, 1969.
(c) The allowability of rental costs
under unexpired leases in connection
with terminations is treated in 31.205–
42(e).
[48 FR 42301, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986; 61 FR 69288, Dec. 31,
1996]
31.205–37 Royalties and other costs for
use of patents.
(a) Royalties on a patent or amortization of the cost of purchasing a patent or patent rights necessary for the
proper performance of the contract and
applicable to contract products or
processes are allowable unless—
(1) The Government has a license or
the right to a free use of the patent;
(2) The patent has been adjudicated
to be invalid, or has been administratively determined to be invalid;
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31.205–38
48 CFR Ch. 1 (10–1–03 Edition)
(3) The patent is considered to be unenforceable; or
(4) The patent is expired.
(b) Care should be exercised in determining reasonableness when the royalties may have been arrived at as a result of less-than-arm’s-length bargaining; e.g., royalties—
(1) Paid to persons, including corporations, affiliated with the contractor;
(2) Paid to unaffiliated parties, including corporations, under an agreement entered into in contemplation
that a Government contract would be
awarded; or
(3) Paid under an agreement entered
into after the contract award.
(c) In any case involving a patent formerly owned by the contractor, the
royalty amount allowed should not exceed the cost which would have been
allowed had the contractor retained
title.
(d) See 31.109 regarding advance
agreements.
31.205–38 Selling costs.
(a) ‘‘Selling’’ is a generic term encompassing all efforts to market the
contractor’s products or services, some
of which are covered specifically in
other subsections of 31.205. The costs of
any selling efforts other than those addressed in this cost principle are unallowable.
(b) Selling activity includes the following broad categories:
(1) Advertising. Advertising is defined
at 31.205-1(b), and advertising costs are
subject to the allowability provisions
of 31.205–1(d) and (f).
(2) Corporate image enhancement. Corporate image enhancement activities,
including broadly targeted sales efforts, other than advertising, are included within the definition of public
relations at 31.205–1(a), and the costs of
such efforts are subject to the allowability provisions at 31.205–1(e) and (f).
(3) Bid and proposal costs. Bid and proposal costs are defined at 31.205–18 and
are subject to the allowability provisions of that subsection.
(4) Market planning. Market planning
involves market research and analysis
and general management planning concerned with development of the contractor’s business. Long-range market
planning costs are subject to the allowability provisions of 31.205–12. Other
market planning costs are allowable.
(5) Direct selling. Direct selling efforts
are those acts or actions to induce particular customers to purchase particular products or services of the contractor. Direct selling is characterized
by person-to-person contact and includes such efforts as familiarizing a
potential customer with the contractor’s products or services, conditions of
sale, service capabilities, etc. It also
includes negotiation, liaison between
customer and contractor personnel,
technical and consulting efforts, individual demonstrations, and any other
efforts having as their purpose the application or adaptation of the contractor’s products or services for a particular customer’s use. The cost of direct selling efforts is allowable.
(c) Notwithstanding any other provision of this subsection, sellers’ or
agents’ compensation, fees, commissions, percentages, retainer or brokerage fees, whether or not contingent
upon the award of contracts, are allowable only when paid to bona fide employees or established commercial or
selling agencies maintained by the contractor for the purpose of securing
business.
[68 FR 43872, July 24, 2003]
31.205–39
Service and warranty costs.
Service and warranty costs include
those arising from fulfillment of any
contractual obligation of a contractor
to provide services such as installation,
training, correcting defects in the
products, replacing defective parts, and
making refunds in the case of inadequate performance. When not inconsistent with the terms of the contract,
service and warranty costs are allowable. However, care should be exercised
to avoid duplication of the allowance
as an element of both estimated product cost and risk.
[48 FR 42301, Sept. 19, 1983, as amended at 66
FR 2131, Jan. 10, 2001]
31.205–40 Special tooling and special
test equipment costs.
(a) The terms special tooling and special test equipment are defined in 45.101.
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(b) The cost of special tooling and
special test equipment used in performing one or more Government contracts is allowable and shall be allocated to the specific Government contract or contracts for which acquired,
except that the cost of (1) items acquired by the contractor before the effective date of the contract (or replacement of such items), whether or not altered or adapted for use in performing
the contract, and (2) items which the
contract schedule specifically excludes,
shall be allowable only as depreciation
or amortization.
(c) When items are disqualified as
special tooling or special test equipment because with relatively minor expense they can be made suitable for
general purpose use and have a value as
such commensurate with their value as
special tooling or special test equipment, the cost of adapting the items
for use under the contract and the cost
of returning them to their prior configuration are allowable.
31.205–41 Taxes.
(a) The following types of costs are
allowable:
(1) Federal, State, and local taxes
(see part 29), except as otherwise provided in paragraph (b) below that are
required to be and are paid or accrued
in accordance with generally accepted
accounting principles. Fines and penalties are not considered taxes.
(2) Taxes otherwise allowable under
subparagraph (a)(1) above, but upon
which a claim of illegality or erroneous
assessment exists; provided the contractor, before paying such taxes—
(i) Promptly requests instructions
from the contracting officer concerning such taxes; and
(ii) Takes all action directed by the
contracting officer arising out of subparagraph (2)(i) above or an independent decision of the Government as
to the existence of a claim of illegality
or erroneous assessment, to (A) determine the legality of the assessment or
(B) secure a refund of such taxes.
(3) Pursuant to subparagraph (a)(2)
above, the reasonable costs of any action taken by the contractor at the direction or with the concurrence of the
contracting officer. Interest or penalties incurred by the contractor for
non-payment of any tax at the direction of the contracting officer or by
reason of the failure of the contracting
officer to ensure timely direction after
a prompt request.
(4) The Environmental Tax found at
section 59A of the Internal Revenue
Code, also called the ‘‘Superfund Tax.’’
(b) The following types of costs are
not allowable:
(1) Federal income and excess profits
taxes.
(2) Taxes in connection with financing, refinancing, refunding operations,
or reorganizations (see 31.205–20 and
31.205–27).
(3) Taxes from which exemptions are
available to the contractor directly, or
available to the contractor based on an
exemption afforded the Government,
except when the contracting officer determines that the administrative burden incident to obtaining the exemption outweighs the corresponding benefits accruing to the Government. When
partial exemption from a tax is attributable to Government contract activity, taxes charged to such work in excess of that amount resulting from application of the preferential treatment
are unallowable. These provisions intend that tax preference attributable
to Government contract activity be realized by the Government. The term exemption means freedom from taxation
in whole or in part and includes a tax
abatement or reduction resulting from
mode of assessment, method of calculation, or otherwise.
(4) Special assessments on land that
represent capital improvements.
(5) Taxes (including excises) on real
or personal property, or on the value,
use, possession or sale thereof, which is
used solely in connection with work
other than on Government contracts
(see paragraph (c) below).
(6) Any excise tax in subtitle D, chapter 43 of the Internal Revenue Code of
1986, as amended. That chapter includes excise taxes imposed in connection with qualified pension plans, welfare plans, deferred compensation
plans, or other similar types of plans.
(7) Income tax accruals designed to
account for the tax effects of differences between taxable income and
pretax income as reflected by the
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48 CFR Ch. 1 (10–1–03 Edition)
books of account and financial statements.
(c) Taxes on property (see subparagraph (b)(5) above) used solely in connection with either non-Government or
Government work should be considered
directly applicable to the respective
category of work unless the amounts
involved are insignificant or comparable results would otherwise be obtained; e.g., taxes on contractor-owned
work-in-process which is used solely in
connection with non-Government work
should be allocated to such work; taxes
on contractor-owned work-in-process
inventory
(and
Government-owned
work-in-process inventory when taxed)
used solely in connection with Government work should be charged to such
work. The cost of taxes incurred on
property used in both Government and
non-Government work shall be apportioned to all such work based upon the
use of such property on the respective
final cost objectives.
(d) Any taxes, interest, or penalties
that were allowed as contract costs and
are refunded to the contractor shall be
credited or paid to the Government in
the manner it directs. If a contractor
or subcontractor obtains a foreign tax
credit that reduces its U.S. Federal income tax return because of the payment of any tax or duty allowed as
contract costs, and if those costs were
reimbursed by a foreign government,
the amount of the reduction shall be
paid to the Treasurer of the United
States at the time the Federal income
tax return is filed. However, any interest actually paid or credited to a contractor incident to a refund of tax, interest, or penalty shall be paid or credited to the Government only to the extent that such interest accrued over
the period during which the contractor
had been reimbursed by the Government for the taxes, interest, or penalties.
[48 FR 42301, Sept. 19, 1983, as amended at 55
FR 3884, Feb. 5, 1990; 55 FR 52794, Dec. 21,
1990; 61 FR 2641, Jan. 26, 1996]
31.205–42 Termination costs.
Contract terminations generally give
rise to the incurrence of costs or the
need for special treatment of costs that
would not have arisen had the contract
not been terminated. The following
cost principles peculiar to terminktion
situations are to be used in conjunction with the other cost principles in
subpart 31.2:
(a) Common items. The costs of items
reasonably usable on the contractor’s
other work shall not be allowable unless the contractor submits evidence
that the items could not be retained at
cost without sustaining a loss. The
contracting officer should consider the
contractor’s plans and orders for current and planned production when determining if items can reasonably be
used on other work of the contractor.
Contemporaneous purchases of common items by the contractor shall be
regarded as evidence that such items
are reasonably usable on the contractor’s other work. Any acceptance of
common items as allocable to the terminated portion of the contract should
be limited to the extent that the quantities of such items on hand, in transit,
and on order are in excess of the reasonable quantitative requirements of
other work.
(b) Costs continuing after termination.
Despite all reasonable efforts by the
contractor, costs which cannot be discontinued immediately after the effective date of termination are generally
allowable. However, any costs continuing after the effective date of the
termination due to the negligent or
willful failure of the contractor to discontinue the costs shall be unallowable.
(c) Initial costs. Initial costs, including starting load and preparatory
costs, are allowable as follows:
(1) Starting load costs not fully absorbed because of termination are nonrecurring labor, material, and related
overhead costs incurred in the early
part of production and result from factors such as—
(i) Excessive spoilage due to inexperienced labor;
(ii) Idle time and subnormal production due to testing and changing production methods;
(iii) Training; and
(iv) Lack of familiarity or experience
with the product, materials, or manufacturing processes.
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(2) Preparatory costs incurred in preparing to perform the terminated contract include such costs as those incurred for initial plant rearrangement
and alterations, management and personnel organization, and production
planning. They do not include special
machinery and equipment and starting
load costs.
(3) When initial costs are included in
the settlement proposal as a direct
charge, such costs shall not also be included in overhead. Initial costs attributable to only one contract shall not
be allocated to other contracts.
(4) If initial costs are claimed and
have not been segregated on the contractor’s books, they shall be segregated for settlement purposes from
cost reports and schedules reflecting
that high unit cost incurred during the
early stages of the contract.
(5) If the settlement proposal is on
the inventory basis, initial costs
should normally be allocated on the
basis of total end items called for by
the contract immediately before termination; however, if the contract includes end items of a diverse nature,
some other equitable basis may be
used, such as machine or labor hours.
(d) Loss of useful value. Loss of useful
value of special tooling, and special
machinery and equipment is generally
allowable, provided—
(1) The special tooling, or special machinery and equipment is not reasonably capable of use in the other work of
the contractor;
(2) The Government’s interest is protected by transfer of title or by other
means deemed appropriate by the contracting officer; and
(3) The loss of useful value for any
one terminated contract is limited to
that portion of the acquisition cost
which bears the same ratio to the total
acquisition cost as the terminated portion of the contract bears to the entire
terminated contract and other Government contracts for which the special
tooling, or special machinery and
equipment was acquired.
(e) Rental under unexpired leases.
Rental costs under unexpired leases,
less the residual value of such leases,
are generally allowable when shown to
have been reasonably necessary for the
performance of the terminated contract, if—
(1) The amount of rental claimed
does not exceed the reasonable use
value of the property leased for the period of the contract and such further
period as may be reasonable; and
(2) The contractor makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of
such lease.
(f) Alterations of leased property. The
cost of alterations and reasonable restorations required by the lease may be
allowed when the alterations were necessary for performing the contract.
(g) Settlement expenses. (1) Settlement
expenses, including the following, are
generally allowable:
(i) Accounting, legal, clerical, and
similar costs reasonably necessary
for—
(A) The preparation and presentation, including supporting data, of
settlement claims to the contracting
officer; and
(B) The termination and settlement
of subcontracts.
(ii) Reasonable costs for the storage,
transportation, protection, and disposition of property acquired or produced
for the contract.
(iii) Indirect costs related to salary
and wages incurred as settlement expenses in (i) and (ii); normally, such indirect costs shall be limited to payroll
taxes, fringe benefits, occupancy costs,
and immediate supervision costs.
(2) If settlement expenses are significant, a cost account or work order
shall be established to separately identify and accumulate them.
(h) Subcontractor claims. Subcontractor claims, including the allocable
portion of the claims common to the
contract and to other work of the contractor, are generally allowable. An appropriate share of the contractor’s indirect expense may be allocated to the
amount of settlements with subcontractors; provided, that the amount
allocated is reasonably proportionate
to the relative benefits received and is
otherwise consistent with 31.201–4 and
31.203(c). The indirect expense so allocated shall exclude the same and similar costs claimed directly or indirectly
as settlement expenses.
[48 FR 42301, Sept. 19, 1983]
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31.205–43 Trade, business, technical,
and professional activity costs.
The following types of costs are allowable:
(a) Memberships in trade, business,
technical, and professional organizations.
(b) Subscriptions to trade, business,
professional, or other technical periodicals.
(c) When the principal purpose of a
meeting, convention, conference, symposium, or seminar is the dissemination of trade, business, technical or
professional information or the stimulation of production or improved productivity:
(1) Costs of organizing, setting up,
and sponsoring the meetings, conventions, symposia, etc., including rental
of meeting facilities, transportation,
subsistence, and incidental costs;
(2) Costs of attendance by contractor
employees, including travel costs (see
31.205–46); and
(3) Costs of attendance by individuals
who are not employees of the contractor, provided;
(i) Such costs are not also reimbursed
to the individual by the employing
company or organization, and
(ii) The individual’s attendance is essential to achieve the purpose of the
conference, meeting, convention, symposium, etc.
[48 FR 42301, Sept. 19, 1983, as amended at 53
FR 27467, July 20, 1988; 60 FR 42660, Aug. 16,
1995]
31.205–44 Training
costs.
and
education
(a) Allowable costs. Training and education costs are allowable to the extent
indicated below.
(b) Vocational training. Costs of preparing and maintaining a noncollege
level program of instruction, including
but not limited to on-the-job, classroom, and apprenticeship training, designed to increase the vocational effectiveness of employees, are allowable.
These costs include (1) salaries or
wages of trainees (excluding overtime
compensation), (2) salaries of the director of training and staff when the
training program is conducted by the
contractor, (3) tuition and fees when
the training is in an institution not op-
erated by the contractor, and/or (4)
training materials and textbooks.
(c) Part-time college level education. Allowable costs of part-time college education at an undergraduate or postgraduate level, including that provided
at the contractor’s own facilities, are
limited to—
(1) Fees and tuition charged by the
educational institution, or, instead of
tuition, instructors’ salaries and the
related share of indirect cost of the
educational institution, to the extent
that the sum thereof is not in excess of
the tuition that would have been paid
to the participating educational institution;
(2) Salaries and related costs of instructors who are employees of the
contractor; and
(3) Training materials and textbooks;
and
(4) Straight-time compensation of
each employee for time spent attending classes during working hours not in
excess of 156 hours per year where circumstances do not permit the operation of classes or attendance at classes after regular working hours. In unusual cases, the period may be extended (see paragraph (h) below).
(d) Full-time education. Costs of tuition, fees, training materials and textbooks (but not subsistence, salary, or
any other emoluments) in connection
with full-time education, including
that provided at the contractor’s own
facilities, at a postgraduate but not undergraduate college level, are allowable
only when the course or degree pursued
is related to the field in which the employee is working or may reasonably be
expected to work and are limited to a
total period not to exceed 2 school
years or the length of the degree program, whichever is less, for each employee so trained.
(e) Specialized programs. Costs of attendance of up to 16 weeks per employee per year at specialized programs
specifically designed to enhance the effectiveness of managers or to prepare
employees for such positions are allowable. Such costs include enrollment
fees and related charges and employees’ salaries, subsistence, training materials, textbooks, and travel. Costs allowable under this paragraph do not include costs for courses that are part of
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a degree-oriented curriculum, which
are only allowable pursuant to paragraphs (c) and (d) of this subsection.
(f) Other expenses. Maintenance expense and normal depreciation or fair
rental on facilities owned or leased by
the contractor for training purposes
are allowable in accordance with
31.205–17, 31.205–24, and 31.205–36.
(g) Grants. Grants to educational or
training institutions, including the donation of facilities or other properties,
scholarships, and fellowships are considered contributions and are unallowable.
(h) Advance agreements. (1) Training
and education costs in excess of those
otherwise allowable under (c) and (d) of
this subsection, including subsistence,
salaries, or any other emoluments,
may be allowed to the extent set forth
in an advance agreement negotiated
under 31.109. To be considered for an
advance agreement, the contractor
must demonstrate that the costs are
consistently incurred under an established managerial, engineering, or scientific training and education program, and that the course or degree
pursued is related to the field in which
employees are now working or may
reasonably be expected to work. Before
entering into the advance agreement,
the contracting officer shall give consideration to such factors as—
(i) The length of employees’ service
with the contractor;
(ii) Employees’ past performance and
potential;
(iii) Whether employees are in formal
development programs; and
(iv) The total number of participating employees.
(2) Any advance agreement must include a provision requiring the contractor to refund to the Government
training and education costs for employees who resign within 12 months of
completion of such training or education for reasons within an employee’s control.
(i) Training or education costs for other
than bona—fide employees. Costs of tuition, fees, textbooks, and similar or related benefits provided for other than
bona—fide employees are unallowable,
except that the costs incurred for educating employee dependents (primary
and secondary level studies) when the
employee is working in a foreign country where public education is not available and where suitable private education is inordinately expensive may
be included in overseas differential.
(j) Employee dependent education
plans. Costs of college plans for employee dependents are unallowable.
[48 FR 42301, Sept. 19, 1983, as amended at 52
FR 9038, Mar. 20, 1987; 52 FR 27806, July 24,
1987; 52 FR 30077, Aug. 12, 1987]
31.205–45
[Reserved]
31.205–46
Travel costs.
(a) Costs for transportation, lodging,
meals, and incidental expenses. (1) Costs
incurred by contractor personnel on official company business are allowable,
subject to the limitations contained in
this subsection. Costs for transportation may be based on mileage rates,
actual costs incurred, or on a combination thereof, provided the method used
results in a reasonable charge. Costs
for lodging, meals, and incidental expenses may be based on per diem, actual expenses, or a combination thereof, provided the method used results in
a reasonable charge.
(2) Except as provided in paragraph
(a)(3) of this section, costs incurred for
lodging, meals, and incidental expenses
(as defined in the regulations cited in
(a)(2) (i) through (iii) of this paragraph)
shall be considered to be reasonable
and allowable only to the extent that
they do not exceed on a daily basis the
maximum per diem rates in effect at
the time of travel as set forth in the—
(i) Federal Travel Regulation, prescribed by the General Services Administration, for travel in the contiguous
United States, available on a subscription basis from the Superintendent of
Documents, U.S. Government Printing
Office, Washington, DC 20402, Stock No.
922–002–00000–2;
(ii) Joint Travel Regulations, Volume
2, DoD Civilian Personnel, Appendix A,
prescribed by the Department of Defense, for travel in Alaska, Hawaii, and
outlying areas of the United States,
available on a subscription basis from
the Superintendent of Documents, U.S.
Government Printing Office, Washington, DC 20402, Stock No. 908–010–
00000–1; or
611
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31.205–46
48 CFR Ch. 1 (10–1–03 Edition)
(iii) Standarized Regulations (Government Civilians, Foreign Areas), section 925, Maximum Travel Per Diem Allowances of Foreign Areas, prescribed by
the Department of State, for travel in
areas not covered in (a)(2) (i) and (ii) of
this paragraph, available on a subscription basis from the Superintendent of
Documents, U.S. Government Printing
Office, Washington, DC 20402, Stock No.
744–088–00000–0.
(3) In special or unusual situations,
actual costs in excess of the above-referenced maximum per diem rates are
allowable provided that such amounts
do not exceed the higher amounts authorized for Federal civilian employees
as permitted in the regulations referenced in (a)(2) (i), (ii), or (iii) or this
section. For such higher amounts to be
allowable, all of the following conditions must be met:
(i) One of the conditions warranting
approval of the actual expense method,
as set forth in the regulations referred
in (a)(2) (i), (ii), or (iii) of this section,
must exist.
(ii) A written justification for use of
the higher amounts must be approved
by an officer of the contractor’s organization or designee to ensure that the
authority is properly administered and
controlled to prevent abuse.
(iii) If it becomes necessary to exercise the authority to use the higher actual expense method repetitively or on
a continuing basis in a particular area,
the contractor must obtain advance approval from the contracting officer.
(iv) Documentation to support actual
costs incurred shall be in accordance
with the contractor’s established practices, subject to paragraph (a)(7) of this
subsection, and provided that a receipt
is required for each expenditure of
$75.00 or more. The approved justification required by paragraph (a)(3)(ii)
and, if applicable, paragraph (a)(3)(iii)
of this subsection must be retained.
(4) Subparagraphs (a)(2) and (a)(3) of
this subsection do not incorporate the
regulations
cited
in
subdivisions
(a)(2)(i), (ii), and (iii) of this subsection
in their entirety. Only the maximum
per diem rates, the definitions of lodging, meals, and incidental expenses,
and the regulatory coverage dealing
with special or unusual situations are
incorporated herein.
(5) An advance agreement (see 31.109)
with respect to compliance with paragraphs (a)(2) and (a)(3) of this section
may be useful and desirable.
(6) The maximum per diem rates referenced in subparagraph (a)(2) of this
subsection generally would not constitute a reasonable daily charge—
(i) When no lodging costs are incurred; and/or
(ii) On partial travel days (e.g., day
of departure and return).
Appropriate downward adjustments
from the maximum per diem rates
would normally be required under
these circumstances. While these adjustments need not be calculated in accordance with the Federal Travel Regulation or Joint Travel Regulations,
they must result in a reasonable
charge.
(7) Costs shall be allowable only if
the following information is documented:
(i) Date and place (city, town, or
other similar designation) of the expenses;
(ii) Purpose of the trip; and
(iii) Name of person on trip and that
person’s title or relationship to the
contractor.
(b) Travel costs incurred in the normal course of overall administration of
the business are allowable and shall be
treated as indirect costs.
(c) Travel costs directly attributable
to specific contract performance are allowable and may be charged to the contract under 31.202.
(d) Airfare costs in excess of the lowest customary standard, coach, or
equivalent airfare offered during normal business hours are unallowable except when such accommodations require circuitous routing, require travel
during unreasonable hours, excessively
prolong travel, result in increased cost
that would offset transportation savings, are not reasonably adequate for
the physical or medical needs of the
traveler, or are not reasonably available to meet mission requirements.
However, in order for airfare costs in
excess of the above standard airfare to
be allowable, the applicable condition(s) set forth in this paragraph must
be documented and justified.
(e)(1) Cost of travel by contractorowned, -leased, or -chartered aircraft, as
612
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Federal Acquisition Regulation
31.205–47
used in this subparagraph, includes the
cost of lease, charter, operation (including personnel), maintenance, depreciation, insurance, and other related costs.
(2) The costs of travel by contractorowned, -leased, or -chartered aircraft
are limited to the standard airfare described in paragraph (d) of this subsection for the flight destination unless
travel by such aircraft is specifically
required by contract specification,
term, or condition, or a higher amount
is approved by the contracting officer.
A higher amount may be agreed to
when one or more of the circumstances
for justifying higher than standard airfare listed in paragraph (d) of this subsection are applicable, or when an advance agreement under subparagraph
(e)(3) of this subsection has been executed. In all cases, travel by contractor-owned, -leased, or
-chartered aircraft must be fully documented and justified. For each contractor-owned, -leased, or -chartered
aircraft used for any business purpose
which is charged or allocated, directly
or indirectly, to a Government contract, the contractor must maintain
and make available manifest/logs for
all flights on such company aircraft.
As a minimum, the manifest/log shall
indicate—
(i) Date, time, and points of departure;
(ii) Destination, date, and time of arrival;
(iii) Name of each passenger and relationship to the contractor;
(iv) Authorization for trip; and
(v) Purpose of trip.
(3) Where an advance agreement is
proposed (see 31.109), consideration
may be given to the following:
(i) Whether scheduled commercial
airlines or other suitable, less costly,
travel facilities are available at reasonable times, with reasonable frequency, and serve the required destinations conveniently.
(ii) Whether increased flexibility in
scheduling results in time savings and
more effective use of personnel that
would outweigh additional travel costs.
(f) Costs of contractor-owned or
leased automobiles, as used in this
paragraph, include the costs of lease,
operation (including personnel), main-
tenance, depreciation, insurance, etc.
These costs are allowable, if reasonable, to the extent that the automobiles are used for company business.
That portion of the cost of companyfurnished automobiles that relates to
personal use by employees (including
transportation to and from work) is
compensation for personal services and
is unallowable as stated in 31.205–
6(m)(2).
[48 FR 42301, Sept. 19, 1983, as amended at 51
FR 12301, Apr. 9, 1986; 51 FR 27489, July 31,
1986; 51 FR 36972, Oct. 16, 1986; 56 FR 41739,
Aug. 22, 1991; 57 FR 20377, May 12, 1992; 61 FR
31657, June 20, 1996; 62 FR 40237, July 25, 1997;
62 FR 64933, Dec. 9, 1997; 68 FR 28083, May 22,
2003]
EFFECTIVE DATE NOTE: At 68 FR 56688, Oct.
1, 2003, § 31.205–46 was amended by removing
paragraphs (b) and (c), redesignating paragraphs (d), (e), and (f) as (b), (c), and (d), and
in the introductory text of newly designated
(c)(2) by removing ‘‘paragraph (d)’’ each time
it appears and adding ‘‘paragraph (b)’’ in its
place, and removing the words ‘‘subparagraph (e)(3)’’ and adding ‘‘paragraph (c)(3)’’
in its place, effective Oct. 31, 2003.
31.205–47 Costs related to legal and
other proceedings.
(a) Definitions. As used in this subpart—
Costs include, but are not limited to,
administrative and clerical expenses;
the costs of legal services, whether performed by in-house or private counsel;
the costs of the services of accountants, consultants, or others retained by
the contractor to assist it; costs of employees, officers, and directors; and any
similar costs incurred before, during,
and after commencement of a judicial
or administrative proceeding which
bears a direct relationship to the proceedings.
Fraud, as used in this subsection,
means—
(1) Acts of fraud or corruption or attempts to defraud the Government or
to corrupt its agents;
(2) Acts which constitute a cause for
debarment or suspension under 9.406–
2(a) and 9.407–2(a); and
(3) Acts which violate the False
Claims Act, 31 U.S.C., sections 3729–
3731, or the Anti-Kickback Act, 41
U.S.C., sections 51 and 54.
613
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31.205–47
48 CFR Ch. 1 (10–1–03 Edition)
Penalty, does not include restitution,
reimbursement, or compensatory damages.
Proceeding, includes an investigation.
(b) Costs incurred in connection with
any proceeding brought by a Federal,
State, local, or foreign government for
violation of, or a failure to comply
with, law or regulation by the contractor (including its agents or employees), or costs incurred in connection with any proceeding brought by a
third party in the name of the United
States under the False Claims Act, 31
U.S.C. 3730, are unallowable if the result is—
(1) In a criminal proceeding, a conviction;
(2) In a civil or administrative proceeding, either a finding of contractor
liability where the proceeding involves
an allegation of fraud or similar misconduct or imposition of a monetary
penalty where the proceeding does not
involve an allegation of fraud or similar misconduct;
(3) A final decision by an appropriate
official of an executive agency to:
(i) Debar or suspend the contractor;
(ii) Rescind or void a contract; or
(iii) Terminate a contract for default
by reason of a violation or failure to
comply with a law or regulation;
(4) Disposition of the matter by consent or compromise if the proceeding
could have led to any of the outcomes
listed in subparagraphs (b) (1) through
(3) of this subsection (but see paragraphs (c) and (d) of this subsection); or
(5) Not covered by subparagraphs (b)
(1) through (4) of this subsection, but
where the underlying alleged contractor misconduct was the same as
that which led to a different proceeding
whose costs are unallowable by reason
of subparagraphs (b) (1) through (4) of
this subsection.
(c)(1) To the extent they are not otherwise unallowable, costs incurred in
connection with any proceeding under
paragraph (b) of this subsection commenced by the United States that is resolved by consent or compromise pursuant to an agreement entered into between the contractor and the United
States, and which are unallowable solely because of paragraph (b) of this subsection, may be allowed to the extent
specifically provided in such agreement.
(2) In the event of a settlement of
any proceeding brought by a third
party under the False Claims Act in
which the United States did not intervene, reasonable costs incurred by the
contractor in connection with such a
proceeding, that are not otherwise unallowable by regulation or by separate
agreement with the United States, may
be allowed if the contracting officer, in
consultation with his or her legal advisor, determines that there was very little likelihood that the third party
would have been successful on the merits.
(d) To the extent that they are not
otherwise unallowable, costs incurred
in connection with any proceeding
under paragraph (b) of this subsection
commenced by a State, local, or foreign government may be allowable
when the contracting officer (or other
official specified in agency procedures)
determines, that the costs were incurred either:
(1) As a direct result of a specific
term or condition of a Federal contract; or
(2) As a result of compliance with
specific written direction of the cognizant contracting officer.
(e) Costs incurred in connection with
proceedings described in paragraph (b)
of this subsection, but which are not
made unallowable by that paragraph,
may be allowable to the extent that:
(1) The costs are reasonable in relation to the activities required to deal
with the proceeding and the underlying
cause of action;
(2) The costs are not otherwise recovered from the Federal Government or a
third party, either directly as a result
of the proceeding or otherwise; and
(3) The percentage of costs allowed
does not exceed the percentage determined to be appropriate considering
the complexity of procurement litigation, generally accepted principles governing the award of legal fees in civil
actions involving the United States as
a party, and such other factors as may
be appropriate. Such percentage shall
not exceed 80 percent. Agreements
reached under paragraph (c) of this
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31.205–49
subsection shall be subject to this limitation. If, however, an agreement described in paragraph (c)(1) of this subsection explicitly states the amount of
otherwise allowable incurred legal fees
and limits the allowable recovery to 80
percent or less of the stated legal fees,
no additional limitation need be applied. The amount of reimbursement
allowed for legal costs in connection
with any proceeding described in paragraph (c)(2) of this subsection shall be
determined by the cognizant contracting officer, but shall not exceed 80
percent of otherwise allowable legal
costs incurred.
(f) Costs not covered elsewhere in
this subsection are unallowable if incurred in connection with—
(1) Defense against Federal Government claims or appeals or the prosecution of claims or appeals against the
Federal Government (see 2.101).
(2) Organization, reorganization, (including mergers and acquisitions) or
resisting mergers and acquisitions (see
also 31.205–27).
(3) Defense of antitrust suits.
(4) Defense of suits brought by employees or ex-employees of the contractor under section 2 of the Major
Fraud Act of 1988 where the contractor
was found liable or settled.
(5) Costs of legal, accounting, and
consultant services and directly associated costs incurred in connection with
the defense or prosecution of lawsuits
or appeals between contractors arising
from either (i) an agreement or contract concerning a teaming arrangement, a joint venture, or similar arrangement of shared interest; or (ii)
dual sourcing, coproduction, or similar
programs, are unallowable, except
when (A) incurred as a result of compliance with specific terms and conditions
of the contract or written instructions
from the contracting officer, or (B)
when agreed to in writing by the contracting officer.
(6) Patent infringement litigation,
unless otherwise provided for in the
contract.
(7) Representation of, or assistance
to, individuals, groups, or legal entities
which the contractor is not legally
bound to provide, arising from an action where the participant was convicted of violation of a law or regula-
tion or was found liable in a civil or administrative proceeding.
(8) Protests of Federal Government
solicitations or contract awards, or the
defense against protests of such solicitations or contract awards, unless the
costs of defending against a protest are
incurred pursuant to a written request
from the cognizant contracting officer.
(g) Costs which may be unallowable
under 31.205–47, including directly associated costs, shall be segregated and
accounted for by the contractor separately. During the pendency of any proceeding covered by paragraph (b) and
subparagraphs (f)(4) and (f)(7) of this
subsection, the contracting officer
shall generally withhold payment of
such costs. However, if in the best interests of the Government, the contracting officer may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreement by the contractor to repay all unallowable costs,
plus interest, if the costs are subsequently determined to be unallowable.
[48 FR 42301, Sept. 19, 1983, as amended at 51
FR 12302, Apr. 9, 1986; 54 FR 13024, Mar. 29,
1989; 55 FR 52794, Dec. 21, 1990; 61 FR 41477,
Aug. 8, 1996; 63 FR 58600, Oct. 30, 1998; 65 FR
80265, Dec. 20, 2000; 66 FR 17754, 17756, Apr. 3,
2001; at 66 FR 2131, Jan. 10, 2001; 66 FR 17756,
Apr. 3, 2001; 66 FR 66986, 66990, Dec. 27, 2001;
67 FR 43514, June 27, 2002]
31.205–48 Research and development
costs.
Research and development, as used in
this subsection, means the type of
technical effort described in 31.205–18
but sponsored by a grant or required in
the performance of a contract. When
costs are incurred in excess of either
the price of a contract or amount of a
grant for research and development effort, the excess is unallowable under
any other Government contract.
[65 FR 46072, July 26, 2000, as amended at 68
FR 28092, May 22, 2003]
31.205–49 Goodwill.
Goodwill, an unidentifiable intangible asset, originates under the purchase method of accounting for a business combination when the price paid
by the acquiring company exceeds the
sum of the identifiable individual assets acquired less liabilities assumed,
615
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31.205–50
48 CFR Ch. 1 (10–1–03 Edition)
based upon their fair values. The excess
is commonly referred to as goodwill.
Goodwill may arise from the acquisition of a company as a whole or a portion thereof. Any costs for amortization, expensing, write-off, or writedown of goodwill (however represented)
are unallowable.
[49 FR 26743, June 29, 1984]
31.205–50
[Reserved]
31.205–51
Costs of alcoholic beverages.
Costs of alcoholic beverages are unallowable.
[51 FR 12302, Apr. 9, 1986]
31.205–52 Asset valuations resulting
from business combinations.
(a) For tangible capital assets, when
the purchase method of accounting for
a business combination is used, whether or not the contract or subcontract is
subject to CAS, the allowable depreciation and cost of money shall be based
on the capitalized asset values measured and assigned in accordance with
48 CFR 9904.404–50(d), if allocable, reasonable, and not otherwise unallowable.
(b) For intangible capital assets,
when the purchase method of accounting for a business combination is used,
allowable amortization and cost of
money shall be limited to the total of
the amounts that would have been allowed had the combination not taken
place.
[63 FR 9068, Feb. 23, 1998]
Subpart 31.3—Contracts With
Educational Institutions
31.301
Purpose.
This subpart provides the principles
for determining the cost of research
and development, training, and other
work performed by educational institutions under contracts with the Government.
31.302
General.
Office of Management and Budget
(OMB) Circular No. A–21, Cost Principles for Educational Institutions, revised, provides principles for determining the costs applicable to research
and development, training, and other
work performed by educational institutions under contracts with the Government.
31.303
Requirements.
(a) Contracts that refer to this subpart 31.3 for determining allowable
costs under contracts with educational
institutions shall be deemed to refer
to, and shall have the allowability of
costs determined by the contracting officer in accordance with, the revision
of OMB Circular A–21 in effect on the
date of the contract.
(b) Agencies are not expected to
place additional restrictions on individual items of cost.
Subparts 31.4–31.5 [Reserved]
Subpart
31.6—Contracts
With
State, Local, and Federally
Recognized Indian Tribal Governments
31.601
Purpose.
This subpart provides the principles
for determining allowable cost of contracts and subcontracts with State,
local, and federally recognized Indian
tribal governments.
31.602
General.
Office of Management and Budget
(OMB) Circular No. A–87, Cost Principles for State and Local Governments, Revised, sets forth the principles for determining the allowable
costs of contracts and subcontracts
with State, local, and federally recognized Indian tribal governments. These
principles are for cost determination
and are not intended to identify the
circumstances or dictate the extent of
Federal and State or local participation in financing a particular contract.
31.603
Requirements.
(a) Contracts that refer to this subpart 31.6 for determining allowable
costs under contracts with State, local
and Indian tribal governments shall be
deemed to refer to, and shall have the
allowability of costs determined by the
contracting officer in accordance with,
the revision of OMB Circular A–87
616
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Federal Acquisition Regulation
31.701
which is in effect on the date of the
contract.
(b) Agencies are not expected to
place additional restrictions on individual items of cost. However, under 10
U.S.C. 2324(e) and 41 U.S.C. 256(e), the
following costs are unallowable:
(1) Costs of entertainment, including
amusement, diversion, and social activities, and any costs directly associated with such costs (such as tickets to
shows or sports events, meals, lodging,
rentals, transportation, and gratuities).
(2) Costs incurred to influence (directly or indirectly) legislative action
on any matter pending before Congress,
a State legislature, or a legislative
body of a political subdivision of a
State.
(3) Costs incurred in defense of any
civil or criminal fraud proceeding or
similar proceeding (including filing of
any false certification) brought by the
United States where the contractor is
found liable or has pleaded nolo
contendere to a charge of fraud or similar proceeding (including filing of a
false certification).
(4) Payments of fines and penalties
resulting from violations of, or failure
to comply with, Federal, state, local,
or foreign laws and regulations, except
when incurred as a result of compliance with specific terms and conditions
of the contract or specific written instructions from the contracting officer
authorizing in advance such payments
in accordance with applicable regulations in the FAR or an executive agency supplement to the FAR.
(5) Costs of any membership in any
social, dining, or country club or organization.
(6) Costs of alcoholic beverages.
(7) Contributions or donations, regardless of the recipient.
(8) Costs of advertising designed to
promote the contractor or its products.
(9) Costs of promotional items and
memorabilia, including models, gifts,
and souvenirs.
(10) Costs for travel by commercial
aircraft which exceed the amount of
the standard commercial fare.
(11) Costs incurred in making any
payment (commonly known as a
‘‘golden parachute payment’’) which
is—
(i) In an amount in excess of the normal severance pay paid by the contractor to an employee upon termination of employment; and
(ii) Is paid to the employee contingent upon, and following, a change in
management control over, or ownership of, the contractor or a substantial
portion of the contractor’s assets.
(12) Costs of commercial insurance
that protects against the costs of the
contractor for correction of the contractor’s own defects in materials or
workmanship.
(13) Costs of severance pay paid by
the contractor to foreign nationals employed by the contractor under a service contract performed outside the
United States, to the extent that the
amount of the severance pay paid in
any case exceeds the amount paid in
the industry involved under the customary or prevailing practice for firms
in that industry providing similar services in the United States, as determined by regulations in the FAR or in
an executive agency supplement to the
FAR.
(14) Costs of severance pay paid by
the contractor to a foreign national
employed by the contractor under a
service contract performed in a foreign
country if the termination of the employment of the foreign national is the
result of the closing of, or curtailment
of activities at, a United States facility
in that country at the request of the
government of that country.
(15) Costs incurred by a contractor in
connection with any criminal, civil, or
administrative proceedings commenced
by the United States or a State, to the
extent provided in 10 U.S.C. 2324(k) or
41 U.S.C. 256(k).
[48 FR 42301, Sept. 19, 1983, as amended at
42660, Aug. 16, 1995]
Subpart 31.7—Contracts With
Nonprofit Organizations
31.701
Purpose.
This subpart provides the principles
for determining the cost applicable to
work performed by nonprofit organizations under contracts with the Government. A nonprofit organization, for
purpose of identification, is defined as
617
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31.702
48 CFR Ch. 1 (10–1–03 Edition)
a business entity organized and operated exclusively for charitable, scientific, or educational purposes, of
which no part of the net earnings inure
to the benefit of any private shareholder or individual, of which no substantial part of the activities is carrying on propaganda or otherwise attempting to influence legislation or
participating in any political campaign
on behalf of any candidate for public
office, and which are exempt from federal income taxation under section 501
of the Internal Revenue Code.
31.702 General.
Office of Management and Budget
(OMB) Circular No. A–122, Cost Principles for Nonprofit Organizations, sets
forth principles for determining the
costs applicable to work performed by
nonprofit organizations under contracts (also applies to grants and other
agreements) with the Government.
31.703 Requirements.
(a) Contracts which refer to this subpart 31.7 for determining allowable
costs shall be deemed to refer to, and
shall have the allowability of costs determined by the contracting officer in
accordance with, the revision of OMB
Circular A–122 in effect on the date of
the contract.
(b) Agencies are not expected to
place additional restrictions on individual items of cost. However, under 10
U.S.C. 2324(e) and 41 U.S.C. 256(e), the
costs cited in 31.603(b) are unallowable.
[48 FR 42301, Sept. 19, 1983, as amended at 60
FR 42661, Aug. 16, 1995]
PART 32—CONTRACT FINANCING
Sec.
32.000 Scope of part.
32.001 Definitions.
32.002 Applicability of subparts.
32.003 Simplified acquisition procedures financing.
32.004 Contract performance in foreign
countries.
32.005 Consideration for contract financing.
32.006 Reduction or suspension of contract
payments upon finding of fraud.
32.006–1 General.
32.006–2 Definition.
32.006–3 Responsibilities.
32.006–4 Procedures.
32.006–5 Reporting.
32.007
32.008
Contract financing payments.
Notification of overpayment.
Subpart 32.1—Non-Commercial Item
Purchase Financing
32.100 Scope of subpart.
32.101 Authority.
32.102 Description of contract financing
methods.
32.103 Progress payments under construction contracts.
32.104 Providing contract financing.
32.105 Uses of contract financing.
32.106 Order of preference.
32.107 Need for contract financing not a deterrent.
32.108 Financial consultation.
32.109 Termination financing.
32.110 Payment of subcontractors under
cost-reimbursement prime contracts.
32.111 Contract clauses for noncommercial
purchases.
32.112 Nonpayment of subcontractors under
contracts for noncommercial items.
32.112–1 Subcontractor assertions of nonpayment.
32.112–2 Subcontractor requests for information.
32.113 Customary contract financing.
32.114 Unusual contract financing.
Subpart 32.2—Commercial Item Purchase
Financing
32.200 Scope of subpart.
32.201 Statutory authority.
32.202 General.
32.202–1 Policy.
32.202–2 Types of payments for commercial
item purchases.
32.202–3 Conducting market research about
financing terms.
32.202–4 Security for Government financing.
32.203 Determining
contract
financing
terms.
32.204 Procedures for contracting officerspecified commercial contract financing.
32.205 Procedures for offeror-proposed commercial contract financing.
32.206 Solicitation provisions and contract
clauses.
32.207 Administration and payment of commercial financing payments.
Subpart 32.3—Loan Guarantees for
Defense Production
32.300 Scope of subpart.
32.301 Definitions.
32.302 Authority.
32.303 General.
32.304 Procedures.
32.304–1 Application for guarantee.
32.304–2 Certificate of eligibility.
32.304–3 Asset formula.
32.304–4 Guarantee amount and maturity.
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Federal Acquisition Regulation
Pt. 32
32.304–5 Assignment of claims under contracts.
32.304–6 Other collateral security.
32.304–7 Contract surety bonds and loan
guarantees.
32.304–8 Other borrowing.
32.305 Loan guarantees for terminated contracts.
32.306 Loan guarantees for subcontracts.
Subpart 32.4—Advance Payments for NonCommercial Items
32.400 Scope of subpart.
32.401 Statutory authority.
32.402 General.
32.403 Applicability.
32.404 Exclusions.
32.405 Applying Pub. L. 85–804 to advance
payments under sealed bid contracts.
32.406 Letters of credit.
32.407 Interest.
32.408 Application for advance payments.
32.409 Contracting officer action.
32.409–1 Recommendation for approval.
32.409–2 Recommendation for disapproval.
32.409–3 Security, supervision, and covenants.
32.410 Findings, determination, and authorization.
32.411 Agreement for special account at a financial insitution.
32.412 Contract clause.
Subpart 32.5—Progress Payments Based on
Costs
32.500 Scope of subpart.
32.501 General.
32.501–1 Customary progress payment rates.
32.501–2 Unusual progress payments.
32.501–3 Contract price.
32.501–4 [Reserved]
32.501–5 Other protective terms.
32.502 Preaward matters.
32.502–1 Use of customary progress payments.
32.502–2 Contract finance office clearance.
32.502–3 Solicitation provisions.
32.502–4 Contract clauses.
32.503 Postaward matters.
32.503–1 Contractor requests.
32.503–2 Supervision of progress payments.
32.503–3 Initiation of progress payments and
review of accounting system.
32.503–4 Approval of progress payment requests.
32.503–5 Administration of progress payments.
32.503–6 Suspension or reduction of payments.
32.503–7 [Reserved]
32.503–8 Liquidation rates—ordinary method.
32.503–9 Liquidation rates—alternate method.
32.503–10 Establishing alternate liquidation
rates.
32.503–11 Adjustments for price reduction.
32.503–12 Maximum unliquidated amount.
32.503–13 [Reserved]
32.503–14 Protection of Government title.
32.503–15 Application of Government title
terms.
32.503–16 Risk of loss.
32.504 Subcontracts under prime contracts
providing progress payments.
Subpart 32.6—Contract Debts
32.600 Scope of subpart.
32.601 Definition.
32.602 General.
32.603 Applicability.
32.604 Exclusions.
32.605 Responsibilities
and
cooperation
among Government officials.
32.606 Debt determination and collection.
32.607 Tax credit.
32.608 Negotiation of contract debts.
32.609 Memorandum of pricing agreement
with refund.
32.610 Demand for payment of contract
debt.
32.611 Routine setoff.
32.612 Withholding and setoff.
32.613 Deferment of collection.
32.614 Interest.
32.614–1 Interest charges.
32.614–2 Interest credits.
32.615 Delays in receipt of notices or demands.
32.616 Compromise actions.
32.617 Contract clause.
Subpart 32.7—Contract Funding
32.700 Scope of subpart.
32.701 [Reserved]
32.702 Policy.
32.703 Contract funding requirements.
32.703–1 General.
32.703–2 Contracts conditioned upon availability of funds.
32.703–3 Contracts crossing fiscal years.
32.704 Limitation of cost or funds.
32.705 Contract clauses.
32.705–1 Clauses for contracting in advance
of funds.
32.705–2 Clauses for limitation of cost or
funds.
Subpart 32.8—Assignment of Claims
32.800 Scope of subpart.
32.801 Definitions.
32.802 Conditions.
32.803 Policies.
32.804 Extent of assignee’s protection.
32.805 Procedure.
32.806 Contract clauses.
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32.000
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 32.9—Prompt Payment
32.900 Scope of subpart.
32.901 Applicability.
32.902 Definitions.
32.903 Responsibilities.
32.904 Determining payment due dates.
32.905 Payment documentation and process.
32.906 Making payments.
32.907 Interest penalties.
32.908 Contract clauses.
32.909 Contractor inquiries.
Subpart 32.10—Performance-Based
Payments
32.1000 Scope of subpart.
32.1001 Policy.
32.1002 Bases for performance-based payments.
32.1003 Criteria for use.
32.1004 Procedures.
32.1005 Solicitation provision and contract
clause.
32.1006 [Reserved]
32.1007 Administration and payment of performance-based payments.
32.1008 Suspension or reduction of performance-based payments.
32.1009 Title.
32.1010 Risk of loss.
Subpart 32.11—Electronic Funds Transfer
32.1100 Scope of subpart.
32.1101 Statutory requirements.
32.1102 Definitions.
32.1103 Applicability.
32.1104 Protection of EFT information.
32.1105 Assignment of claims.
32.1106 EFT mechanisms.
32.1107 Payment information.
32.1108 Payment by Governmentwide commercial purchase card.
32.1109 EFT information submitted by
offerors.
32.1110 Solicitation provision and contract
clauses.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct.
1, 2003, the authority citation for Part 32 was
revised, effective Oct. 31, 2003. For the convenience of the user, the revised text is set
forth below:
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42328, Sept. 19, 1983, unless
otherwise noted.
32.000 Scope of part.
This part prescribes policies and procedures for contract financing and
other payment matters. This part addresses—
(a) Payment methods, including partial payments and progress payments
based on percentage or stage of completion;
(b) Loan guarantees, advance payments, and progress payments based on
costs;
(c) Administration of debts to the
Government arising out of contracts;
(d) Contract funding, including the
use of contract clauses limiting costs
or funds;
(e) Assignment of claims to aid in
private financing;
(f) Selected payment clauses;
(g) Financing of purchases of commercial items;
(h) Performance-based payments; and
(i) Electronic funds transfer payments.
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 49710, Sept. 26, 1995; 61 FR 45772, Aug. 29,
1996; 67 FR 13054, Mar. 20, 2002]
32.001 Definitions.
As used in this part—
Commercial interim payment means
any payment that is not a commercial
advance payment or a delivery payment. These payments are contract financing payments for prompt payment
purposes (i.e., not subject to the interest penalty provisions of the Prompt
Payment Act in accordance with subpart 32.9). A commercial interim payment is given to the contractor after
some work has been done, whereas a
commercial advance payment is given
to the contractor when no work has
been done.
Contract action means an action resulting in a contract, as defined in subpart 2.1, including actions for additional supplies or services outside the
existing contract scope, but not including actions that are within the scope
and under the terms of the existing
contract, such as contract modifications issued pursuant to the Changes
clause, or funding and other administrative changes.
Contract financing payment means an
authorized Government disbursement
of monies to a contractor prior to acceptance of supplies or services by the
Government.
(1) Contract financing payments include—
(i) Advance payments;
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Federal Acquisition Regulation
32.002
(ii) Performance-based payments;
(iii) Commercial advance and interim
payments;
(iv) Progress payments based on cost
under the clause at 52.232–16, Progress
Payments;
(v) Progress payments based on a percentage or stage of completion (see
32.102(e)), except those made under the
clause at 52.232–5, Payments Under
Fixed-Price Construction Contracts, or
the clause at 52.232–10, Payments Under
Fixed-Price Architect-Engineer Contracts; and
(vi) Interim payments under a cost
reimbursement contract, except for a
cost reimbursement contract for services when Alternate I of the clause at
52.232–25, Prompt Payment, is used.
(2) Contract financing payments do
not include—
(i) Invoice payments;
(ii) Payments for partial deliveries;
or
(iii) Lease and rental payments.
Customary contract financing means
that financing deemed by an agency to
be available for routine use by contracting officers. Most customary contract financing arrangements should be
usable by contracting officers without
specific reviews or approvals by higher
management.
Delivery payment means a payment
for accepted supplies or services, including payments for accepted partial
deliveries. Commercial financing payments are liquidated by deduction from
these payments. Delivery payments are
invoice payments for prompt payment
purposes.
Designated billing office means the office or person (governmental or nongovernmental) designated in the contract where the contractor first submits invoices and contract financing
requests. The contract might designate
different offices to receive invoices and
contract financing requests. The designated billing office might be—
(1) The Government disbursing office;
(2) The contract administration office;
(3) The office accepting the supplies
delivered or services performed by the
contractor;
(4) The contract audit office; or
(5) A nongovernmental agent.
Designated payment office means the
office designated in the contract to
make invoice payments or contract financing payments. Normally, this will
be the Government disbursing office.
Due date means the date on which
payment should be made.
Invoice payment means a Government
disbursement of monies to a contractor
under a contract or other authorization for supplies or services accepted
by the Government.
(1) Invoice payments include—
(i) Payments for partial deliveries
that have been accepted by the Government;
(ii) Final cost or fee payments where
amounts owed have been settled between the Government and the contractor;
(iii) For purposes of subpart 32.9 only,
all payments made under the clause at
52.232–5, Payments Under Fixed-Price
Construction Contracts, and the clause
at 52.232–10, Payments Under FixedPrice Architect-Engineer Contracts;
and
(iv) Interim payments under a costreimbursement contract for services
when Alternate I of the clause at
52.232–25, Prompt Payment, is used.
(2) Invoice payments do not include
contract financing payments.
Unusual contract financing means any
financing not deemed customary contract financing by the agency. Unusual
contract financing is financing that is
legal and proper under applicable laws,
but that the agency has not authorized
contracting officers to use without specific reviews or approvals by higher
management.
[52 FR 30077, Aug. 12, 1987, as amended at 60
FR 49710, Sept. 26, 1995; 66 FR 2131, Jan. 10,
2001; 66 FR 65354, Dec. 18, 2001; 67 FR 13054,
Mar. 20, 2002]
32.002 Applicability of subparts.
(a) The following sections and subparts of this part are applicable to all
purchases subject to part 32:
(1) Sections 32.000 through 32.005.
(2) Subpart 32.3, Loan Guarantees for
Defense Production.
(3) Subpart 32.6, Contract Debts.
(4) Subpart 32.7, Contract Funding.
(5) Subpart 32.8, Assignment of
Claims.
(6) Subpart 32.9, Prompt Payment.
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32.003
48 CFR Ch. 1 (10–1–03 Edition)
(7) Subpart 32.11, Electronic Funds
Transfer.
(b) Subpart 32.2, Commercial Item
Purchase Financing, is applicable only
to purchases of commercial items
under authority of part 12.
(c) The following subparts of this
part are applicable to all purchases
made under any authority other than
part 12:
(1) Subpart 32.1, Non-Commercial
Item Purchase Financing.
(2) Subpart 32.4, Advance Payments
For Non-Commercial Items.
(3) Subpart 32.5, Progress Payments
Based on Costs.
(4) Subpart 32.10, Performance-Based
Payments.
[60 FR 49710, Sept. 26, 1995, as amended at 61
FR 45772, Aug. 29, 1996]
32.003 Simplified acquisition procedures financing.
Unless agency regulations otherwise
permit, contract financing shall not be
provided for purchases made under the
authority of part 13.
[60 FR 49710, Sept. 26, 1995]
32.004 Contract performance in foreign countries.
The enforceability of contract provisions for security of Government financing in a foreign jurisdiction is dependent upon local law and procedure.
Prior to providing contract financing
where foreign jurisdictions may become involved, the contracting officer
shall ensure the Government’s security
is enforceable. This may require the
provision of additional or different security than that normally provided for
in the standard contract clauses.
[60 FR 49710, Sept. 26, 1995]
32.005 Consideration for contract financing.
(a) Requirement. When a contract financing clause is included at the inception of a contract, there shall be no
separate consideration for the contract
financing clause. The value of the contract financing to the contractor is expected to be reflected in either
(1) A bid or negotiated price that will
be lower than such price would have
been in the absence of the contract financing, or
(2) Contract terms and conditions,
other than price, that are more beneficial to the Government than they
would have been in the absence of the
contract financing. Adequate new consideration is required for changes to, or
the addition of, contract financing
after award.
(b) Amount of new consideration. The
contractor may provide new consideration by monetary or nonmonetary
means, provided the value is adequate.
The fair and reasonable consideration
should approximate the amount by
which the price would have been less
had the contract financing terms been
contained in the initial contract. In
the absence of definite information on
this point, the contracting officer
should apply the following criteria in
evaluating whether the proposed new
consideration is adequate:
(1) The value to the contractor of the
anticipated amount and duration of the
contract financing at the imputed financial costs of the equivalent working
capital.
(2) The estimated profit rate to be
earned through contract performance.
(c) Interest. Except as provided in subpart 32.4, Advance Payments for NonCommercial Items, the contract shall
not provide for any other type of specific charges, such as interest, for contract financing.
[60 FR 49710, Sept. 26, 1995]
32.006 Reduction or suspension of contract payments upon finding of
fraud.
32.006–1 General.
(a) Under Title 10 of the United
States Code, the statutory authority
implemented by this section is available only to the Department of Defense; this statutory authority is not
available to the National Aeronautics
and Space Administration or the
United States Coast Guard. Under the
Federal Property and Administrative
Services Act (41 U.S.C. 255), this statutory authority is available to all agencies subject to that Act.
(b) 10 U.S.C. 2307(h)(2) and 41 U.S.C.
255, as amended by the Federal Acquisition Streamlining Act of 1994, Public
Law 103–355, provide for a reduction or
suspension of further payments to a
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Federal Acquisition Regulation
32.006–4
contractor when the agency head determines there is substantial evidence
that the contractor’s request for advance, partial, or progress payments is
based on fraud. This authority does not
apply to commercial interim payments
under subpart 32.2, or performancebased payments under subpart 32.10.
(c) The agency head may not delegate
his or her responsibilities under these
statutes below Level IV of the Executive Schedule.
(d) Authority to reduce or suspend
payments under these statutes is in addition to other Government rights,
remedies, and procedures.
(e) In accordance with these statutes,
agency head determinations and decisions under this section may be made
for an individual contract or any group
of contracts affected by the fraud.
[60 FR 49728, Sept. 26, 1995]
32.006–2 Definition.
Remedy coordination official, as used
in this section, means the person or entity in the agency who coordinates
within that agency the administration
of criminal, civil, administrative, and
contractual remedies resulting from
investigations of fraud or corruption
related to procurement activities. (See
10 U.S.C. 2307(h)(10) and 41 U.S.C.
255(g)(9).)
[60 FR 49729, Sept. 26, 1995, as amended at 66
FR 2132, Jan. 10, 2001]
32.006–3 Responsibilities.
(a) Agencies shall establish appropriate procedures to implement the
policies and procedures of this section.
(b) Government personnel shall report suspected fraud related to advance, partial, or progress payments in
accordance with agency regulations.
[60 FR 49729, Sept. 26, 1995]
32.006–4 Procedures.
(a) In any case in which an agency’s
remedy coordination official finds substantial evidence that a contractor’s
request for advance, partial, or
progress payments under a contract
awarded by that agency is based on
fraud, the remedy coordination official
shall recommend that the agency head
reduce or suspend further payments to
the contractor. The remedy coordina-
tion official shall submit to the agency
head a written report setting forth the
remedy coordination official’s findings
that support each recommendation.
(b) Upon receiving a recommendation
from the remedy coordination official
under paragraph (a) of this subsection,
the agency head shall determine
whether substantial evidence exists
that the request for payment under a
contract is based on fraud.
(c) If the agency head determines
that substantial evidence exists, the
agency head may reduce or suspend
further payments to the contractor
under the affected contract(s). Such reduction or suspension shall be reasonably commensurate with the anticipated loss to the Government resulting
from the fraud.
(d) In determining whether to reduce
or suspend further payment(s), as a
minimum, the agency head shall consider—
(1) A recommendation from investigating officers that disclosure of the
allegations of fraud to the contractor
may compromise an ongoing investigation;
(2) The anticipated loss to the Government as a result of the fraud;
(3) The contractor’s overall financial
condition and ability to continue performance if payments are reduced or
suspended;
(4) The contractor’s essentiality to
the national defense, or to the execution of the agency’s official business;
and
(5) Assessment of all documentation
concerning the alleged fraud, including
documentation submitted by the contractor in its response to the notice required by paragraph (e) of this subsection.
(e) Before making a decision to reduce or suspend further payments, the
agency head shall, in accordance with
agency procedures—
(1) Notify the contractor in writing
of the action proposed by the remedy
coordination official and the reasons
therefor (such notice must be sufficiently specific to permit the contractor to collect and present evidence
addressing the aforesaid reasons); and
(2) Provide the contractor an opportunity to submit information within a
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32.006–5
48 CFR Ch. 1 (10–1–03 Edition)
reasonable time, in response to the action proposed by the remedy coordination official.
(f) When more than one agency has
contracts affected by the fraud, the
agencies shall consider designating one
agency as the lead agency for making
the determination and decision.
(g) The agency shall retain in its files
the written justification for each—
(1) Decision of the agency head
whether to reduce or suspend further
payments; and
(2) Recommendation received by an
agency head in connection with such
decision.
(h) Not later than 180 calendar days
after the date of the reduction or suspension action, the remedy coordination official shall—
(1) Review the agency head’s determination on which the reduction or
suspension decision is based; and
(2) Transmit a recommendation to
the agency head as to whether the reduction or suspension should continue.
[60 FR 49729, Sept. 26, 1995]
32.006–5
Reporting.
(a) In accordance with 41 U.S.C. 255,
the head of an agency, other than the
Department of Defense, shall prepare a
report for each fiscal year in which a
recommendation has been received pursuant to 32.006–4(a). Reports within the
Department of Defense shall be prepared in accordance with 10 U.S.C. 2307.
(b) In accordance with 41 U.S.C. 255
and 10 U.S.C. 2307, each report shall
contain—
(1) Each recommendation made by
the remedy coordination official;
(2) The actions taken on the recommendation(s), with reasons for such
actions; and
(3) An assessment of the effects of
each action on the Government.
[60 FR 49729, Sept. 26, 1995]
32.007
Contract financing payments.
(a)(1) Unless otherwise prescribed in
agency policies and procedures or otherwise specified in paragraph (b) of this
section, the due date for making contract financing payments by the designated payment office is the 30th day
after the designated billing office re-
ceives a proper contract financing request.
(2) If an audit or other review of a
specific financing request is required to
ensure compliance with the terms and
conditions of the contract, the designated payment office is not compelled to make payment by the specified due date.
(3) Agency heads may prescribe
shorter periods for payment based on
contract pricing or administrative considerations. For example, a shorter period may be justified by an agency if
the nature and extent of contract financing arrangements are integrated
with agency contract pricing policies.
(4) Agency heads must not prescribe
a period shorter than 7 days or longer
than 30 days.
(b) For advance payments, loans, or
other arrangements that do not involve
recurrent submission of contract financing requests, the designated payment office will make payment in accordance with the applicable contract
financing terms or as directed by the
contracting officer.
(c) A proper contract financing request must comply with the terms and
conditions specified by the contract.
The contractor must correct any defects in requests submitted in the manner specified in the contract or as directed by the contracting officer.
(d) The designated billing office and
designated payment office must annotate each contract financing request
with the date their respective offices
received the request.
(e) The Government will not pay an
interest penalty to the contractor as a
result of delayed contract financing
payments.
[66 FR 65355, Dec. 18, 2001]
32.008 Notification of overpayment.
If the contractor notifies the contracting officer of a duplicate contract
financing or invoice payment or that
the Government has otherwise overpaid on a contract financing or invoice
payment, the contracting officer must
promptly provide instructions to the
contractor, in coordination with the
cognizant payment office, regarding
timely disposition of the overpayment.
[68 FR 56683, Oct. 1, 2003]
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Federal Acquisition Regulation
32.102
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct.
1, 2003, § 32.008 was added, effective Oct. 31,
2003.
Subpart 32.1—Non-Commercial
Item Purchase Financing
32.100 Scope of subpart.
This subpart provides policies and
procedures applicable to contract financing and payment for any purchases other than purchases of commercial items in accordance with part
12.
[60 FR 49710, Sept. 26, 1995]
32.101 Authority.
The basic authority for the contract
financing described in this part is contained in section 305 of the Federal
Property and Administrative Services
Act of 1949 (41 U.S.C. 255), section 2307
of the Armed Services Procurement
Act (10 U.S.C. 2307), and Title III of the
Defense Production Act of 1950 (50
U.S.C. App. 2091), as amended.
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 49710, Sept. 26, 1995]
32.102 Description of contract financing methods.
(a) Advance payments are advances
of money by the Government to a
prime contractor before, in anticipation of, and for the purpose of complete
performance under one or more contracts. They are expected to be liquidated from payments due to the contractor incident to performance of the
contracts. Since they are not measured
by performance, they differ from partial, progress, or other payments based
on the performance or partial performance of a contract. Advance payments
may be made to prime contractors for
the purpose of making advances to subcontractors.
(b) Progress payments based on costs
are made on the basis of costs incurred
by the contractor as work progresses
under the contract. This form of contract financing does not include—
(1) Payments based on the percentage
or stage of completion accomplished;
(2) Payments for partial deliveries
accepted by the Government;
(3) Partial payments for a contract
termination proposal; or
(4) Performance-based payments.
(c) Loan guarantees are made by Federal Reserve banks, on behalf of designated guaranteeing agencies, to enable contractors to obtain financing
from private sources under contracts
for the acquisition of supplies or services for the national defense.
(d) Payments for accepted supplies
and services that are only a part of the
contract requirements (i.e., partial deliveries) are authorized under 41 U.S.C.
255 and 10 U.S.C. 2307. In accordance
with 5 CFR 1315.4(k), agencies must pay
for partial delivery of supplies or partial performance of services unless specifically prohibited by the contract.
Although payments for partial deliveries generally are treated as a method
of payment and not as a method of contract financing, using partial delivery
payments can assist contractors to
participate in contracts without, or
with minimal, contract financing.
When appropriate, contract statements
of work and pricing arrangements must
permit acceptance and payment for
discrete portions of the work, as soon
as accepted (see 32.906(c)).
(e)(1) Progress payments based on a
percentage or stage of completion are
authorized by the statutes cited in
32.101.
(2) This type of progress payment
may be used as a payment method
under agency procedures. Agency procedures must ensure that payments are
commensurate with work accomplished, which meets the quality standards established under the contract.
Furthermore, progress payments may
not exceed 80 percent of the eligible
costs
of
work
accomplished
on
undefinitized contract actions.
(f) Performance-based payments are
contract financing payments made on
the basis of—
(1) Performance measured by objective, quantifiable methods;
(2)
Accomplishment
of
defined
events; or
(3) Other quantifiable measures of results.
[48 FR 42328, Sept. 19, 1987, as amended at 52
FR 30077, Aug. 12, 1987; 60 FR 49711, Sept. 26,
1995; 62 FR 12706, Mar. 17, 1997; 66 FR 65355,
Dec. 18, 2001]
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32.103
48 CFR Ch. 1 (10–1–03 Edition)
32.103 Progress payments under construction contracts.
When satisfactory progress has not
been achieved by a contractor during
any period for which a progress payment is to be made, a percentage of the
progress payment may be retained.
Retainage should not be used as a substitute for good contract management,
and the contracting officer should not
withhold funds without cause. Determinations to retain and the specific
amount to be withheld shall be made
by the contracting officer on a case-bycase basis. Such decisions will be based
on the contracting officer’s assessment
of past performance and the likelihood
that such performance will continue.
The amount of retainage withheld shall
not exceed 10 percent of the approved
estimated amount in accordance with
the terms of the contract and may be
adjusted as the contract approaches
completion to recognize better than expected performance, the ability to rely
on alternative safeguards, and other
factors. Upon completion of all contract requirements, retained amounts
shall be paid promptly.
[51 FR 19716, May 30, 1986, as amended at 60
FR 49711, Sept. 26, 1995]
32.104
Providing contract financing.
(a) Prudent contract financing can be
a useful working tool in Government
acquisition by expediting the performance of essential contracts. Contracting officers must consider the criteria in this part in determining
whether to include contract financing
in solicitations and contracts. Resolve
reasonable doubts by including contract financing in the solicitation. The
contracting officer must—
(1) Provide Government financing
only to the extent actually needed for
prompt and efficient performance, considering the availability of private financing and the probable impact on
working capital of the predelivery expenditures and production lead-times
associated with the contract, or groups
of contracts or orders (e.g., issued
under indefinite-delivery contracts,
basic ordering agreements, or their
equivalent);
(2) Administer contract financing so
as to aid, not impede, the acquisition;
(3) Avoid any undue risk of monetary
loss to the Government through the financing;
(4) Include the form of contract financing deemed to be in the Government’s best interest in the solicitation
(see 32.106 and 32.113); and
(5) Monitor the contractor’s use of
the contract financing provided and
the contractor’s financial status.
(b) If the contractor is a small business concern, the contracting officer
must give special attention to meeting
the contractor’s contract financing
need. However, a contractor’s receipt
of a certificate of competency from the
Small Business Administration has no
bearing on the contractor’s need for or
entitlement to contract financing.
(c) Subject to specific agency regulations and paragraph (d) of this section,
the contracting officer—
(1) May provide customary contract
financing in accordance with 32.113;
and
(2) Must not provide unusual contract financing except as authorized in
32.114.
(d) Unless otherwise authorized by
agency procedures, the contracting officer may provide contract financing in
the form of performance-based payments (see subpart 32.10) or customary
progress payments (see subpart 32.5) if
the following conditions are met:
(1) The contractor—
(i) Will not be able to bill for the first
delivery of products for a substantial
time after work must begin (normally 4
months or more for small business concerns, and 6 months or more for others), and will make expenditures for
contract
performance
during
the
predelivery period that have a significant impact on the contractor’s working capital; or
(ii) Demonstrates actual financial
need or the unavailability of private financing.
(2) If the contractor is not a small
business concern—
(i) For an individual contract, the
contract price is $2 million or more; or
(ii) For an indefinite-delivery contract, a basic ordering agreement or a
similar ordering instrument, the contracting officer expects the aggregate
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Federal Acquisition Regulation
32.110
value of orders or contracts that individually exceed the simplified acquisition threshold to have a total value of
$2 million or more. The contracting officer must limit financing to those orders or contracts that exceed the simplified acquisition threshold.
(3) If the contractor is a small business concern—
(i) For an individual contract, the
contract price exceeds the simplified
acquisition threshold; or
(ii) For an indefinite-delivery contract, a basic ordering agreement or a
similar ordering instrument, the contracting officer expects the aggregate
value of orders or contracts to exceed
the simplified acquisition threshold.
[65 FR 16278, Mar. 27, 2000]
32.105 Uses of contract financing.
(a) Contract financing methods covered in this part are intended to be
self-liquidating through contract performance. Consequently, agencies shall
only use the methods for financing of
contractor working capital, not for the
expansion of contractor-owned facilities or the acquisition of fixed assets.
However, under loan guarantees, exceptions may be made for—
(1) Facilities expansion of a minor or
incidental nature, if a relatively small
part of the guaranteed loan is used for
the expansion and the contractor’s repayment would not be delayed or impaired; or
(2) Other instances of facilities expansion for which contract financing is
appropriate under agency procedures.
(b) The limitations in this section do
not apply to contracts under which facilities are being acquired for Government ownership.
32.106 Order of preference.
The contracting officer must consider the following order of preference
when a contractor requests contract financing, unless an exception would be
in the Government’s best interest in a
specific case:
(a) Private financing without Government guarantee. It is not intended,
however, that the contracting officer
require the contractor to obtain private financing—
(1) At unreasonable terms; or
(2) From other agencies.
(b) Customary contract financing
other than loan guarantees and certain
advance payments (see 32.113).
(c) Loan guarantees.
(d) Unusual contract financing (see
32.114).
(e) Advance payments (see exceptions
in 32.402(b)).
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 49711, Sept. 26, 1995; 65 FR 16279, Mar. 27,
2000]
32.107 Need for contract financing not
a deterrent.
(a) If the contractor or offeror meets
the standards prescribed for responsible prospective contractors at 9.104,
the contracting officer shall not treat
the contractor’s need for contract financing as a handicap for a contract
award; e.g., as a responsibility factor
or evaluation criterion.
(b) The contractor should not be disqualified from contract financing solely because the contractor failed to indicate a need for contract financing before the contract was awarded.
32.108 Financial consultation.
Each contracting office should have
available and use the services of contract financing personnel competent to
evaluate credit and financial problems.
In resolving any questions concerning
(a) the financial capability of an offeror or contractor to perform a contract
or (b) what form of contract financing
is appropriate in a given case, the contracting officer should consult the appropriate contract financing office.
32.109 Termination financing.
To encourage contractors to invest
their own funds in performance despite
the susceptibility of the contract to
termination for the convenience of the
Government, the contract financing
procedures under this part may be applied to the financing of terminations
either in connection with or independently of financing for contract performance (see 49.112–1).
32.110 Payment
of
subcontractors
under cost-reimbursement prime
contracts.
If the contractor makes financing
payments to a subcontractor under a
cost-reimbursement prime contract,
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32.111
48 CFR Ch. 1 (10–1–03 Edition)
the contracting officer should accept
the financing payments as reimbursable costs of the prime contract only
under the following conditions:
(a) The payments are made under the
criteria in subpart 32.5 for customary
progress payments based on costs,
32.202–1 for commercial item purchase
financing, or 32.1003 for performancebased payments, as applicable.
(b) If customary progress payments
are made, the payments do not exceed
the progress payment rate in 32.501–1,
unless unusual progress payments to
the subcontractor have been approved
in accordance with 32.501–2.
(c) If customary progress payments
are made, the subcontractor complies
with the liquidation principles of
32.503–8, 32.503–9, and 32.503–10.
(d) If performance-based payments
are made, the subcontractor complies
with the liquidation principles of
32.1004(d).
(e) The subcontract contains financing payments terms as prescribed in
this part.
[65 FR 16279, Mar. 27, 2000]
32.111 Contract
clauses
for
noncommercial purchases.
(a) The contracting officer shall insert the following clauses, appropriately modified with respect to payment due dates, in accordance with
agency regulations—
(1) The clause at 52.232–1, Payments,
in solicitations and contracts when a
fixed-price supply contract, a fixedprice service contract, or a contract for
nonregulated communication services
is contemplated;
(2) The clause at 52.232–2, Payment
under Fixed-Price Research and Development Contracts, in solicitations and
contracts when a fixed-price research
and development contract is contemplated;
(3) The clause at 52.232–3, Payments
under Personal Services Contracts, in
solicitations and contracts for personal
services;
(4) The clause at 52.232–4, Payments
under Transportation Contracts and
Transportation-Related Services Contracts, in solicitations and contracts
for transportation or transportationrelated services;
(5) The clause at 52.232–5, Payments
under Fixed-Price Construction Contracts, in solicitations and contracts
for construction when a fixed-price
contract is contemplated; and
(6) The clause at 52.232–6, Payments
under Communication Service Contracts with Common Carriers, in solicitations and contracts for regulated
communication services by common
carriers.
(b) The contracting officer shall insert the clause at 52.232–7, Payments
under Time-and-Materials and LaborHour Contracts, appropriately modified
with respect to payment due dates in
accordance with agency regulations, in
solicitations and contracts when a
time-and-materials or labor-hour contract is contemplated. If (i) the nature
of the work to be performed requires
the contractor to furnish material that
is regularly sold to the general public
in the normal course of business by the
contractor and (ii) the price is under
the
limitations
prescribed
in
16.601(b)(3), the contracting officer
shall use the clause with its Alternate
I. If a labor-hour contract is contemplated, and if no specific reimbursement for materials furnished is
intended, the contracting officer may
use the clause with its Alternate II.
(c) The contracting officer shall insert the following clauses, appropriately modified with respect to payment due dates in accordance with
agency regulations:
(1) The clause at 52.232–8, Discounts
for Prompt Payment, in solicitations
and contracts when a fixed-price supply
contract or fixed-price service contract
is contemplated.
(2) A clause, substantially the same
as the clause at 52.232–9, Limitation on
Withholding of Payments, in solicitations and contracts when a supply contract, research and development contract, service contract, time-and-materials contract, or labor-hour contract
is contemplated that includes two or
more terms authorizing the temporary
withholding of amounts otherwise payable to the contractor for supplies delivered or services performed.
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Federal Acquisition Regulation
32.113
(d) The contracting officer shall insert the following clauses, appropriately modified with respect to payments due dates in accordance with
agency regulations:
(1) The clause at 52.232–10, Payments
under Fixed-Price Architect-Engineer
Contracts, in fixed-price architect-engineer contracts.
(2) The clause at 52.232–11, Extras, in
solicitations and contracts when a
fixed-price supply contract, fixed-price
service contract, or a transportation
contract is contemplated.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986; 60 FR 49711, Sept. 26,
1995]
32.112 Nonpayment of subcontractors
under contracts for noncommercial
items.
32.112–1 Subcontractor assertions of
nonpayment.
(a) In accordance with Section
806(a)(4) of Pub. L. 102–190, as amended
by Sections 2091 and 8105 of Pub. L. 103–
355, upon the assertion by a subcontractor or supplier of a Federal contractor that the subcontractor or supplier has not been paid in accordance
with the payment terms of the subcontract, purchase order, or other
agreement with the prime contractor,
the contracting officer may determine—
(1) For a construction contract,
whether the contractor has made—
(i) Progress payments to the subcontractor or supplier in compliance with
Chapter 39 of Title 31, United States
Code (Prompt Payment Act); or
(ii) Final payment to the subcontractor or supplier in compliance with
the terms of the subcontract, purchase
order, or other agreement with the
prime contractor;
(2) For a contract other than construction, whether the contractor has
made progress payments, final payments, or other payments to the subcontractor or supplier in compliance
with the terms of the subcontract, purchase order, or other agreement with
the prime contractor; or
(3) For any contract, whether the
contractor’s certification of payment
of a subcontractor or supplier accom-
panying its payment request to the
Government is accurate.
(b) If, in making the determination
in paragraphs (a)(1) and (2) of this section, the contracting officer finds the
prime contractor is not in compliance,
the contracting officer may—
(1) Encourage the contractor to make
timely payment to the subcontractor
or supplier; or
(2) If authorized by the applicable
payment clauses, reduce or suspend
progress payments to the contractor.
(c) If the contracting officer determines that a certification referred to
in paragraph (a)(3) of this section is inaccurate in any material respect, the
contracting officer shall initiate administrative or other remedial action.
[60 FR 48274, Sept. 18, 1995]
32.112–2 Subcontractor requests for
information.
(a) In accordance with Section
806(a)(1) of Pub. L. 102–190, as amended
by Sections 2091 and 8105 of Pub. L. 103–
355, upon the request of a subcontractor or supplier under a Federal
contract for a non-commercial item,
the contracting officer shall promptly
advise the subcontractor or supplier as
to—
(1) Whether the prime contractor has
submitted requests for progress payments or other payments to the Federal Government under the contract;
and
(2) Whether final payment under the
contract has been made by the Federal
Government to the prime contractor.
(b) In accordance with 5 U.S.C.
552(b)(1), this subsection does not apply
to matters that are—
(1) Specifically authorized under criteria established by an Executive order
to be kept classified in the interest of
national defense or foreign policy; and
(2) Properly classified pursuant to
such Executive order.
[60 FR 48274, Sept. 18, 1995]
32.113 Customary contract financing.
The solicitation must specify the
customary contract financing offerors
may propose. The following are customary contract financing when provided in accordance with this part and
agency regulations:
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32.114
48 CFR Ch. 1 (10–1–03 Edition)
(a) Financing of shipbuilding, or ship
conversion, alteration, or repair, when
agency regulations provide for progress
payments based on a percentage or
stage of completion.
(b) Financing of construction or architect-engineer services purchased
under the authority of part 36.
(c) Financing of contracts for supplies or services awarded under the
sealed bid method of procurement in
accordance with part 14 through
progress payments based on costs in
accordance with subpart 32.5.
(d) Financing of contracts for supplies or services awarded under the
competitive negotiation method of procurement in accordance with part 15,
through either progress payments
based on costs in accordance with subpart 32.5, or performance-based payments in accordance with subpart 32.10
(but not both).
(e) Financing of contracts for supplies or services awarded under a solesource acquisition as defined in 2.101
and using the procedures of part 15,
through either progress payments
based on costs in accordance with subpart 32.5, or performance-based payments in accordance with subpart 32.10
(but not both).
(f) Financing of contracts for supplies
or services through advance payments
in accordance with subpart 32.4.
(g) Financing of contracts for supplies or services through guaranteed
loans in accordance with subpart 32.3.
(h) Financing of contracts for supplies or services through any appropriate combination of advance payments, guaranteed loans, and either
performance-based
payments
or
progress payments (but not both) in accordance with their respective subparts.
[65 FR 16279, Mar. 27, 2000, as amended at 66
FR 2132, Jan. 10, 2001]
32.114
Unusual contract financing.
Any contract financing arrangement
that deviates from this part is unusual
contract financing. Unusual contract
financing shall be authorized only after
approval by the head of the agency or
as provided for in agency regulations.
[60 FR 49711, Sept. 26, 1995]
Subpart 32.2—Commercial Item
Purchase Financing
SOURCE: 60 FR 49711, Sept. 26, 1995, unless
otherwise noted.
32.200 Scope of subpart.
This subpart provides policies and
procedures for commercial financing
arrangements under commercial purchases pursuant to Part 12.
32.201 Statutory authority.
10 U.S.C. 2307(f) and 41 U.S.C. 255(f)
provide that payment for commercial
items may be made under such terms
and conditions as the head of the agency determines are appropriate or customary in the commercial marketplace
and are in the best interest of the
United States.
32.202
General.
32.202–1 Policy.
(a) Use of financing in contracts. It is
the responsibility of the contractor to
provide all resources needed for performance of the contract. Thus, for
purchases of commercial items, financing of the contract is normally the contractor’s responsibility. However, in
some markets the provision of financing by the buyer is a commercial practice. In these circumstances, the contracting officer may include appropriate financing terms in contracts for
commercial purchases when doing so
will be in the best interest of the Government.
(b) Authorization. Commercial interim payments and commercial advance payments may be made under
the following circumstances—
(1) The contract item financed is a
commercial supply or service;
(2) The contract price exceeds the
simplified acquisition threshold;
(3) The contracting officer determines that it is appropriate or customary in the commercial marketplace
to make financing payments for the
item;
(4) Authorizing this form of contract
financing is in the best interest of the
Government (see paragraph (e) of this
subsection);
(5) Adequate security is obtained (see
32.202–4);
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Federal Acquisition Regulation
32.202–4
(6) Prior to any performance of work
under the contract, the aggregate of
commercial advance payments shall
not exceed 15 percent of the contract
price;
(7) The contract is awarded on the
basis of competitive procedures or, if
only one offer is solicited, adequate
consideration is obtained (based on the
time value of the additional financing
to be provided) if the financing is expected to be substantially more advantageous to the offeror than the
offeror’s normal method of customer financing; and
(8) The contracting officer obtains
concurrence from the payment office
concerning liquidation provisions when
required by 32.206(e).
(c) Difference from non-commercial financing. Government financing of commercial purchases under this subpart is
expected to be different from that used
for non-commercial purchases under
subpart 32.1 and its related subparts.
While the contracting officer may
adapt techniques and procedures from
the non-commercial subparts for use in
implementing commercial contract financing arrangements, the contracting
officer must have a full understanding
of effects of the differing contract environments and of what is needed to protect the interests of the Government in
commercial contract financing.
(d) Unusual contract financing. Any
contract financing arrangement not in
accord with the requirements of agency
regulations or this part is unusual contract financing and requires advance
approval in accordance with agency
procedures. If not otherwise specified,
such unusual contract financing shall
be approved by the head of the contracting activity.
(e) Best interest of the Government. The
statutes cited in 32.201 do not allow
contract financing by the Government
unless it is in the best interest of the
United States. Agencies may establish
standards to determine whether contract financing is in the best interest
of the Government. These standards
may be for certain types of procurements, certain types of items, or certain dollar levels of procurements.
32.202–2 Types of payments for commercial item purchases.
[60 FR 49711, Sept. 26, 1995, as amended at 61
FR 39190, July 26, 1996]
(a) Policy. (1) 10 U.S.C. 2307(f) and 41
U.S.C. 255(f) require the Government to
These definitions incorporate the requirements of the statutory commercial financing authority and the implementation of the Prompt Payment Act.
Commercial advance payment, as used
in this subsection, means a payment
made before any performance of work
under the contract. The aggregate of
these payments shall not exceed 15 percent of the contract price. These payments are contract financing payments
for prompt payment purposes (i.e., not
subject to the interest penalty provisions of the Prompt Payment Act in
accordance with subpart 32.9). These
payments are not subject to subpart
32.4, Advance Payments for Non-Commercial Items.
Commercial interim payment (See
32.001.)
Delivery payment (See 32.001).
[60 FR 49711, Sept. 26, 1995, as amended at 66
FR 2132, Jan. 10, 2001]
32.202–3 Conducting market research
about financing terms.
Contract financing may be a subject
included in the market research conducted in accordance with part 10. If
market research for contract financing
is conducted, the contracting officer
should consider—
(a) The extent to which other buyers
provide contract financing for purchases in that market;
(b) The overall level of financing normally provided;
(c) The amount or percentages of any
payments equivalent to commercial
advance payments (see 32.202–2);
(d) The basis for any payments equivalent to commercial interim payments
(see 32.001), as well as the frequency,
and amounts or percentages; and
(e) Methods of liquidation of contract
financing payments and any special or
unusual payment terms applicable to
delivery payments (see 32.001).
[60 FR 49711, Sept. 26, 1995, as amended at 66
FR 2132, Jan. 10, 2001]
32.202–4 Security for Government financing.
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32.203
48 CFR Ch. 1 (10–1–03 Edition)
obtain adequate security for Government financing. The contracting officer shall specify in the solicitation the
type of security the Government will
accept. If the Government is willing to
accept more than one form of security,
the offeror shall be required to specify
the form of security it will provide. If
acceptable to the contracting officer,
the resulting contract shall specify the
security (see 32.206(b)(1)(iv)).
(2) Subject to agency regulations, the
contracting officer may determine the
offeror’s financial condition to be adequate security, provided the offeror
agrees to provide additional security
should that financial condition become
inadequate as security (see paragraph
(c) of the clause at 52.232–29, Terms for
Financing of Purchases of Commercial
Items). Assessment of the contractor’s
financial condition shall consider both
net worth and liquidity. If the contracting officer finds the offeror’s financial condition is not adequate security, the contracting officer shall require other adequate security. Paragraphs (b), (c), and (d) of this subsection list other (but not all) forms of
security that the contracting officer
may find acceptable.
(3) The value of the security must be
at least equal to the maximum unliquidated amount of contract financing
payments to be made to the contractor. The value of security may be
adjusted periodically during contract
performance, as long as it is always
equal to or greater than the amount of
unliquidated financing.
(b) Paramount lien. (1) The statutes
cited in 32.201 provide that if the Government’s security is in the form of a
lien, such lien is paramount to all
other liens and is effective immediately upon the first payment, without filing, notice, or other action by
the United States.
(2) When the Government’s security
is in the form of a lien, the contract
shall specify what the lien is upon, e.g.,
the work in process, the contractor’s
plant, or the contractor’s inventory.
Contracting officers may be flexible in
the choice of assets. The contract must
also give the Government a right to
verify the existence and value of the
assets.
(3) Provision of Government financing shall be conditioned upon a contractor certification that the assets
subject to the lien are free from any
prior encumbrances. Prior liens may
result from such things as capital
equipment loans, installment purchases, working capital loans, various
lines of credit, and revolving credit arrangements.
(c) Other assets as security. Contracting officers may consider the
guidance at 28.203–2, 28.203–3, and 28.204
in determining which types of assets
may be acceptable as security. For the
purpose of applying the guidance in
part 28 to this subsection, the term
‘‘surety’’ and/or ‘‘individual surety’’
should be interpreted to mean ‘‘offeror’’ and/or ‘‘contractor.’’
(d) Other forms of security. Other acceptable forms of security include—
(1) An irrevocable letter of credit
from a federally insured financial institution;
(2) A bond from a surety, acceptable
in accordance with part 28 (note that
the bond must guarantee repayment of
the unliquidated contract financing);
(3) A guarantee of repayment from a
person or corporation of demonstrated
liquid net worth, connected by significant ownership to the contractor; or
(4) Title to identified contractor assets of adequate worth.
(e) Management of risk and security. In
establishing contract financing terms,
the contracting officer must be aware
of certain risks. For example, very
high amounts of financing early in the
contract (front-end loading) may unduly increase the risk to the Government. The security and the amounts
and timing of financing payments must
be analyzed as a whole to determine
whether the arrangement will be in the
best interest of the Government.
32.203 Determining contract financing
terms.
When the criteria in 32.202–1(b) are
met, the contracting officer may either
specify the financing terms in the solicitation (see 32.204) or permit each offeror to propose its own customary financing terms (see 32.205). When the
contracting officer has sufficient information on financing terms that are
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32.206
customary in the commercial marketplace for the item, those terms may be
specified in the solicitation.
32.204 Procedures for contracting officer-specified commercial contract
financing.
The financing terms shall be included
in the solicitation. Contract financing
shall not be a factor in the evaluation
of resulting proposals, and proposals of
alternative financing terms shall not
be accepted (but see 14.208 and 15.206
concerning amendments of solicitations). However, an offer stating that
the contracting officer-specified contract financing terms will not be used
by the offeror does not alter the evaluation of the offer, nor does it render
the offer nonresponsive or otherwise
unacceptable. In the event of award to
an offeror who declined the proposed
contract financing, the contract financing provisions shall not be included in the resulting contract. Contract financing shall not be a basis for
adjusting offerors’ proposed prices, because the effect of contract financing
is reflected in each offeror’s proposed
prices.
[60 FR 49711, Sept. 26, 1995, as amended at 62
FR 51271, Sept. 30, 1997]
32.205 Procedures
for
offeror-proposed commercial contract financing.
(a) Under this procedure, each offeror
may propose financing terms. The contracting officer must then determine
which offer is in the best interests of
the United States.
(b) Solicitations. The contracting officer must include in the solicitation the
provision at 52.232–31, Invitation to
Propose Financing Terms. The contracting officer must also—
(1) Specify the delivery payment (invoice) dates that will be used in the
evaluation of financing proposals; and
(2) Specify the interest rate to be
used in the evaluation of financing proposals (see paragraph (c)(4) of this section).
(c) Evaluation of proposals. (1) When
contract financing terms vary among
offerors, the contracting officer must
adjust each proposed price for evaluation purposes to reflect the cost of providing the proposed financing in order
to determine the total cost to the Government of that particular combination of price and financing.
(2) Contract financing results in the
Government making payments earlier
than it otherwise would. In order to determine the cost to the Government of
making payments earlier, the contracting officer must compute the imputed cost of those financing payments
and add it to the proposed price to determine the evaluated price for each
offeror.
(3) The imputed cost of a single financing payment is the amount of the
payment multiplied by the annual interest rate, multiplied by the number
of years, or fraction thereof, between
the date of the financing payment and
the date the amount would have been
paid as a delivery payment. The imputed cost of financing is the sum of
the imputed costs of each of the financing payments.
(4) The contracting officer must calculate the time value of proposal-specified contract financing arrangements
using as the interest rate the nominal
discount rate specified in Appendix C
of the Office of Management and Budget (OMB) Circular A–94, ‘‘Guidelines
and Discount Rates for Benefit-Cost
Analysis of Federal Programs’’, appropriate to the period of contract financing. Where the period of proposed financing does not match the periods in
the OMB Circular, the interest rate for
the period closest to the finance period
shall be used. Appendix C is updated
yearly, and is available from the Office
of Economic Policy in the Office of
Management and Budget (OMB).
[60 FR 49711, Sept. 26, 1995, as amended at 65
FR 16279, Mar. 27, 2000]
32.206 Solicitation provisions and contract clauses.
(a) The contract shall contain the
paragraph entitled ‘‘Payment’’ of the
clause at 52.212–4, Contract Terms and
Conditions—Commercial Items. If the
contract will provide for contract financing, the contracting officer shall
construct a solicitation provision and
contract clause. This solicitation provision shall be constructed in accordance with 32.204 or 32.205. If the procedure at 32.205 is used, the solicitation
provision at 52.232–31, Invitation to
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32.206
48 CFR Ch. 1 (10–1–03 Edition)
Propose Financing Terms, shall be included. The contract clause shall be
constructed in accordance with the requirements of this subpart and any
agency regulations.
(b) Each contract financing clause
shall include:
(1) A description of the—
(i) Computation of the financing payment amounts (see paragraph (c) of
this section);
(ii) Specific conditions of contractor
entitlement to those financing payments (see paragraph (c) of this section);
(iii) Liquidation of those financing
payments by delivery payments (see
paragraph (e) of this section);
(iv) Security the contractor will provide for financing payments and any
terms or conditions specifically applicable thereto (see 32.202–4); and
(v) Frequency, form, and any additional content of the contractor’s request for financing payment (in addition to the requirements of the clause
at 52.232–29, Terms for Financing of
Purchases of Commercial Items; and
(2) Unless agency regulations authorize alterations, the unaltered text of
the clause at 52.232–29, Terms for Financing of Purchases of Commercial
Items.
(c) Computation of amounts, and contractor entitlement provisions. (1) Contracts shall provide that delivery payments shall be made only for completed supplies and services accepted
by the Government in accordance with
the terms of the contract. Contracts
may provide for commercial advance
and commercial interim payments
based upon a wide variety of bases, including (but not limited to) achievement or occurrence of specified events,
the passage of time, or specified times
prior to the delivery date(s). The basis
for payment must be objectively determinable. The clause written by the
contracting officer shall specify, to the
extent access is necessary, the information and/or facilities to which the
Government shall have access for the
purpose of verifying the contractor’s
entitlement to payment of contract financing.
(2) If the contract is awarded using
the offeror-proposed procedure at
32.205, the clause constructed by the
contracting officer under paragraph
(b)(1) of this section shall contain the
following:
(i) A statement that the offeror’s proposed listing of earliest times and
greatest amounts of projected financing payments submitted in accordance
with paragraph (d)(2) of the provision
at 52.232–31, Invitation to Propose Financing Terms, is incorporated into
the contract, and
(ii) A statement that financing payments shall be made in the lesser
amount and on the later of the date
due in accordance with the financing
terms of the contract, or in the amount
and on the date projected in the listing
of earliest times and greatest amounts
incorporated in the contract.
(3) If the security accepted by the
contracting officer is the contractor’s
financial condition, the contracting officer shall incorporate in the clause
constructed under paragraph (b)(1) of
this section the following—
(i) A statement that the contractor’s
financial condition has been accepted
as adequate security for commercial financing payments; and
(ii) A statement that the contracting
officer may exercise the Government’s
rights to require other security under
paragraph (c), Security for Government
Financing, of the clause at 52.232–29,
Terms for Financing of Purchases of
Commercial Items, in the event the
contractor’s
financial
condition
changes and is found not to be adequate security.
(d) Instructions for multiple appropriations. If contract financing is to be
computed for the contract as a whole,
and if there is more than one appropriation account (or subaccount) funding payments under the contract, the
contracting officer shall include, in the
contract, instructions for distribution
of financing payments to the respective
funds accounts. Distribution instructions and contract liquidation instructions must be mutually consistent.
(e) Liquidation. Liquidation of contract financing payments shall be on
the same basis as the computation of
contract financing payments; that is,
financing payments computed on a
whole contract basis shall be liquidated
on a whole contract basis; and a payment computed on a line item basis
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Federal Acquisition Regulation
32.207
shall be liquidated against that line
item. If liquidation is on a whole contract basis, the contracting officer
shall use a uniform liquidation percentage as the liquidation method, unless the contracting officer obtains the
concurrence of the cognizant payment
office that the proposed liquidation
provisions can be executed by that office, or unless agency regulations provide alternative liquidation methods.
(f) Prompt payment for commercial purchase payments. The provisions of subpart 32.9, Prompt Payment, apply to
contract financing and invoice payments for commercial purchases in the
same manner they apply to non-commercial purchases. The contracting officer is responsible for including in the
contract all the information necessary
to implement prompt payment. In particular, contracting officers must be
careful to clearly differentiate in the
contract between contract financing
and invoice payments and between
items having different prompt payment
times.
(g) Installment payment financing for
commercial items. Contracting officers
may insert the clause at 52.232–30, Installment Payments for Commercial
Items, in solicitations and contracts in
lieu of constructing a specific clause in
accordance
with
paragraphs
(b)
through (e) of this section, if the contract action qualifies under the criteria
at 32.202–1(b) and installment payments
for the item are either customary or
are authorized in accordance with
agency procedures.
(1) Description. Installment payment
financing is payment by the Government to a contractor of a fixed number
of equal interim financing payments
prior to delivery and acceptance of a
contract item. The installment payment arrangement is designed to reduce administrative costs. However, if
a contract will have a large number of
deliveries, the administrative costs
may increase to the point where installment payments are not in the best
interests of the Government.
(2) Authorized types of installment payment financing and rates. Installment
payments may be made using the
clause at 52.232–30, Installment Payments for Commercial Items, either at
the 70 percent financing rate cited in
the clause or at a lower rate in accordance with agency procedures.
(3) Calculating the amount of installment financing payments. The contracting officer shall identify in the
contract schedule those items for
which installment payment financing
is authorized. Monthly installment
payment amounts are to be calculated
by the contractor pursuant to the instructions in the contract clause only
for items authorized to receive installment payment financing.
(4) Liquidating installment payments. If
installment payments have been made
for an item, the amount paid to the
contractor upon acceptance of the item
by the Government shall be reduced by
the amount of installment payments
made for the item. The contractor’s request for final payment for each item
is required to show this calculation.
32.207 Administration and payment of
commercial financing payments.
(a) Responsibility. The contracting officer responsible for administration of
the contract shall be responsible for review and approval of contract financing requests.
(b) Approval of financing requests. Unless otherwise provided in agency regulations, or by agreement with the appropriate payment official—
(1) The contracting officer shall be
responsible for receiving, approving,
and transmitting all contract financing
requests to the appropriate payment
office; and
(2) Each approval shall specify the
amount to be paid, necessary contractual information, and the account(s)
(see 32.206(d)) to be charged for the payment.
(c) Management of security. After contract award, the contracting officer responsible for approving requests for financing payments shall be responsible
for determining that the security continues to be adequate. If the contractor’s financial condition is the Government’s security, this contracting officer is also responsible for monitoring
the contractor’s financial condition.
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32.300
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 32.3—Loan Guarantees
for Defense Production
32.300
Scope of subpart.
This subpart prescribes policies and
procedures for designated agencies’
guarantees of loans made by private financial institutions to borrowers performing contracts related to national
defense (see 30.102).
32.301
Definitions.
As used in this subpart—
Borrower means a contractor, subcontractor (at any tier), or other supplier
who receives a guaranteed loan.
Federal Reserve Board means the
Board of Governors of the Federal Reserve System.
Guaranteed loan or V loan means a
loan, revolving credit fund, or other financial arrangement made pursuant to
Regulation V of the Federal Reserve
Board, under which the guaranteeing
agency is obligated, on demand of the
lender, to purchase a stated percentage
of the loan and to share any losses in
the amount of the guaranteed percentage.
Guaranteeing agency means any agency that the President has authorized to
guarantee loans, through Federal Reserve Banks, for expediting national
defense production.
[48 FR 42328, Sept. 19, 1983, as amended at 66
FR 2132, Jan. 10, 2001]
32.302
Authority.
Congress has authorized Federal Reserve Banks to act, on behalf of guaranteeing agencies, as fiscal agents of
the United States in the making of
loan guarantees for defense production
(Section 301, Defense Production Act of
1950 (50 U.S.C. App. 2091)). By Executive
Order 10480, August 14, 1953 (3 CFR 1949–
53), as amended, the President has designated the following agencies as guaranteeing agencies:
(a) Department of Defense.
(b) Department of Energy.
(c) Department of Commerce.
(d) Department of the Interior.
(e) Department of Agriculture.
(f) General Services Administration.
(g) National Aeronautics and Space
Administration.
32.303 General.
(a) Section 301 of the Defense Production Act authorizes loan guarantees for
contract performance or other operations related to national defense, subject to amounts annually authorized by
Congress on the maximum obligation
of any guaranteeing agency under any
loan, discount, advance, or commitment in connection therewith, entered
into under section 301. (See 50 U.S.C.
App. 2091 for statutory limitations and
exceptions concerning the authorization of loan guarantee amounts and the
use of loan guarantees for the prevention of insolvency or bankruptcy.)
(b) The guarantee shall be for less
than 100 percent of the loan unless the
agency determines that—
(1) The circumstances are exceptional;
(2) The operations of the contractor
are vital to the national defense; and
(3) No other suitable means of financing are available.
(c) Loan guarantees are not issued to
other agencies of the Government.
(d) Guaranteed loans are essentially
the same as conventional loans made
by private financial institutions, except that the guaranteeing agency is
obligated, on demand of the lender, to
purchase a stated percentage of the
loan and to share any losses in the
amount of the guaranteed percentage.
It is the responsibility of the private financial institution to disburse and collect funds and to administer the loan.
Under Regulation V of the Federal Reserve Board (12 CFR 245), any private
financing institution may submit an
application to the Federal Reserve
Bank of its district for guarantee of a
loan or credit.
(e) Federal Reserve Banks will make
the loan guarantee agreements on behalf of the guaranteeing agencies.
(f) Under Section 302(c) of Executive
Order 10480, August 14, 1953 (3 CFR 1949–
53), as amended, all actions and operations of Federal Reserve Banks, as fiscal agents, are subject to the supervision of the Federal Reserve Board.
The Federal Reserve Board is authorized to prescribe the following, after
consultation with the heads of guaranteeing agencies:
(1) Regulations governing the actions
and operations of fiscal agents.
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Federal Acquisition Regulation
32.304–2
(2) Rates of interest, guarantee and
commitment fees, and other charges
that may be made for loans, discounts,
advances, or commitments guaranteed
by the guaranteeing agencies through
the Federal Reserve Banks. These prescriptions may be in the form of specific rates or limits, or in other forms.
(3) Uniform forms and procedures to
be used in connection with the guarantees.
(g) The guaranteeing agency is responsible for certifying eligibility for
the guarantee and fixing the maximum
dollar amount and maturity date of the
guaranteed loan to meet the contractor’s requirement for financing performance of the defense production
contract on hand at the time the guarantee application is submitted.
32.304
Procedures.
32.304–1
Application for guarantee.
(a) A contractor, subcontractor, or
supplier that needs operating funds to
perform a contract related to national
defense may apply to a financing institution for a loan. If the financing institution is willing to extend credit, but
considers a Government guarantee necessary, the institution may apply to
the Federal Reserve Bank of its district for the guarantee. Application
forms and guidance are available at all
Federal Reserve Banks.
(b) The Federal Reserve Bank will
promptly send a copy of the application, including a list of the relevant defense contracts held by the contractor,
to the Federal Reserve Board. The
Board will transmit the application
and the list of contracts to the interested guaranteeing agency, so that the
agency can determine the eligibility of
the contractor.
(c) To expedite the process, the Federal Reserve Bank may, pursuant to instructions of a guaranteeing agency,
submit lists of the defense contracts to
the interested contracting officers.
(d) While eligibility is being determined, the Federal Reserve Bank will
make any necessary credit investigations to supplement the information
furnished by the applicant financing
institution in order to—
(1) Expedite necessary defense financing; and
(2) Protect the Government against
monetary loss.
(e) The Federal Reserve Bank will
send its report and recommendation to
the Federal Reserve Board. The Board
will transmit them to the interested
guaranteeing agency.
32.304–2 Certificate of eligibility.
(a) The contracting officer shall prepare the certificate of eligibility for a
contract that the contracting officer
deems to be of material consequence,
when—
(1) The contract financing office requests it;
(2) Another interested agency requests it; or
(3) The application for a loan guarantee relates to a contract or subcontract within the cognizance of the
contracting officer.
(b) The agency shall evaluate the relevant data, including the certificate of
eligibility, the accompanying data, and
any other relevant information on the
contractor’s financial status and performance, to determine whether authorization of a loan guarantee would
be in the Government’s interest.
(c) If the contractor has several
major national defense contracts, it is
normally not necessary to evaluate the
eligibility of relatively minor contracts. The determination of eligibility
should be processed, without delay,
based on the preponderance of the
amount of the contracts.
(d) The certificate of eligibility shall
include the following determinations:
(1) The supplies or services to be acquired are essential to the national defense.
(2) The contractor has the facilities
and the technical and management
ability required for contract performance.
(3) There is no practicable alternate
source for the acquisition without prejudice to the national defense. (This
statement shall not be included if the
contractor is a small business concern.)
(e) The contracting officer shall consider the following factors in determining if a practicable alternate
source exists:
(1) Prejudice to the national defense,
because reletting of a contract with another source would conflict with a
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32.304–3
48 CFR Ch. 1 (10–1–03 Edition)
major policy on defense acquisition;
e.g., policies relating to the mobilization base.
(2) The urgency of contract performance schedules.
(3) The technical ability and facilities of other potential sources.
(4) The extent to which other sources
would need contract financing to perform.
(5) The willingness of other sources
to enter into contracts.
(6) The time and expense involved in
repurchasing for contracts or parts of
contracts. This may include potential
claims under a termination for convenience or delays incident to default at a
later date.
(7) The comparative prices available
from other sources.
(8) The disruption of established subcontracting arrangements.
(9) Other pertinent factors.
(f) The contracting officer shall attach sufficient data to the certificate
of eligibility to support the determinations made. Available pertinent information shall be included on—
(1) The contractor’s past performance;
(2) The relationship of the contractor’s operations to performance schedules; and
(3) Other factors listed in paragraph
(e) above, if relevant to the case under
consideration.
(g) If the contracting officer determines that a certificate of eligibility is
not justified, the facts and reasons supporting that conclusion shall be documented and furnished to the agency
contract finance office.
(h) The guaranteeing agency shall review the proposed guarantee terms and
conditions. If they are considered appropriate, the guaranteeing agency
shall complete a standard form of authorization as prescribed by the Federal Reserve Board. The agency shall
transmit the authorization through the
Federal Reserve Board to the Federal
Reserve Bank. The Bank is authorized
to execute and deliver to the financing
institution a standard form of guarantee agreement, with the terms and
conditions approved for the particular
case. The financing institution will
then make the loan.
(i) Substantially the same procedure
may be followed for the application of
an offeror who is actively negotiating
or bidding for a defense contract, except that the guarantee shall not be
authorized until the contract has been
executed.
(j) The contracting officer shall report to the agency contract finance office any information about the contractor that would have a potentially
adverse impact on a pending guarantee
application. The contracting officer is
not required, however, to initiate any
special investigation for this purpose.
(k) With regard to existing contracts,
the agency shall not consider the percentage of guarantee requested by the
financing institution in determining
the contractor’s eligibility.
32.304–3
Asset formula.
(a) Under guaranteed loans made primarily for working capital purposes,
the agency shall normally limit the
guarantee, by use of an asset formula,
to an amount that does not exceed a
specified percentage (90 percent or less)
of the contractor’s investment (e.g.,
payrolls and inventories) in defense
production contracts. The asset formula may include all items under defense contracts for which the contractor would be entitled to payment
on performance or termination. The
formula shall exclude—
(1) Amounts for which the contractor
has not done any work or made any expenditure;
(2) Amounts that would become due
as the result of later performance
under the contracts; and
(3) Cash collateral or bank deposit
balances.
(b) Progress payments are deducted
from the asset formula.
(c) The agency may relax the asset
formula to an appropriate extent for
the time actually necessary for contract performance, if the contractor’s
working capital and credit are inadequate.
32.304–4
rity.
Guarantee amount and matu-
The agency may change the guarantee amount or maturity date, within
the limitations at 32.304–3, as follows:
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Federal Acquisition Regulation
32.304–7
(a) If the contractor enters into additional defense production contracts
after the application for, but before authorization of, a guarantee, the agency
may adjust the loan guarantee amount
or maturity date to meet any significant increase in financing need.
(b) If the contractor enters into defense production contracts during the
term of the guaranteed loan, the parties may adjust the existing guarantee
agreement to provide for financing the
new contracts. Pertinent information
and the Federal Reserve Bank reports
will be submitted to the guaranteeing
agency under the procedures for the
original guarantee application, described in 32.304–1. Normally, a new
certificate of eligibility is required.
32.304–5 Assignment of claims under
contracts.
(a) The agency shall generally require a contractor that is provided a
guaranteed loan to execute an assignment of claims under defense production contracts (including any contracts
entered into during the term of the
guaranteed loan that are eligible for financing under the loan); however, the
agency need not require assignment if
any of the following conditions are
present:
(1) The contractor’s financial condition is so strong that the protection to
the Government provided by an assignment of claims is unnecessary.
(2) In connection with the assignment of claims under a major contract,
the increased protection of the loan
that would be provided by the assignments under additional, relatively
smaller contracts is not considered
necessary by the agency.
(3) The assignment of claims would
create an administrative burden disproportionate to the protection required; e.g., if the contractor has a
large number of contracts with individually small dollar amounts.
(b) The contractor shall also execute
an assignment of claims if requested to
do so by the guarantor or the financing
institution.
(c) A subcontract or purchase order
issued to a subcontractor shall not be
considered eligible for financing under
guaranteed loans when the issuer of
the subcontract or purchase order re-
serves (1) the privilege of making payments directly to the assignor or to the
assignor and assignee jointly, after notice of the assignment, or (2) the right
to reduce or set off assigned proceeds
under defense production contracts by
reason of claims against the borrower
arising after notice of assignment and
independently of defense production
contracts under which the borrower is
the seller.
32.304–6
Other collateral security.
The following are examples of other
forms of security that, although seldom invoked under guaranteed loans,
may be required when considered necessary for protection of the Government interest:
(a) Mortgages on fixed assets.
(b) Liens against inventories.
(c) Endorsements.
(d) Guarantees.
(e) Subordinations or standbys of
other indebtedness.
32.304–7 Contract surety bonds and
loan guarantees.
(a) Contract surety bonds are incompatible with the Government’s interests under guaranteed loans, unless the
interests of the surety are subordinated to the guaranteed loan.
(b) If a substantial share of the contractor’s defense contracts are covered
by surety bonds, or the amount of the
bond is substantial in relation to the
contractor’s net worth, the agency
shall not authorize the guarantee of a
loan on a bonded contract unless the
surety enters into an agreement with
the financing institution to subordinate the surety’s rights and claims in
favor of the guaranteed loan.
(c) The agency approval of a guarantee for a loan involving relatively
substantial subcontracts covered by
surety bonds shall also depend on the
establishment of a reasonable allocation agreement between the sureties
and the financing institution. The
agreement should give the financing
institution the benefit, with regard to
payments to be made on the contract,
of the portion of its loans fairly attributable to expenditures made under the
bonded subcontracts before notice of
default.
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32.304–8
32.304–8
48 CFR Ch. 1 (10–1–03 Edition)
Other borrowing.
(a) Because of the limitations under
guaranteed loans, some contractors
seek to supplement the loan by other
borrowing (outside the guarantee) from
the financing institution or other
sources. It has been recognized in practice that, while prohibition of borrowings outside the guaranteed loan is
preferable when practicable in a given
V-loan case, such other borrowings
should be permitted when necessary.
(b) If the agency consents to the contractor obtaining other borrowing during the guaranteed loan period, the
agency shall apply the following restrictions:
(1) A reasonable limit on the amount
of other borrowing.
(2) If guaranteed and unguaranteed
loans are made by the same financing
institution, a requirement that any
collateral security requested by the institution under the unguaranteed loan
is also to be secondary collateral for
the guaranteed loan.
(3) A requirement that the contractor
provide appropriate documentation to
the guaranteeing agency, at intervals
not longer than 30 days, to disclose
outstanding unguaranteed borrowings.
[48 FR 42328, Sept. 19, 1983, as amended at 62
FR 237, Jan. 2, 1997]
contracts that have been totally terminated or (2) the terminated portion of
contracts that have been partially terminated. The agency shall take precautions necessary to avoid Government losses and to ensure the loans
will be self-liquidating from the proceeds of defense production contracts.
(c) Loan guarantees for contract termination financing shall not be provided before specific contract terminations are certain.
32.306 Loan
contracts.
(a) The purpose of guaranteed loans;
i.e., to provide for financing based on
the borrower’s recoverable investment
in defense production contracts, may
also apply to contracts that have been
terminated (partially or totally) for
the convenience of the Government.
Guaranteed loans also may be made before such termination if it is known
that termination of particular contracts for the convenience of the Government is about to occur. These loans
are expected to provide necessary financing pending termination settlements and payments. They may also finance continuing performance of defense production contracts that are eligible for guaranteed loans.
(b) The procedure for such guarantees
is substantially the same as that outlined in 32.304, except that certificates
of eligibility are not required for (1)
for
Subpart 32.4—Advance Payments
for Non-Commercial Items
Scope of subpart.
This subpart provides policies and
procedures for advance payments on
prime contracts and subcontracts. It
does not include policies and procedures for advance payments for the
types of transactions listed in 32.404.
This subpart does not apply to commercial advance payments, which are
subject to subpart 32.2.
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 49714, Sept. 26, 1995]
32.401
Statutory authority.
The agency may authorize advance
payments in negotiated and sealed bid
contracts if the action is appropriate
under (a) section 305 of the Federal
Property and Administrative Services
Act of 1949 (41 U.S.C. 255), (b) the
Armed Services Procurement Act (10
U.S.C. 2307), or (c) Pub. L. 85–804 (50
U.S.C. 1431–1435) and Executive Order
10789, November 14, 1958 (3 CFR 1958
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If the request for a loan guarantee
concerns a subcontractor that is financially weak in comparison with its contractor, the Government’s interests
may be fostered by the contractor
making progress payments to the subcontractor. If so, the agency shall try
to arrange for the contractor to provide the progress payments. As a result, the need for the loan guarantee
may be reduced or eliminated and the
contractor would bear part or all of the
risk of loss arising from the selection
of the subcontractor.
32.400
32.305 Loan guarantees for terminated
contracts.
guarantees
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Federal Acquisition Regulation
32.403
Supp. pp. 72–74) (see part 50 of the Federal Acquisition Regulation (FAR) for
other applications of this statute).
[48 FR 42328, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
32.402
General.
(a) A limitation on authority to
grant advance payments under Pub. L.
85–804 (50 U.S.C. 1431–1435) is described
at FAR 50.203(b)(4).
(b) Advance payments may be provided on any type of contract; however,
the agency shall authorize advance
payments sparingly. Except for the
contracts described in 32.403(a) and (b),
advance payment is the least preferred
method of contract financing (see
32.106) and generally they should not be
authorized if other types of financing
are reasonably available to the contractor in adequate amounts. Loans
and credit at excessive interest rates or
other exorbitant charges, or loans from
other Government agencies, are not
considered reasonably available financing.
(c) If statutory requirements and
standards for advance payment determinations are met, the contracting officer shall generally recommend that
the agency authorize advance payments.
(1) The statutory requirements are
that—
(i) The contractor gives adequate security;
(ii) The advance payments will not
exceed the unpaid contract price (see
32.410(b), subparagraph (a)(2)); and
(iii) The agency head or designee determines, based on written findings,
that the advance payment—
(A) Is in the public interest (under
32.401(a) or (b)); or
(B) Facilitates the national defense
(under 32.401(c)).
(2) The standards for advance payment determinations are that—
(i) The advance payments will not exceed the contractor’s interim cash
needs based on—
(A) Analysis of the cash flow required
for contract performance;
(B) Consideration of the reimbursement or other payment cycle; and
(C) To the extent possible, employment of the contractor’s own working
capital;
(ii) The advance payments are necessary to supplement other funds or
credit available to a contractor;
(iii) The recipient is otherwise qualified as a responsible contractor;
(iv) The Government will benefit
from performance prospects or there
are other practical advantages; and
(v) The case fits one or more of the
categories described in 32.403.
(d) If necessary, the agency may authorize advance payments in addition
to progress or partial payments on the
same contract (see 32.501–1(c)).
(e) Each agency that provides advance payments shall—
(1) Place the responsibility for making findings and determinations, and
for approval of contract terms concerning advance payments (see 32.410),
at an organizational level high enough
to ensure uniform application of this
subpart (see the limitation at 50.201(b)
which also applies to advance payments authorized under Pub. L. 85–804
(50 U.S.C. 1431–1435)); and
(2) Establish procedures for coordination, before advance payment authorization, with the activity that provides
contract financing support.
(f) If the contract provides for advance payments under Pub. L. 85–804,
the contracting officer shall ensure
conformance with the requirements of
FAR 50.307.
[48 FR 42328, Sept. 19, 1983, as amended at 59
FR 67047, Dec. 28, 1994]
32.403 Applicability.
Advance payments may be considered
useful and appropriate for the following:
(a) Contracts for experimental, research, or development work with nonprofit educational or research institutions.
(b) Contracts solely for the management and operation of Governmentowned plants.
(c) Contracts for acquisition at cost
of facilities for Government ownership.
(d) Contracts of such a highly classified nature that the agency considers it
undesirable for national security to
permit assignment of claims under the
contract.
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32.404
48 CFR Ch. 1 (10–1–03 Edition)
(e) Contracts entered into with financially weak contractors whose technical ability is considered essential to
the agency. In these cases, the agency
shall closely monitor the contractor’s
performance and financial controls to
reduce the Government’s financial
risk.
(f) Contracts for which a loan by a
private financial institution is not
practicable, whether or not a loan
guarantee under this part is issued; for
example, if—
(1) Financing institutions will not assume a reasonable portion of the risk
under a guaranteed loan;
(2) Loans with reasonable interest
rates or finance charges are not available to the contractor; or
(3) Contracts involve operations so
remote from a financial institution
that the institution could not be expected to suitably administer a guaranteed loan.
(g) Contracts with small business
concerns, under which circumstances
that make advance payments appropriate often occur (but see 32.104(b)).
(h) Contracts under which exceptional circumstances make advance
payments the most advantageous contract financing method for both the
Government and the contractor.
32.404
Exclusions.
(a) This subpart does not apply to advance payments authorized by law
for—
(1) Rent;
(2) Tuition;
(3) Insurance premiums;
(4) Expenses of investigations in foreign countries;
(5) Extension or connection of public
utilities for Government buildings or
installations;
(6) Subscriptions to publications;
(7) Purchases of supplies or services
in foreign countries, if—
(i) The purchase price does not exceed $10,000 (or equivalent amount of
the applicable foreign currency); and
(ii) The advance payment is required
by the laws or government regulations
of the foreign country concerned;
(8) Enforcement of the customs or
narcotics laws; or
(9) Other types of transactions excluded by agency procedures under
statutory authority.
(b) Agencies may issue their own instructions to deal with advance payment items in paragraph (a) above authorized under statutes relevant to
their agencies.
32.405 Applying Pub. L. 85–804 to advance payments under sealed bid
contracts.
(a) Actions that designated agencies
may take to facilitate the national defense without regard to other provisions of law relating to contracts, as
explained in 50.101(a), also include
making advance payments. These advance payments may be made at or
after award of sealed bid contracts as
well as negotiated contracts.
(b) Bidders may request advance payments before or after award, even if the
invitation for bids does not contain an
advance payment provision. However,
the contracting officer shall reject any
bid requiring that advance payments
be provided as a basis for acceptance.
(c) When advance payments are requested, the agency may—
(1) Enter into the contract and provide for advance payments conforming
to this part 32;
(2) Enter into the contract without
providing for advance payments if the
contractor does not actually need advance payments; or
(3) Deny award of the contract if the
request for advance payments has been
disapproved under 32.409–2 and funds
adequate for performance are not otherwise available to the offeror.
[48 FR 42328, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
32.406
Letters of credit.
(a) The Department of the Treasury
(Treasury) prescribes regulations and
instructions covering the use of letters
of credit for advance payments under
contracts. See Treasury Department
Circular 1075 (31 CFR part 205), and the
implementing instructions in the
Treasury Financial Manual, available
in offices providing financial advice
and assistance.
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Federal Acquisition Regulation
32.407
(b) If agencies provide advance payments to contractors, use of the following methods is required unless the
agency has obtained a waiver from the
Treasury Department:
(1) By letter of credit if the contracting agency expects to have a continuing relationship with the contractor for a year or more, with advances totaling at least $120,000 a year.
(2) By direct Treasury check if the
circumstances do not meet the criteria
in subparagraph (1) above.
(c) If the agency has entered into
multiple contracts (or a combination
of contract(s) and assistance agreement(s)) involving eligibility of a contractor for more than one letter of
credit, the agency shall follow arrangements made under Treasury procedures
for (1) consolidating funding to the
same contractor under one letter of
credit or (2) replacing multiple letters
of credit with a single letter of credit.
(d) The letter of credit enables the
contractor to withdraw Government
funds in amounts needed to cover its
own disbursements of cash for contract
performance. Whenever feasible, the
agency shall, under the direction and
approval of the Department of the
Treasury, use a letter of credit method
that requires the contractor not to
withdraw the Government funds until
the contractor’s checks have been (1)
forwarded to the payees (delay of drawdown technique), or (2) presented to the
contractor’s bank for payment (checks
paid technique) (see 31 CFR 205.3 and
205.4(d)).
(e) The Treasury regulations provide
for terminating the advance financing
arrangement if the contractor is unwilling or unable to minimize the
elapsed time between receipt of the advance and disbursement of the funds.
In such cases, if reversion to normal
payment methods is not feasible, the
Treasury regulation provides for use of
a working capital method of advance;
i.e., for limiting advances to (1) only
the estimated disbursements for a
given initial period and (2) subsequently, for only actual cash disbursements (31 CFR 205.3(k) and 205.7).
[48 FR 42328, Sept. 19, 1983, as amended at 52
FR 19805, May 27, 1987]
32.407 Interest.
(a) Except as provided in paragraph
(d) below, the contracting officer shall
charge interest on the daily unliquidated balance of all advance payments
at the higher of—
(1) The published prime rate of the financial institution (depository) in
which the special account (see 32.409–3)
is established; or
(2) The rate established by the Secretary of the Treasury under 50 U.S.C.
App. 1215(b)(2).
(b) The interest rate for advance payments shall be adjusted for changes in
the prime rate of the depository and
the semiannual determination by the
Secretary of the Treasury under 50
U.S.C. App. 1215(b)(2). The contracting
officer shall obtain data from the depository on changes in the interest
rate during the month. Interest shall
be computed at the end of each month
on the daily unliquidated balance of
advance payments at the applicable
daily interest rate.
(c) Interest shall be required on contracts that are for acquisition, at cost,
of facilities for Government ownership,
if the contracts are awarded in combination with, or in contemplation of,
supply contracts or subcontracts.
(d) The agency head or designee may
authorize advance payments without
interest under the following types of
contracts, if in the Government’s interest:
(1) Contracts for experimental, research, or development work (including
studies, surveys, and demonstrations in
socio-economic areas) with nonprofit
education or research institutions.
(2) Contracts solely for the management and operation of Governmentowned plants.
(3) Cost-reimbursement contracts
with governments, including State or
local governments, or their instrumentalities.
(4) Other classes of contracts, or unusual cases, for which the exclusion of
interest on advances is specifically authorized by agency procedures.
(e) If a contract provides for interestfree advance payments, the contracting
officer may require the contractor to
charge
interest
on
advances
or
downpayments to subcontractors and
credit the Government for the proceeds
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32.408
48 CFR Ch. 1 (10–1–03 Edition)
from the interest charges. Interest
rates shall be determined as described
in paragraphs (a) and (b) above. The
contracting officer need not require the
contractor to charge interest on an advance to a subcontractor that is an institution of the kind described in paragraph (d)(1).
(f) The contracting officer shall not
allow interest charges, required by this
32.407, as reimbursable costs under
cost-reimbursement contracts, whether
the interest charge was incurred by the
prime contractor or a subcontractor.
(6) Other information appropriate to
an understanding of (i) the contractor’s
financial condition and need, (ii) the
contractor’s ability to perform the contract without loss to the Government,
and (iii) financial safeguards needed to
protect the Government’s interest. Ordinarily, if the contract is a type described in 32.403(a) or (b), the contractor may limit the response to this
subparagraph (6) to information on the
contractor’s reliability, technical ability, and accounting system and controls.
[48 FR 42328, Sept. 19, 1983, as amended at 66
FR 2138, Jan. 10, 2001]
[48 FR 42328, Sept. 19, 1983, as amended at 66
FR 2138, Jan. 10, 2001]
32.408 Application for advance payments.
32.409 Contracting officer action.
After analysis of the contractor’s application and any appropriate investigation, the contracting officer shall
recommend approval or disapproval
and transmit the request and recommendation to the approving authority designated under 32.402(e).
(a) A contractor may apply for advance payments before or after the
award of a contract.
(b) The contractor shall submit any
advance payment request in writing to
the contracting officer and provide the
following information:
(1) A reference to the contract if the
request concerns an existing contract,
or a reference to the solicitation if the
request concerns a proposed contract.
(2) A cash flow forecast showing estimated disbursements and receipts for
the period of contract performance. If
the application pertains to a type of
contract described in 32.403(a) or (b),
the contractor shall limit the forecast
to the contract to be financed by advance payments.
(3) The proposed total amount of advance payments.
(4) The name and address of the financial institution at which the contractor expects to establish a special
account as depository for the advance
payments. If advance payments in the
form of a letter of credit are anticipated, the contractor shall identify the
specific account at the financial institution to be used. This subparagraph
(4) is not applicable if an alternate
method is used under agency procedures.
(5) A description of the contractor’s
efforts to obtain unguaranteed private
financing or a V-loan (see 32.301) under
eligible contracts. This requirement is
not applicable to the contract types described in 32.403(a) or (b).
32.409–1 Recommendation
for
approval.
If recommending approval, the contracting officer shall transmit the following, under agency procedures, to
the approving authority:
(a) Contract data, including—
(1) Identification and date of the
award;
(2) Citation of the appropriation;
(3) Type and dollar amount of the
contract;
(4) Items to be supplied, schedule of
deliveries or performance, and status of
any deliveries or performance;
(5) The contract fee or profit contemplated; and
(6) A copy of the contract, if available.
(b) The contractor’s request and supporting information.
(c) A report on the contractor’s past
performance, responsibility, technical
ability, and plant capacity.
(d) Comments on (1) the contractor’s
need for advance payments and (2) potential Government benefits from the
contract performance.
(e) Proposed advance payment contract terms, including proposed security requirements.
(f) The findings, determination, and
authorization (see 32.410).
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Federal Acquisition Regulation
32.410
(g) The recommendation for approval
of the advance payment request.
(h) Justification of any proposal for
waiver of interest charges (see 32.407).
32.409–2 Recommendation
for
disapproval.
If recommending disapproval, the
contracting officer shall, under agency
procedures, transmit—
(a) The items prescribed in 32.409–
1(a), (b), and (c); and
(b) The recommendation for disapproval and the reasons.
32.409–3 Security, supervision, and
covenants.
(a) If advance payments are approved, the contracting officer shall
enter into an agreement with the contractor covering special accounts and
suitable covenants protecting the Government’s interest (see 32.411). This requirement generally applies under all
statutory authorities, but modified requirements applicable to certain specific cases are prescribed in paragraphs
(e) through (g) below.
(b) The agency shall (1) ensure that
the amount of advance payments does
not exceed the contractor’s financial
needs, and (2) closely supervise the contractor’s withdrawal of funds from special accounts in which the advance
payments are deposited.
(c) In the terms of the agreement, the
contracting officer should provide for a
paramount lien in favor of the Government. This lien may supplement or replace other security requirements. The
lien should cover—
(1) Supplies being acquired;
(2) Any credit balance in the special
account in which advance payments
are deposited; and
(3) All property that the contractor
acquires for performing the contract,
except to the extent to which the Government otherwise has valid title to
the property.
(d) Security requirements vary to fit
the circumstances of different cases.
Minimum security requirements are
covered by the clauses prescribed in
the contract. The contracting officer
may supplement these as necessary in
each case for protection of the Government’s interest. Examples of additional
security terms are—
(1) Personal or corporate endorsements or guarantees;
(2) Pledges of collateral;
(3) Subordination or standby of other
indebtedness;
(4) Controls or limitations on profit
distributions, salaries, bonuses or commissions, rentals and royalties, capital
expenditures, creation of liens, retirement of stock or debt, and creation of
additional obligations; and
(5) Advance payment bonds (rarely
required).
(e) In an advance payment agreement
with an instrumentality of the Government, a State, a local government, or
an agency or instrumentality of a
State or local government, the contracting officer may omit the requirement for deposit of the advances in a
special account, if the official approving the advance determines that other
adequate security exists to protect the
Government’s interest.
(f) The requirements of this 32.409–3
do not apply when using letters of credit if an agency’s procedures provide
for—
(1) The use under a cost-reimbursement contract of Federal funds deposited in the contractor’s account at a financial institution (without the contractor acquiring title to the funds);
and
(2) The security of such deposit of
public moneys in accordance with governing regulations of the Treasury Department.
(g) If a separate special account is
not required; e.g., advance payment by
a letter of credit, an agency may require a special account for an individual case, or classes of cases, if the
circumstances warrant.
[48 FR 42328, Sept. 19, 1983, as amended at 66
FR 2138, Jan. 10, 2001]
32.410 Findings, determination, and
authorization.
(a) Each determination concerning
advance payments shall be supported
by
written
findings
(see
32.402(c)(1)(iii)).
(b) The following is an example of the
format and text of findings, determination, and authorization with alternative words, phrases, and paragraphs
to be selected to conform to the circumstances involved:
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32.410
48 CFR Ch. 1 (10–1–03 Edition)
FINDINGS, DETERMINATION, AND AUTHORIZATION FOR ADVANCE PAYMENTS
FINDINGS
(a) The undersigned hereby finds that:
(1) The llll [insert the name of the contracting activity] and llll [insert the name
of the contractor] (have entered) (propose to
enter) into (negotiated) (sealed bid) Contract
No. ll, dated lll
[Summarize the specific facts and significant
circumstances concerning the contract and the
contractor, that, together with the other findings, will clearly support the determination
below.]
(2) Advance payments (in an amount not to
exceed $lll at any time outstanding) (in
an aggregate amount not exceeding $lll,
less the aggregate amounts repaid, or withdrawn by the Government) are required by
the Contractor to perform under the contract. The amount does not exceed the unpaid contract price or the estimated interim
cash needs arising during the reimbursement
cycle.
(3) The advance payments are necessary for
prompt, efficient contract performance that
will benefit the Government.
(4) The proposed advance payment clause
provides for security for the protection of
the Government. The clause requires that all
payments will be desposited in a special account at the Contractor’s financial institution and that the Government will have a
paramount lien on (i) the credit balance in
the special account, (ii) any supplies contracted for, and (iii) any material or other
property acquired for performance of the
contract. [Insert the following, if applicable
(The Contractor’s financial management system provides for effective control over and
accountability for all Federal funds under
governing regulations of the Treasury Department.) (An advance payment bond is required.)] This security is considered adequate.
(5) Advance payments are the only adequate means of financing available to the
Contractor, and the amount designated in (2)
above is based, to the extent possible, on the
use of the Contractor’s own working capital
in performing the contract.
[Insert paragraph (6), (7), or (8), as applicable].
(6) The Contractor is a nonprofit (educational) (and) (research) institution, and
the contract is for (experimental) (,) (research and development) work.
(7) The contract is solely for the management and operation of a Government-owned
plant.
(8) The following unusual facts and circumstances favor making advance payments
to the Contractor without interest:
[List the pertinent facts and circumstances.]
DETERMINATION
(b) Based on the findings in (a) above, the
undersigned determined that the making of
the proposed advance payments, (with interest at the rate of —[Insert the interest rate
computed in accordance with 32.407] percent on
the daily unliquidated balance of the advance payments,) (without interest, except
as provided by the proposed advance payment clause,) (is in the public interest) (will
facilitate the national defense).
AUTHORIZATION
(c) The advance payments, of which (the
amount at any time outstanding) (the aggregate amount, less the aggregate amounts repaid, or withdrawn by the Government),
shall not exceed $ll, are hereby authorized
under (section 305 of the Federal Property
and Administrative Services Act of 1949 (41
U.S.C. 255)) (the Armed Services Procurement Act (10 U.S.C. 2307)) (the Extraordinary
Contracting Authority of Government Agencies in Connection with National Defense
Functions (50 U.S.C. 1431–1435) and Executive
Order No. 10789 of November 14, 1958 (3 CFR
1958 Supp. pp. 72–74)) [or, if other, cite appropriate authority] on (terms substantially as
contained in the proposed advance payment
clause, a copy (an outline) of which is annexed to this authorization) (the following
terms:) [Insert the appropriate terms.]
(All prior authorizations for advance payments under Contract No. lll are superseded.)
llllllllllllllllllllllll
(Signature)
llllllllllllllllllllllll
(Name typed)
llllllllllllllllllllllll
(Title of authorized official)
[Each Findings, Determination, and Authorization shall be individually prepared to fit the
particular circumstances at hand. Subparagraphs (a)(1), (2), (3) and (4) and paragraphs
(b) and (c) shall be used in each case. If the
contract is (a) for experimental, developmental,
or research work and with a nonprofit educational or research institution, or (b) only for
management and operation of a Governmentowned plant, subparagraph (a)(5) should not be
included. If the advance payment is to be made
without interest to the contractor, include subparagraph (a)(6), (7), or (8). If any advance
payments have previously been authorized for
the contract, include the final sentence of paragraph (c). The alternate parenthetical wording
or other modifications may be used as appropriate. The paragraphs actually used shall be
renumbered sequentially].
[48 FR 42328, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 66 FR 2138, Jan. 10, 2001]
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Federal Acquisition Regulation
32.412
32.411 Agreement for special account
at a financial institution.
The contracting officer must use substantially the following form of agreement for a special account for advance
payments:
Agreement for Special Account
This agreement is entered into this ll
day of ll, 20ll, between the United States
of America (the Government), represented by
the Contracting Officer executing this agreement, llll [Insert the name of the Contractor], a llll [Insert the name of the State
of incorporation] corporation (the Contractor), and llll, a financial institution
operating under the laws of llll, located
at llll (the financial institution).
Recitals
(a) Under date of llll, 20llll, the
Government and the Contractor entered into
Contract No. ll, or a related supplemental
agreement, providing for advance payments
to the Contractor. A copy of the advance
payment terms was furnished to the financial institution.
(b) The contract or supplemental agreement requires that amounts advanced to the
Contractor be deposited separate from the
Contractor’s general or other funds, in a Special Account at a member bank of the Federal Reserve System, any ‘‘insured’’ bank
within the meaning of the Act creating the
Federal Deposit Insurance Corporation (12
U.S.C. 1811), or a credit union insured by the
National Credit Union Administration. The
parties agree to deposit the amounts with
the financial institution, which meets the requirement.
(c) This Special Account is designated
‘‘llll[Insert the Contractor’s name],
llll [Insert the name of the Government
agency] Special Account.’’
Covenants
In consideration of the foregoing, and for
other good and valuable considerations, the
parties agree to the following conditions:
(a) The Government shall have a lien on
the credit balance in the account to secure
the repayment of all advance payments
made to the Contractor. The lien is paramount to any lien or claim of the financial
institution regarding the account.
(b) The financial institution is bound by
the terms of the contract relating to the deposit and withdrawal of funds in the Special
Account, but is not responsible for the application of funds withdrawn from the account.
The financial institution shall act on written
directions from the Contracting Officer, the
administering office, or a duly authorized
representative of either. The financial institution is not liable to any party to this
agreement for any action that complies with
the written directions. Any written directions received by the financial institution
through the Contracting Officer on llll
[Insert the name of the agency] stationery and
purporting to be signed by, or by the direction of llll or duly authorized representative, shall be, as far as the rights, duties,
and liabilities of the financial institution are
concerned, considered as being properly
issued and filed with the financial institution by the llll [Insert the name of the
agency].
(c) The Government, or its authorized representatives, shall have access to the books
and records maintained by the financial institution regarding the Special Account at
all reasonable times and for all reasonable
purposes, including (but not limited to), the
inspection or copying of the books and
records and any and all pertinent memoranda, checks, correspondence, or documents. The financial institution shall preserve the books and records for a period of 6
years after the closing of this Special Account.
(d) In the event of the service of any writ
of attachment, levy of execution, or commencement of garnishment proceedings regarding the Special Account, the financial
institution will promptly notify llll
[Insert the name of the administering office].
(e) While this Special Account exists, the
financial institution shall inform the Government each month of the financial institution’s published prime interest rate and
changes to the rate during the month. The
financial institution shall give this information to the Contracting Officer on the last
business day of the month. [This covenant will
not be included in the Special Account Agreements covering interest-free advance payments.]
Each of the parties to this agreement has
executed the agreement on llll, 20ll.
llllllllllllllllllllllll
llllllllllllllllllllllll
[Signatures and Official Titles]
[66 FR 2138, Jan. 10, 2001]
32.412
Contract clause.
(a) The contracting officer shall insert the clause at 52.232–12, Advance
Payments, in solicitations and contracts under which the Government
will provide advance payments, except
as provided in 32.412(b).
(b) If the agency desires to waive the
countersignature requirement because
of the contractor’s financial strength,
good performance record, and favorable
experience concerning cost disallowances, the contracting officer shall use
the clause with its Alternate I.
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32.500
48 CFR Ch. 1 (10–1–03 Edition)
(c) If a cost-reimbursement contract
is contemplated, the contracting officer shall use the clause with its Alternate II.
(d) If the agency considers a more
rapid liquidation appropriate, the contracting officer shall use the clause
with its Alternate III.
(e) If the agency provides advance
payments under the contract at no interest to the prime contractor, the contracting officer shall use the clause
with its Alternate IV.
(f) If the requirement for a special account is eliminated in accordance with
32.409–3 (e) or (g), the contracting officer shall insert in the solicitation or
contract the clause set forth in Alternate V of 52.232–12, Advance Payments,
instead of the basic clause.
[48 FR 42328, Sept. 19, 1983, as amended at 55
FR 25530, June 21, 1990; 66 FR 2138, Jan. 10,
2001]
Subpart 32.5—Progress Payments
Based on Costs
32.500 Scope of subpart.
This subpart prescribes policies, procedures, forms, solicitation provisions,
and contract clauses for providing contract financing through progress payments based on costs. This subpart
does not apply to—
(a) Payments under cost-reimbursement contracts, but see 32.110 for
progress payments made to subcontractors under cost-reimbursement prime
contracts; or
(b) Contracts for construction or for
shipbuilding or ship conversion, alteration, or repair, when the contracts
provide for progress payments based on
a percentage or stage of completion.
[48 FR 42328, Sept. 19, 1983, as amended at 65
FR 16279, Mar. 27, 2000]
32.501 General.
Progress payments may be customary
or
unusual.
Customary
progress payments are those made
under the general guidance in this subpart, using the customary progress
payment rate, the cost base, and frequency of payment established in the
Progress Payments clause, and either
the ordinary liquidation method or the
alternate method as provided in sub-
sections 32.503–8 and 32.503–9. Any other
progress payments are considered unusual, and may be used only in exceptional cases when authorized in accordance with subsection 32.501–2.
32.501–1 Customary progress payment
rates.
(a) The customary progress payment
rate is 80 percent, applicable to the
total costs of performing the contract.
The customary rate for contracts with
small business concerns is 85 percent.
(b) The contracting officer must—
(1) Consider any rate higher than
those permitted in paragraph (a) of this
section an unusual progress payment;
and
(2) Not include a higher rate in a contract unless advance agency approval
is obtained as prescribed in 32.501–2.
(c) When advance payments and
progress payments are authorized
under the same contract, the contracting officer must not authorize a
progress payment rate higher than the
customary rate.
(d) In accordance with 10 U.S.C.
2307(e)(2) and 41 U.S.C. 255, the limit for
progress payments is 80 percent on
work accomplished under undefinitized
contract actions. The contracting officer must not authorize a higher rate
under unusual progress payments or
other customary progress payments for
the undefinitized actions.
[65 FR 16279, Mar. 27, 2000]
32.501–2
Unusual progress payments.
(a) The contracting officer may provide unusual progress payments only
if—
(1)
The
contract
necessitates
predelivery expenditures that are large
in relation to contract price and in relation to the contractor’s working capital and credit;
(2) The contractor fully documents
an actual need to supplement any private financing available, including
guaranteed loans; and
(3) The contractor’s request is approved by the head of the contracting
activity or a designee. In addition, see
32.502–2.
(b) The excess of the unusual
progress payment rate approved over
the customary progress payment rate
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32.502–2
should be the lowest amount possible
under the circumstances.
(c) Progress payments will not be
considered unusual merely because
they are on letter contracts or the definitive contracts that supersede letter
contracts.
32.501–3
Contract price.
(a) For the purpose of making
progress payments and determining the
limitation on progress payments, the
contract price shall be as follows:
(1) Under firm-fixed-price contracts,
the contract price is the current contract price plus any unpriced modifications for which funds have been obligated.
(2) If the contract is redeterminable
or subject to economic price adjustment, the contract price is the initial
price until modified.
(3) Under a fixed-price incentive contract, the contract price is the target
price plus any unpriced modifications
for which funds have been obligated.
However, if the contractor’s properly
incurred costs exceed the target price,
the contracting officer may provisionally increase the price up to the ceiling
or maximum price.
(4) Under a letter contract, the contract price is the maximum amount obligated by the contract as modified.
(5) Under an unpriced order issued
against a basic ordering agreement, the
contract price is the maximum amount
obligated by the order, as modified.
(6) Any portion of the contract specifically providing for reimbursement
of costs only shall be excluded from the
contract price.
(b) The contracting officer shall not
make progress payments or increase
the contract price beyond the funds obligated under the contract, as amended.
32.501–4
[Reserved]
32.501–5
Other protective terms.
If the contracting officer considers it
necessary for protection of the Government’s interest, protective terms such
as the following may be used in addition to the Progress Payments clause
of the contract:
(a) Personal or corporate guarantees.
(b) Subordinations or standbys of indebtedness.
(c) Special bank accounts.
(d) Protective covenants of the kinds
in paragraph (p) of the clause at 52.232–
12, Advance Payments.
(e) A provision, included in the solicitation and resultant contract when
first article testing is required (see
subpart 9.3), limiting progress payments on first article work by a stated
amount or percentage.
[48 FR 42328, Sept. 19, 1983, as amended at 55
FR 52794, Dec. 21, 1990]
32.502
Preaward matters.
This section covers matters that generally are relevant only before contract
award. This does not preclude taking
actions discussed here after award, if
appropriate; e.g., postaward addition of
a Progress Payments clause for consideration.
32.502–1 Use of customary progress
payments.
The contracting officer may use a
Progress Payments clause in solicitations and contracts, in accordance with
this subpart. The contracting officer
must reject as nonresponsive bids conditioned on progress payments when
the solicitation did not provide for
progress payments.
[65 FR 16280, Mar. 27, 2000]
32.502–2 Contract finance office clearance.
The contracting officer shall obtain
the approval of the contract finance office or other offices designated under
agency procedures before taking any of
the following actions:
(a) Providing a progress payment
rate higher than the customary rate
(see 32.501–1).
(b) Deviating from the progress payments terms prescribed in this part.
(c) Providing progress payments to a
contractor—
(1) Whose financial condition is in
doubt;
(2) Who has had an advance payment
request or loan guarantee denied for financial reasons (or approved but withdrawn or lapsed) within the previous 12
months; or
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32.502–3
48 CFR Ch. 1 (10–1–03 Edition)
(3) Who is named in the consolidated
list of contractors indebted to the
United States (known commonly as the
Hold-up List).
32.502–3 Solicitation provisions.
(a) The contracting officer shall insert the provision at 52.232–13, Notice of
Progress Payments, in invitations for
bids and requests for proposals that include a Progress Payments clause.
(b)(1) Under the authority of the statutes cited in 32.101, an invitation for
bids may restrict the availability of
progress payments to small business
concerns only.
(2) The contracting officer shall insert the provision at 52.232–14, Notice of
Availability of Progress Payments Exclusively for Small Business Concerns,
in invitations for bids if it is anticipated that (1) both small business concerns and others may submit bids in response to the same invitation and (2)
only the small business bidders would
need progress payments.
(c) The contracting officer shall insert the provision at 52.232–15, Progress
Payments Not Included, in invitations
for bids if the solicitation will not contain one of the provisions prescribed in
paragraphs (a) and (b) above.
32.502–4 Contract clauses.
(a)(1) Insert the clause at 52.232–16,
Progress Payments, in—
(i) Solicitations that may result in
contracts providing for progress payments based on costs; and
(ii) Fixed-price contracts under
which the Government will provide
progress payments based on costs.
(2) If advance agency approval has
been given in accordance with 32.501–1,
the contracting officer may substitute
a different customary rate for other
than small business concerns for the
progress payment and liquidation rate
indicated.
(3) If an unusual progress payment
rate is approved for the prime contractor (see 32.501–2), substitute the approved rate for the customary rate in
paragraphs (a)(1), (a)(6), and (b) of the
clause.
(4) If the liquidation rate is changed
from the customary progress payment
rate (see 32.503–8 and 32.503–9), substitute the new rate for the rate in
paragraphs (a)(1), (a)(6), and (b) of the
clause.
(5) If an unusual progress payment
rate is approved for a subcontract (see
32.504(c) and 32.501–2), modify paragraph (j)(6) of the clause to specify the
new rate, the name of the subcontractor, and that the new rate shall be
used for that subcontractor in lieu of
the customary rate.
(b) If the contractor is a small business concern, use the clause with its
Alternate I.
(c) If the contract is a letter contract, use the clause with its Alternate
II.
(d) If the contractor is not a small
business concern, and progress payments are authorized under an indefinite-delivery contract, basic ordering
agreement, or their equivalent, use the
clause with its Alternate III.
(e) If the nature of the contract necessitates separate progress payment
rates for portions of work that are
clearly severable and accounting segregation would be maintained (e.g., annual production requirements), describe the application of separate
progress payment rates in a supplementary special provision within the
contract. The contractor must submit
separate progress payment requests
and subsequent invoices for the severable portions of work in order to maintain accounting integrity.
[65 FR 16280, Mar. 27, 2000, as amended at 65
FR 24325, Apr. 25, 2000]
32.503
Postaward matters.
This section covers matters that are
generally relevant only after award of
a contract. This does not preclude taking actions discussed here before
award, if appropriate; e.g., preaward review of accounting systems and controls.
32.503–1
Contractor requests.
Each contractor request for progress
payment must—
(a) Be submitted on Standard Form
1443, Contractor’s Request for Progress
Payment, in accordance with the form
instructions and the contract terms;
(b) Include any additional information reasonably requested by the contracting officer; and
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(c) Be $2,500 or more, unless agency
procedures authorize a lower amount.
[65 FR 16280, Mar. 27, 2000]
32.503–2 Supervision of progress payments.
(a) The extent of progress payments
supervision, by prepayment review or
periodic review, should vary inversely
with the contractor’s experience, performance record, reliability, quality of
management, and financial strength,
and with the adequacy of the contractor’s accounting system and controls.
Supervision shall be of a kind and degree sufficient to provide timely
knowledge of the need for, and timely
opportunity for, any actions necessary
to protect Government interests.
(b) The administering office must
keep itself informed of the contractor’s
overall operations and financial condition, since difficulties encountered and
losses suffered in operations outside
the particular progress payment contract may affect adversely the performance of that contract and the liquidation of the progress payments.
(c) For contracts with contractors (1)
whose financial condition is doubtful
or not strong in relation to progress
payments outstanding or to be outstanding, (2) with management of
doubtful capacity, (3) whose accounting
controls are found by experience to be
weak, or (4) experiencing substantial
difficulties in performance, full information on progress under the contract
involved (including the status of subcontracts) and on the contractor’s
other operations and overall financial
condition should be obtained and analyzed frequently, with a view to protecting the Government’s interests better and taking such action as may be
proper to make contract performance
more certain.
(d) So far as practicable, all cost
problems, particularly those involving
indirect costs, that are likely to create
disagreements in future administration
of the contract should be identified and
resolved at the inception of the contract (see 31.109).
32.503–3 Initiation of progress payments and review of accounting
system.
(a) For contractors that the administrative contracting officer (ACO) has
found by previous experience or recent
audit review (within the last 12
months) to be (1) reliable, competent,
and capable of satisfactory performance, (2) possessed of an adequate accounting system and controls, and (3)
in sound financial condition, progress
payments in amounts requested by the
contractor should be approved as a
matter of course.
(b) For all other contractors, the
ACO shall not approve progress payments before determining (1) that (i)
the contractor will be capable of liquidating any progress payments or (ii)
the Government is otherwise protected
against loss by additional protective
provisions, and (2) that the contractor’s accounting system and controls
are adequate for proper administration
of progress payments. The services of
the responsible audit agency or office
should be used to the greatest extent
practicable. However, if the auditor so
advises, a complete audit may not be
necessary.
[48 FR 42328, Sept. 19, 1983, as amended at 63
FR 9061, Feb. 23, 1998]
32.503–4 Approval of progress payment requests.
(a) When the reliability of the contractor and the adequacy of the contractor’s accounting system and controls have been established (see 32.503–
3 above) the ACO may, in approving
any particular progress payment request (including initial requests on new
contracts), rely upon that accounting
system and upon the contractor’s certification, without requiring audit or
review of the request before payment.
(b) The ACO should not routinely ask
for audits of progress payment requests. However, when there is reason
to (1) question the reliability or accuracy of the contractor’s certification or
(2) believe that the contract will involve a loss, the ACO should ask for a
review or audit of the request before
payment is approved or the request is
otherwise disposed of.
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32.503–5
48 CFR Ch. 1 (10–1–03 Edition)
(c) When there is reason to doubt the
amount of a progress payment request,
only the doubtful amount should be
withheld, subject to later adjustment
after review or audit; any clearly proper and due amounts should be paid
without awaiting resolution of the differences.
32.503–5 Administration
payments.
of
progress
(a) While the ACO may, in approving
progress
payment
requests
under
32.503–3 above, rely on the contractor’s
accounting system and certification
without
prepayment
review,
postpayment reviews (including audits
when considered necessary) shall be
made periodically, or when considered
desirable by the ACO to determine the
validity of progress payments already
made and expected to be made.
(b) These postpayment reviews or audits shall, as a minimum, include a determination of whether or not—
(1) The unliquidated progress payments are fairly supported by the value
of the work accomplished on the undelivered portion of the contract;
(2) The applicable limitation on
progress payments in the Progress
Payments clause has been exceeded;
(3)(i) The unpaid balance of the contract price will be adequate to cover
the anticipated cost of completion, or
(ii) The contractor has adequate resources to complete the contract; and
(4) There is reason to doubt the adequacy and reliability of the contractor’s accounting system and controls
and certification.
(c) Under indefinite-delivery contracts, the contracting officer should
administer progress payments made
under each individual order as if the
order constituted a separate contract,
unless agency procedures provide otherwise. When the contract will be administered by an agency other than the
awarding agency, the contracting officer shall coordinate with the contract
administration office if the awarding
agency wants the administration of
progress payments to be on a basis
other than order—by— order.
[48 FR 42328, Sept. 19, 1983, as amended at 65
FR 16280, Mar. 27, 2000; 68 FR 13208, Mar. 18,
2003]
32.503–6 Suspension or reduction of
payments.
(a) General. The Progress Payments
clause provides a Government right to
reduce or suspend progress payments,
or to increase the liquidation rate,
under specified conditions. These conditions and actions are discussed in
paragraphs (b) through (g) below.
(1) The contracting officer shall take
these actions only in accordance with
the
contract
terms
and
never
precipitately or arbitrarily. These actions should be taken only after—
(i) Notifying the contractor of the intended action and providing an opportunity for discussion;
(ii) Evaluating the effect of the action on the contractor’s operations,
based on the contractor’s financial condition, projected cash requirements,
and the existing or available credit arrangements; and
(iii) Considering the general equities
of the particular situation.
(2) The contracting officer shall take
immediate unilateral action only if
warranted by circumstances such as
overpayments or unsatisfactory contract performance.
(3) In all cases, the contracting officer shall (i) act fairly and reasonably,
(ii) base decisions on substantial evidence, and (iii) document the contract
file. Findings made under paragraph (c)
of the Progress Payments clause shall
be in writing.
(b) Contractor noncompliance. (1) The
contractor must comply with all material requirements of the contract. This
includes the requirement to maintain
an efficient and reliable accounting
system and controls, adequate for the
proper administration of progress payments. If the system or controls are
deemed inadequate, progress payments
shall be suspended (or the portion of
progress payments associated with the
unacceptable portion of the contractor’s accounting system shall be suspended) until the necessary changes
have been made.
(2) If the contractor fails to comply
with the contract without fault or negligence, the contracting officer will not
take action permitted by paragraph
(c)(1) of the Progress Payments clause,
other than to correct overpayments
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and collect amounts due from the contractor.
(c) Unsatisfactory financial condition.
(1) If the contracting officer finds that
contract performance (including full
liquidation of progress payments) is endangered by the contractor’s financial
condition, or by a failure to make
progress, the contracting officer shall
require the contractor to make additional operating or financial arrangements adequate for completing the
contract without loss to the Government.
(2) If the contracting officer concludes that further progress payments
would increase the probable loss to the
Government, the contracting officer
shall suspend progress payments and
all other payments until the unliquidated balance of progress payments is
eliminated.
(d) Excessive inventory. If the inventory allocated to the contract exceeds
reasonable requirements (including a
reasonable accumulation of inventory
for continuity of operations), the contracting officer should, in addition to
requiring the transfer of excessive inventory from the contract, take one or
more of the following actions, as necessary, to avoid or correct overpayment:
(1) Eliminate the costs of the excessive inventory from the costs eligible
for progress payments, with appropriate reduction in progress payments
outstanding.
(2) Apply additional deductions to
billings for deliveries (increase liquidation).
(e) Delinquency in payment of costs of
performance. (1) If the contractor is delinquent in paying the costs of contract performance in the ordinary
course of business, the contracting officer shall evaluate whether the delinquency is caused by an unsatisfactory
financial condition and, if so, shall
apply the guidance in paragraph (c)
above. If the contractor’s financial condition is satisfactory, the contracting
officer shall not deny progress payments if the contractor agrees to—
(i) Cure the payment delinquencies;
(ii) Avoid further delinquencies; and
(iii) Make additional arrangements
adequate for completing the contract
without loss to the Government.
(2) If the contractor has, in good
faith, disputed amounts claimed by
subcontractors, suppliers, or others,
the contracting officer shall not consider the payments delinquent until
the amounts due are established by the
parties through litigation or arbitration. However, the amounts shall be excluded from costs eligible for progress
payments so long as they are disputed.
(3) Determinations of delinquency in
making contributions under employee
pension, profit sharing, or stock ownership plans, and exclusion of costs for
such contributions from progress payment requests, shall be in accordance
with paragraph (a)(3) of the clause at
52.232–16, Progress Payments, without
regard to the provisions of 32.503–6.
(f) Fair value of undelivered work.
Progress payments must be commensurate with the fair value of work accomplished in accordance with contract requirements. Governed by the principles
of paragraphs (c) and (e) of this subsection, the contracting officer must
adjust progress payments when necessary to ensure that the fair value of
undelivered work equals or exceeds the
amount of unliquidated progress payments. On loss contracts, the application of a loss ratio as described in paragraph (g) of this subsection constitutes
this adjustment.
(g) Loss contracts. (1) If the sum of the
total costs incurred under a contract
plus the estimated costs to complete
the performance are likely to exceed
the contract price, the contracting officer shall compute a loss ratio factor
and adjust future progress payments to
exclude the element of loss. The loss
ratio factor is computed as follows:
(i) Revise the current contract price
used in progress payment computations (the current ceiling price under
fixed-price incentive contracts) to include any pending change orders and
unpriced orders to the extent funds for
the orders have been obligated.
(ii) Divide the revised contract price
by the sum of the total costs incurred
to date plus the estimated additional
costs of completing the contract performance.
(2) If the contracting officer believes
a loss is probable, future progress payment requests shall be modified as follows:
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32.503–7
48 CFR Ch. 1 (10–1–03 Edition)
(i) The contract price shall be the revised amount computed under subparagraph (1)(i) above.
(ii) The total costs eligible for
progress payments shall be the product
of (A) the sum of paid costs eligible for
progress payments times (B) the loss
ratio factor computed under subparagraph (1)(ii) above.
(iii) The costs applicable to items delivered, invoiced, and accepted shall
not include costs in excess of the contract price of the items.
(3) The contracting officer may use
audit assistance, technical services,
management reports, and other sources
of pertinent data to evaluate progress
payment requests. If the contracting
officer concludes that the contractor’s
figures in the contractor’s progress
payment request are not correct, the
contracting officer shall—
(i) In the manner prescribed in paragraph (4) below, prepare a supplementary analysis to be attached to the
contractor’s request;
(ii) Advise the contractor in writing
of the differences; and
(iii) Adjust all further progress payments in accordance with paragraph (1)
above, using the contracting officer’s
figures, until the difference is resolved.
(4) The following is an example of the
supplementary analysis required in
paragraph (g)(3) of this subsection:
Section I
Contract price. ................
$2,850,000
Change orders and unpriced orders (to extent
funds have been obligated) ...........................
150,000
Revised contract price ....
3,000,000
Section II
Total costs incurred to
date ..............................
2,700,000
Estimated additional
costs to complete .........
900,000
Total costs to complete ...
3,600,000
Loss ratio factor
$3,000,000
= 83.3%
$3,600,000
Total costs eligible for
progress payments ........
Loss ratio factor ..............
Recognized costs for
progress payments ........
2,700,000
×83.3%
2,249,100
Progress payment rate ....
Alternate amount to be
used ..............................
Section III
Factored costs of items
delivered* .....................
Recognized costs applicable to undelivered items
($2,249,100–750,000) .........
×80.0%
1,799,280
750,000
1,499,100
* This amount must be the same as the contract
price of the items delivered.
[48 FR 42328, Sept. 19, 1983, as amended at 52
FR 30077, Aug. 12, 1987; 54 FR 5056, Jan. 31,
1989; 54 FR 48989, Nov. 28, 1989; 64 FR 72451,
Dec. 27, 1999; 65 FR 16280, Mar. 27, 2000]
32.503–7
[Reserved]
32.503–8 Liquidation
method.
rates—ordinary
The Government recoups progress
payments through the deduction of liquidations from payments that would
otherwise be due to the contractor for
completed contract items. To determine the amount of the liquidation,
the contracting officer applies a liquidation rate to the contract price of
contract items delivered and accepted.
The ordinary method is that the liquidation rate is the same as the
progress payment rate. At the beginning of a contract, the contracting officer must use this method.
[65 FR 16280, Mar. 27, 2000]
32.503–9 Liquidation
method.
rates—alternate
(a) The liquidation rate determined
under 32.503–8 shall apply throughout
the period of contract performance unless the contracting officer adjusts the
liquidation rate under the alternate
method in this 32.503–9. The objective
of the alternate liquidation rate method is to permit the contractor to retain
the earned profit element of the contract prices for completed items in the
liquidation process. The contracting officer may reduce the liquidation rate
if—
(1) The contractor requests a reduction in the rate;
(2) The rate has not been reduced in
the preceding 12 months;
(3) The contract delivery schedule extends at least 18 months from the contract award date;
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32.503–10
the initial contract. The parties shall
promptly make the payment or liquidation required in the circumstances.
32.503–10 Establishing
uidation rates.
alternate
(a) The contracting officer must ensure that the liquidation rate is—
(1) High enough to result in Government recoupment of the applicable
progress payments on each billing; and
(2) Supported by documentation included in the administration office
contract file.
(b) The minimum liquidation rate is
the expected progress payments divided by the contract price. Each of
these factors is discussed below:
(1) The contracting officer must compute the expected progress payments
by multiplying the estimated cost of
performing the contract by the
progress payment rate.
(2) For purposes of computing the liquidation rate, the contracting officer
may adjust the estimated cost and the
contract price to include the estimated
value of any work authorized but not
yet priced and any projected economic
adjustments; however, the contracting
officer’s adjustment must not exceed
the Government’s estimate of the price
of all authorized work or the funds obligated for the contract.
(3) The following are examples of the
computation. Assuming an estimated
price of $2,200,000 and total estimated
costs eligible for progress payments of
$2,000,000:
(i) If the progress payment rate is 80
percent, the minimum liquidation rate
should be 72.7 percent, computed as follows:
$2,000,000 × 80%
= 72.7%
$2,200,000
(ii) If the progress payment rate is 85
percent, the minimum liquidation rate
should be 77.3 percent, computed as follows:
(4) Minimum liquidation rates will
generally be expressed to tenths of a
percent. Decimals between tenths will
be rounded up to the next highest tenth
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= 77.3%
$2,200,000
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(4) Data on actual costs are available
(i) for the products delivered, or (ii) if
no deliveries have been made, for a performance period of at least 12 months;
(5) The reduced liquidation rate
would result in the Government recouping under each invoice the full extent of the progress payments applicable to the costs allocable to that invoice;
(6) The contractor would not be paid
for more than the costs of items delivered and accepted (less allocable
progress payments) and the earned
profit on those items;
(7) The unliquidated progress payments would not exceed the limit prescribed in paragraph (a)(4) of the
Progress Payments clause;
(8) The parties agree on an appropriate rate; and
(9) The contractor agrees to certify
annually, or more often if requested by
the contracting officer, that the alternate rate continues to meet the conditions of subsections 5, 6, and 7 above.
The certificate must be accompanied
by adequate supporting information.
(b) The contracting officer shall
change the liquidation rate in the following circumstances:
(1) The rate shall be increased for
both previous and subsequent transactions, if the contractor experiences a
lower profit rate than the rate anticipated at the time the liquidation rate
was established. Accordingly, the contracting officer shall adjust the
progress payments associated with contract items already delivered, as well
as subsequent progress payments.
(2) The rate shall be increased or decreased in keeping with the successive
changes to the contract price or target
profit when—
(i) The target profit is changed under
a fixed-price incentive contract with
successive targets; or
(ii) A redetermined price involves a
change in the profit element under a
contract with prospective price redetermination at stated intervals.
(c) Whenever the liquidation rate is
changed, the contracting officer shall
issue a contract modification to specify the new rate in the Progress Payments clause. Adequate consideration
for these contract modifications is provided by the consideration included in
32.503–11
48 CFR Ch. 1 (10–1–03 Edition)
(not necessarily the nearest tenth),
since rounding down would produce a
rate below the minimum rate calculated.
[48 FR 42328, Sept. 19, 1983, as amended 52 FR
30077, Aug. 12, 1987; 65 FR 16281, Mar. 27, 2000]
32.503–11
tion.
Adjustments for price reduc-
(a) If a retroactive downward price
reduction occurs under a redeterminable contract that provides for
progress payments, the contracting officer shall—
(1) Determine the refund due and obtain repayment from the contractor for
the excess of payments made for delivered items over amounts due as recomputed at the reduced prices; and
(2) Increase the unliquidated progress
payments amount for overdeductions
made from the contractor’s billings for
items delivered.
(b) The contracting officer shall also
increase the unliquidated progress payments amount if the contractor makes
an interim or voluntary price reduction under a redeterminable or incentive contract.
32.503–12 Maximum
amount.
unliquidated
(a) The contracting officer shall ensure that any excess of the unliquidated progress payments over the contractual limitation in paragraph (a) of
the Progress Payments clause in the
contract is promptly corrected through
one or more of the following actions:
(1) Increasing the liquidation rate.
(2) Reducing the progress payment
rate.
(3) Suspending progress payments.
(b) The excess described in paragraph
(a) above is most likely to arise under
the following circumstances:
(1) The costs of performance exceed
the contract price.
(2) The alternate method of liquidation (see 32.503–9) is used and the actual
costs of performance exceed the cost
estimates used to establish the liquidation rate.
(3) The rate of progress or the quality
of contract performance is unsatisfactory.
(4) The rate of rejections, waste, or
spoilage is excessive.
(c) As required, the services of the responsible audit agency or office should
be fully utilized, along with the services of qualified cost analysis and engineering personnel.
[48 FR 42328, Sept. 19, 1983, as amended at 63
FR 9061, Feb. 23, 1998]
32.503–13
[Reserved]
32.503–14 Protection of Government
title.
(a) Since the Progress Payments
clause gives the Government title to
all of the materials, work-in-process,
finished goods, and other items of property described in paragraph (d) of the
Progress Payments clause, under the
contract under which progress payments have been made, the ACO must
ensure that the Government title to
these inventories is not compromised
by other encumbrances. Ordinarily, the
ACO, in the absence of reason to believe otherwise, may rely upon the contractor’s certification contained in the
progress payment request.
(b) If the ACO becomes aware of any
arrangement or condition that would
impair the Government’s title to the
property affected by progress payment,
the ACO shall require additional protective provisions (see 32.501–5) to establish and protect the Government’s
title.
(c) The existence of any such encumbrance is a violation of the contractor’s obligations under the contract,
and the ACO may, if necessary, suspend
or reduce progress payments under the
terms of the Progress Payments clause
covering failure to comply with any
material requirement of the contract.
In addition, if the contractor fails to
disclose an existing encumbrance in
the progress payments certification,
the ACO should consult with legal
counsel concerning possible violation
of 31 U.S.C. 3729, the False Claims Act.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986]
32.503–15 Application of Government
title terms.
(a) Property to which the Government obtains title by operation of the
Progress Payments clause solely is not,
as a consequence, Government-furnished property.
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32.504
(b) Although property title is vested
in the Government under the Progress
Payments clause, the acquisition, handling, and disposition of certain types
of property are governed by other
clauses, as follows:
(1) The clause at 52.245–17, Special
Tooling, for special tooling.
(2) The termination clauses at 52.249,
for termination inventory.
(c) The contractor may sell or otherwise dispose of current production
scrap in the ordinary course of business
on its own volition, even if title has
vested in the Government under the
Progress Payments clause. The contracting officer shall require the contractor to credit the costs of the contract performance with the proceeds of
the scrap disposition.
(d) When the title to materials or
other inventories is vested in the Government under the Progress Payments
clause, the contractor may transfer the
inventory items from the contract for
its own use or other disposition only if,
and on terms, approved by the contracting officer. The contractor shall
(1) eliminate the costs allocable to the
transferred property from the costs of
contract performance, and (2) repay or
credit to the Government an amount
equal to the unliquidated progress payments, allocable to the transferred
property.
(e) If excess property remains after
the contract performance is complete
and all contractor obligations under
the contract are satisfied, including
full liquidation of progress payments,
the excess property is outside the scope
of the Progress Payments clause.
Therefore, the contractor holds title to
it.
32.503–16
Risk of loss.
(a) Under the Progress Payments
clause, and except for normal spoilage,
the contractor bears the risk for loss,
theft, destruction, or damage to property affected by the clause, even
though title is vested in the Government, unless the Government has expressly assumed this risk. The clauses
prescribed in this regulation related to
progress payments, default, and terminations do not constitute a Government assumption of this risk.
(b) If a loss occurs in connection with
property for which the contractor
bears the risk, the contractor is obligated to repay to the Government the
amount of unliquidated progress payments based on costs allocable to the
property.
(c) The contractor is not obligated to
pay for the loss of property for which
the Government has assumed the risk
of loss. However, a serious loss may impede the satisfactory progress of contract performance, so that the contracting officer may need to act under
paragraph (c)(5) of the Progress Payments clause.
32.504 Subcontracts under prime contracts providing progress payments.
(a) Subcontracts may include either
performance-based payments, provided
they meet the criteria in 32.1003, or
progress payments, provided they meet
the criteria in subpart 32.5 for customary progress payments, but not
both. Subcontracts for commercial purchases may include commercial item
purchase financing terms, provided
they meet the criteria in 32.202–1.
(b) The contractor’s requests for
progress payments may include the full
amount of commercial item purchase
financing
payments,
performancebased payments, or progress payments
to a subcontractor, whether paid or unpaid, provided that unpaid amounts are
limited to amounts determined due and
that the contractor will pay—
(1) In accordance with the terms and
conditions of a subcontract or invoice;
and
(2) Ordinarily within 30 days of the
submission of the contractor’s progress
payment request to the Government.
(c) If the contractor is considering
making unusual progress payments to
a subcontractor, the parties will be
guided by the policies in 32.501–2. If the
Government approves unusual progress
payments for the subcontract, the contracting officer must issue a contract
modification to specify the new rate in
paragraph (j)(6) of the clause at 52.232–
16, Progress Payments, in the prime
contract. This will allow the contractor to include the progress payments to the subcontractor in the cost
basis for progress payments by the
Government. This modification is not a
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32.600
48 CFR Ch. 1 (10–1–03 Edition)
deviation and does not require the
clearance prescribed in 32.502–2(b).
(d) The contractor has a duty to ensure that financing payments to subcontractors conform to the standards
and principles prescribed in paragraph
(j) of the Progress Payments clause in
the prime contract. Although the contracting officer should, to the extent
appropriate, review the subcontract as
part of the overall administration of
progress payments in the prime contract, there is no special requirement
for contracting officer review or consent merely because the subcontract
includes financing payments, except as
provided in paragraph (c) of this section. However, the contracting officer
must ensure that the contractor has installed the necessary management control systems, including internal audit
procedures.
(e) When financing payments are in
the form of progress payments, the
Progress Payments clause at 52.232–16
requires that the subcontract include
the substance of the Progress Payments clause in the prime contract,
modified to indicate that the contractor, not the Government, awards
the subcontract and administers the
progress payments. The following exceptions apply to wording modifications:
(1) The subcontract terms on title to
property under progress payments
shall provide for vesting of title in the
Government, not the contractor, as in
paragraph (d) of the Progress Payments clause in the prime contract. A
reference to the contractor may, however, be substituted for ‘‘Government’’
in paragraph (d)(2)(iv) of the clause.
(2) In the subcontract terms on reports and access to records, the contractor shall not delete the references
to ‘‘Contracting Officer’’ and ‘‘Government’’ in adapting paragraph (g) of the
Progress Payments clause in the contract, but may expand the terms as follows:
(i) The term ‘‘Contracting Officer’’
may be changed to ‘‘Contracting Officer or Prime Contractor.’’
(ii) The term ‘‘the Government’’ may
be changed to ‘‘the Government or
Prime Contractor.’’
(3) The subcontract special terms regarding default shall include paragraph
(h) of the Progress Payments clause in
the contract through its subdivision
(i). The rest of paragraph (h) is optional.
(f) When financing payments are in
the form of performance-based payments, the Performance-Based Payments clause at 52.232–32 requires that
the subcontract terms include the substance of the Performance-Based Payments clause, modified to indicate that
the contractor, not the Government,
awards the subcontract and administers the performance-based payments, and include appropriately worded modifications similar to those noted
in paragraph (e) of this section.
(g) When financing payments are in
the form of commercial item purchase
financing, the subcontract must include a contract financing clause structured in accordance with 32.206.
[65 FR 16281, Mar. 27, 2000, as amended at 67
FR 70521, Nov. 22, 2002]
Subpart 32.6—Contract Debts
32.600
Scope of subpart.
This subpart prescribes policies and
procedures for the Government’s actions in ascertaining and collecting
contract debts, charging interest on
the debts, deferring collections, and
compromising and terminating certain
debts.
32.601
Definition.
Responsible official, as used in this
subpart, means the contracting officer
(see subpart 2.1) or other official designated under agency procedures to administer the collection of contract
debts and applicable interest.
32.602
General.
The contract debts covered in this
subpart arise in various ways. The following are some examples:
(a) Damages or excess costs related
to defaults in performance.
(b) Breach of contract obligations
concerning progress payments, advance
payments, or Government-furnished
property or material.
(c) Government expense of correcting
defects.
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32.606
(d) Overpayments related to errors in
quantity or billing or deficiencies in
quality.
(e) Retroactive price reductions resulting from contract terms for price
redetermination or for determination
of prices under incentive type contracts.
(f) Overpayments disclosed by quarterly statements required under price
redetermination or incentive contracts.
(g) Delinquency in contractor payments due under agreements or arrangements for deferral or postponement of collections.
(h) Reimbursement of costs, as provided in 33.102(b) and 33.104(h)(1), paid
by the Government where a postaward
protest is sustained as a result of an
awardee’s misstatement, misrepresentation, or miscertification.
(1) Discover promptly when a contract debt arises;
(2) Ascertain the correct amount of
the debt;
(3) Act promptly and effectively to
collect the debt;
(4) Administer deferment of collection agreements; and
(5) Provide up-to-date information on
the status of the debt.
(b) For most kinds of contract debts,
including reimbursement of protest
costs, the contracting officer has the
primary responsibility for determining
the amounts of and collecting contract
debt. Under some agency procedures,
however, the individual who is responsible for payment under the contract;
e.g., the disbursing officer, may have
this primary responsibility.
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 48275, Sept. 18, 1995; 61 FR 41470, Aug. 8,
1996]
32.606 Debt determination and collection.
(a) If any indication of a contract
debt arises, the responsible official
shall determine promptly whether an
actual debt is due the Government and
the amount. Any unwarranted delay
may contribute to—
(1) Loss of timely availability of the
funds to the program for which the
funds were initially provided;
(2) Increased difficulty in collecting
the debt; or
(3) Actual monetary loss to the Government.
(b) In determining the amount of any
contract debt, the responsible official
shall fairly consider both the Government’s claim and any contract claims
by the contractor against the Government. This determination does not constitute a settlement of such claims, nor
is it a contracting officer’s final determination under the Contract Disputes
Act of 1978.
(c) The responsible official shall establish a control record for each contract debt, to include at least the following information:
(1) The name and address of the contractor.
(2) The contract number, if any.
(3) A description of the debt.
(4) The amount of debt and the appropriation to be credited.
(5) The date the debt was determined.
32.603
Applicability.
Except as otherwise specified, this
subpart applies to all debts to the Government arising in connection with
contracts and subcontracts for the acquisition of supplies or services, and
debts arising from the Government’s
payment of costs, as provided in
33.102(b) and 33.104(h)(1), where a
postaward protest is sustained as a result of an awardee’s misstatement,
misrepresentation, or miscertification.
[61 FR 41470, Aug. 8, 1996]
32.604
Exclusions.
This subpart does not apply to claims
of the Government against military or
civilian employees or their dependents
arising in connection with current or
past employment by the Government.
Sections 32.613, 32.614, and 32.616 do not
apply to claims against common carriers for transportation overcharges
and freight and cargo losses.
32.605 Responsibilities and cooperation among Government officials.
(a) To protect the Government’s interests, contracting officers, contract
financing offices, disbursing officials,
and auditors shall cooperate fully with
each other to—
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 48275, Sept. 18, 1995]
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32.607
48 CFR Ch. 1 (10–1–03 Edition)
(6) The dates of demands for payment.
(7) The amounts and dates of collections, as they occur.
(8) The date of any appeal filed or action brought in the Court of Claims
under the Disputes clause.
(9) The status of collections. Examples include—
(i) Actions reported to the disbursing
officer (name, location, and date);
(ii) Funds requested to be withheld
by the disbursing officer;
(iii) Funds requested to be withheld
by other offices (date and office);
(iv) Deferment or installment payment arrangement requested;
(v) Deferment or installment request
reviewed;
(vi) Supplemental information requested to support deferment requests;
and
(vii) Actions transferred to the contract financing office.
(d) Except in cases in which an agreement has been entered into for
deferment of collections (32.613) or
bankruptcy proceedings against the
contractor have been initiated, the
contractor shall be required to liquidate the debt by—
(1) Cash payment in a lump sum, on
demand; or
(2) Credit against existing unpaid
bills due the contractor.
(e) The responsible officials shall use
all proper means available to them for
collecting debts as rapidly as possible.
Practices for ascertaining and collecting debts shall be comprehensive,
dynamic, and as uniform as practicable. Full consideration shall be
given to personal contact and followup.
[48 FR 42328, Sept. 19, 1983, as amended at 55
FR 38517, Sept. 18, 1990]
32.607 Tax credit.
(a) If the contractor is entitled to a
tax credit under section 1481 of the Internal Revenue Code (26 U.S.C. 1481)
and requests recognition of the credit
in the debt collection, the responsible
official shall comply.
(b) The tax credit shall be considered
to reduce the amount of the debt as of
the date when interest on the debt begins to accrue.
(c) The amount of the debt reduction
shall be the amount of the tax credit
certificate, if a certificate was issued
by the Internal Revenue Service (IRS).
If the IRS has not yet issued a certificate, the responsible official may accept the contractor’s estimate of the
tax credit amount until the certificate
is issued, subject to any verification
that the responsible official considers
appropriate.
(d) A reduction for a tax credit does
not apply to a debt arising from a subcontract.
32.608
Negotiation of contract debts.
(a) The responsible official shall ensure that any negotiations concerning
debt determinations are completed expeditiously. If consistent with the contract, the official shall make a unilateral determination promptly if the
contractor is delinquent in any of the
following actions:
(1) Furnishing pertinent information.
(2) Negotiating expeditiously.
(3) Entering into an agreement on a
fair and reasonable price revision.
(4) Signing an interim memorandum
evidencing a negotiated pricing agreement involving refund.
(5) Executing an appropriate contract
modification reflecting the result of
negotiations.
(b) The amount of indebtedness determined unilaterally shall be an
amount that—
(1) Is proper based on the merits of
the case;
(2) Does not exceed an amount that
would have been considered acceptable
in a negotiated agreement; and
(3) Is consistent with the contract
terms.
(c) For unilateral debt determinations, the contracting officer shall
issue a decision as required by the
clause at 52.233–1, Disputes. Such decision shall include a demand for payment (see 33.211(a)(4)(vi)). No demand
for payment under 32.610 shall be issued
prior to a contracting officer’s final decision. A copy of the final decision
shall be sent to the appropriate finance
office.
[48 FR 42328, Sept. 19, 1983, as amended at 54
FR 34755, Aug. 21, 1989]
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32.613
32.609 Memorandum of pricing agreement with refund.
(a) If a refund to the Government is
agreed upon in negotiations under a
price revision type of contract, the responsible official shall promptly write
a memorandum to document the agreement and the contract debt. The
memorandum shall be signed by the negotiators for the Government and the
contractor. If the procedures of either
the agency or the contractor require
approval of the negotiation results by
higher authority, the memorandum
shall be written without prejudice to
the final pricing. After negotiations
are completed, a supplemental agreement shall be executed without delay.
(b) The amount of refund shall be
computed promptly, without waiting
for itemization of adjustment of past
billings, accounting adjustments, or
the adjusted invoices.
32.610 Demand for payment of contract debt.
(a) A demand for payment shall be
made as soon as the responsible official
has computed the amount of refund
due. If the debt arises from excess costs
for a default termination, the demand
shall be made without delay, as explained in 49.402–6.
(b) The demand shall include the following:
(1) A description of the debt, including the debt amount.
(2) Notification that any amounts
not paid within 30 days from the date
of the demand will bear interest from
the date of the demand, or from any
earlier date specified in the contract,
and that the interest rate shall be the
rate established by the Secretary of
the Treasury, for the period affected,
under Public Law 92–41. In the case of
a debt arising from a price reduction
for defective pricing, or as specifically
set forth in a Cost Accounting Standards (CAS) clause in the contract, that
interest will run from the date of overpayment by the Government until repayment by the contractor at the underpayment rate established by the
Secretary of the Treasury, for the periods affected, under 26 U.S.C. 6621(a)(2).
(3) A notification that the contractor
may submit a proposal for deferment of
collection if immediate payment is not
practicable or if the amount is disputed.
(4) Identification of the responsible
official designated for determining the
amount of the debt and for its collection.
(c) If subparagraph (b)(3) of the
clause at 52.232–17, Interest, applies,
the demand mentioned in paragraph (a)
above shall accompany or be included
in the transmittal mentioned in the
clause.
[48 FR 42328, Sept. 19, 1983, as amended at 54
FR 34755, Aug. 21, 1989; 55 FR 52794, Dec. 21,
1990; 56 FR 29128, June 25, 1991; 61 FR 18922,
Apr. 29, 1996]
32.611
Routine setoff.
If a disbursing officer is the responsible official for collection of a contract debt, or is notified of the debt by
the responsible official and has contractor invoices on hand for payment,
the disbursing officer shall make an appropriate setoff. The disbursing officer
shall give the contractor an explanation of the setoff. To the extent that
the setoff reduces the debt, the explanation shall replace the demand prescribed in 32.610.
32.612
Withholding and setoff.
During the 30 days following the
issuance of a demand, the advisability
of withholding payments otherwise due
to the contractor shall be considered
based on the circumstances of the individual cases. If payment is not completed within 30 days, and deferment is
not requested, withholding of principal
and interest shall be initiated immediately. In the event the contract is assigned under the Assignment of Claims
Act of 1940 (31 U.S.C. 3727 and 41 U.S.C.
15), the rights of the assignee will be
scrupulously respected and withholding
of payments shall be consistent with
those rights. For additional information on assignment of claims, see subpart 32.8.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986]
32.613
Deferment of collection.
(a) If the responsible official receives
a written request from the contractor
for a deferment of the debt collection
or installment payments, the official
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48 CFR Ch. 1 (10–1–03 Edition)
shall promptly review the request to
see if the information included is adequate for action on the request. If not,
the contractor shall be asked to furnish the needed information. Any necessary changes to the terms of the proposed deferment/installment agreement shall also be suggested.
(b) If the contractor has appealed the
debt under the procedures of the Disputes clause of the contract, the information with the request for deferment
may be limited to an explanation of
the contractor’s financial condition.
(c) If there is no appeal pending or
action filed under the Disputes clause
of the contract, the following information about the contractor should be
submitted with the request:
(1) Financial condition.
(2) Contract backlog.
(3) Projected cash receipts and requirements.
(4) The feasibility of immediate payment of the debt.
(5) The probable effect on operations
of immediate payment in full.
(d) Although the existence of a contractor appeal of the debt does not of
itself require the Government to suspend or delay collection action, the responsible official shall consider whether deferment of the debt collection is
advisable to avoid possible overcollection. The responsible official may authorize a deferment pending the resolution of appeal.
(e) Deferments pending disposition of
appeal may be granted to small business concerns and financially weak
contractors, with a reasonable balance
of the need for Government security
against loss and undue hardship on the
contractor.
(f) If a contractor has not appealed
the debt or filed an action under the
Disputes clause of the contract, the responsible official may arrange for
deferment/installment payments if the
contractor is unable to pay at once in
full or the contractor’s operations
under national defense contracts would
be seriously impaired. The arrangement shall include appropriate covenants and securities and should be
limited to the shortest practicable maturity.
(g) Contracts and arrangements for
deferment may not provide that a
claim of the Government will not become due and payable pending mutual
agreement on the amount of the claim
or, in the case of a dispute, until the
decision is reached.
(h) At a minimum, the deferment
agreement shall contain the following:
(1) A description of the debt.
(2) The date of first demand for payment.
(3) Notice of an interest charge, in
conformity with FAR 32.614 and the
clause at FAR 52.232–17, Interest; or, in
the case of a debt arising from a defective pricing or a CAS noncompliance
overpayment, interest, as prescribed by
the applicable Price Reduction for Defective Cost or Pricing Data or CAS
clause.
(4) Identification of the office to
which the contractor is to send debt
payments.
(5) A requirement for the contractor
to submit financial information requested by the Government and for
reasonable access to the contractor’s
records and property by Government
representatives.
(6) Provision for the Government to
terminate the deferment agreement
and accelerate the maturity of the debt
if the contractor defaults or if bankruptcy or insolvency proceedings are
instituted by or against the contractor.
(7) Protective requirements that are
considered by the Government to be
prudent and feasible in the specific circumstances. The coverage of protective
terms at 32.409 and 32.501–5 may be used
as a guide.
(i) If a contractor appeal of the debt
determination
is
pending,
the
deferment agreement shall also include
a requirement that the contractor
shall—
(1) Diligently prosecute the appeal;
and
(2) Pay the debt in full when the appeal is decided, or when the parties
reach agreement on the debt amount.
(j) If the contractor does not plan to
appeal the debt or file an action under
the Disputes clause of the contract, the
deferment/installment agreement shall
include a specific schedule or plan for
payment. It should permit the Government to make periodic financial reviews of the contractor and to require
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32.614–2
prepayments if the Government considers the contractor’s ability to pay
improved. It should also provide for required stated or measurable prepayments on the occurrence of specific
events or contingencies that improve
the contractor’s ability to pay.
(k) If desired by the contractor, the
deferment agreement may provide for
the right to make prepayments without prejudice, for refund of overpayments, and for crediting of interest (see
32.614–2).
(l) Actions filed by contractors under
the Disputes clause shall not suspend
or delay collection. Until the action is
decided, deferments shall only be
granted if, within 30 days after the filing of such action, the contractor presents to the responsible official a good
and sufficient bond, or other collateral
acceptable to the responsible official,
in the amount of the claim, and approved by the responsible official. Any
amount collected by the Government
in excess of the amount found to be due
on appeal under the Disputes clause of
the contract shall be refunded to the
contractor with interest thereon from
the date of collection by the Government at the annual rate established by
the Secretary of Treasury under Pub.
L. 92–41. Simple interest shall be calculated through the period of indebtedness to reflect each 6-month period
change in the rates established by the
Secretary.
[48 FR 42328, Sept. 19, 1983, as amended at 55
FR 52795, Dec. 21, 1990; 56 FR 29128, June 25,
1991; 61 FR 18922, Apr. 29, 1996]
32.614
Interest.
32.614–1 Interest charges.
(a) Under the clause at 52.232–17, Interest, the responsible official shall
apply interest charges to any contract
debt unpaid after 30 days from the
issuance of a demand, unless—
(1) The contract specifies another due
date or procedure for charging or collecting interest;
(2) The contract is a kind excluded
under 32.617; or
(3) The contract or debt has been exempted from interest charges under
agency procedures.
(b) If not already applicable under
the contract terms, interest on con-
tract debt shall be made an element of
any
agreement
entered
into
on
deferment of collection.
(c) Unless specified otherwise in the
clause at FAR 52.232–17, the interest
charge shall be at the rate established
by the Secretary of the Treasury under
Public Law 92–41 for the period in
which the amount becomes due. The interest charge shall be computed for the
actual number of calendar days involved beginning on the due date and
ending on—
(1) The date on which the designated
office receives payment from the contractor;
(2) The date of issuance of a Government check to the contractor from
which an amount otherwise payable
has been withheld as a credit against
the contract debt;
(3) The date on which an amount
withheld and applied to the contract
debt would otherwise have become payable to the contractor; or
(4) The date of any applicable tax
credit under 32.607.
[48 FR 42328, Sept. 19, 1983, as amended at 56
FR 29128, June 25, 1991; 61 FR 18922, Apr. 29,
1996]
32.614–2 Interest credits.
(a) An equitable interest credit shall
be applied under the following circumstances:
(1) When the amount of debt initially
determined is subsequently reduced;
e.g., through a successful appeal.
(2) When the collection procedures
followed in a given case result in an
overcollection of the debt due.
(3) When the responsible official determines that the Government has unduly delayed payments to the contractor on the same contract at some
time during the period to which the interest charge applied, provided an interest penalty was not paid for such
late payment.
(b) Any appropriate interest credits
shall be computed under the following
procedures:
(1) Interest at the rate under 32.614–
1(c) shall be charged on the reduced
debt from the date specified in the first
demand made for payment of the higher debt.
(2) Interest may not be reduced for
any time between the due date under
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48 CFR Ch. 1 (10–1–03 Edition)
the demand and the period covered by
a deferment of collection, unless the
contract includes an interest clause;
e.g., the clause prescribed in 32.617.
(3) Interest shall not be credited in
an amount that, when added to other
amounts refunded or released to the
contractor, exceeds the total amount
that has been collected, or withheld for
the purpose of collecting the debt. This
limitation shall be further reduced by
the amount of any limitation applicable under 32.614–2(b)(2).
(5) Contracts without any provision
for profit or fee with a nonprofit organization.
(6) Contracts described in subpart 5.5,
Paid advertisements.
(7) Any other exceptions authorized
under agency procedures.
(b) The contracting officer may insert the clause at 52.232–17, Interest, in
solicitations and contracts when it is
contemplated that the contract will be
in any of the categories specified in
32.617(a).
32.615 Delays in receipt of notices or
demands.
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
If delivery of the demands or notices
required by the clause at 52.232–17, Interest, is delayed by the Government
(e.g., undue delay after dating at the
originating office or delays in the
mail), the date of the debt and accrual
of interest shall be extended to a time
that is fair and reasonable under the
particular circumstances.
Subpart 32.7—Contract Funding
32.616
Compromise actions.
For debts under $100,000, excluding
interest, if further collection is not
practicable or would cost more than
the amount of recovery, the agency
may compromise the debt or terminate
or suspend further collection action.
Compromise is authorized by the Federal Claims Collection Act of 1966 (31
U.S.C. 3711). Compromise actions shall
conform to Federal claims collection
standards (4 CFR 101–105), and agency
regulations.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986; 56 FR 29128, June 25,
1991]
32.617
Contract clause.
(a) The contracting officer shall insert the clause at 52.232–17, Interest, in
solicitations and contracts, unless it is
contemplated that the contract will be
in one or more of the following categories:
(1) Contracts at or below the simplified acquisition threshold.
(2) Contracts with Government agencies.
(3) Contracts with a State or local
government or instrumentality.
(4) Contracts with a foreign government or instrumentality.
32.700
Scope of subpart.
This subpart (a) describes basic requirements for contract funding and (b)
prescribes procedures for using limitation of cost or limitation of funds
clauses. Detailed acquisition funding
requirements are contained in agency
fiscal regulations.
32.701
[Reserved]
32.702
Policy.
No officer or employee of the Government may create or authorize an obligation in excess of the funds available,
or in advance of appropriations (AntiDeficiency Act, 31 U.S.C. 1341), unless
otherwise authorized by law. Before
executing any contract, the contracting officer shall (a) obtain written
assurance from responsible fiscal authority that adequate funds are available or (b) expressly condition the contract upon availability of funds in accordance with 32.703–2.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986]
32.703
Contract funding requirements.
32.703–1
General.
(a) If the contract is fully funded,
funds are obligated to cover the price
or target price of a fixed-price contract
or the estimated cost and any fee of a
cost-reimbursement contract.
(b) If the contract is incrementally
funded, funds are obligated to cover the
amount allotted and any corresponding
increment of fee.
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Federal Acquisition Regulation
32.704
32.703–2 Contracts conditioned upon
availability of funds.
(a) Fiscal year contracts. The contracting officer may initiate a contract
action properly chargeable to funds of
the new fiscal year before these funds
are available, provided that the contract includes the clause at 52.232–18,
Availability of Funds (see 32.705–1(a)).
This authority may be used only for
operation and maintenance and continuing services (e.g., rentals, utilities,
and supply items not financed by stock
funds) (1) necessary for normal operations and (2) for which Congress previously had consistently appropriated
funds, unless specific statutory authority exists permitting applicability to
other requirements.
(b) Indefinite-quantity or requirements
contracts. A one-year indefinite-quantity or requirements contract for services that is funded by annual appropriations may extend beyond the fiscal
year in which it begins; provided, that
(1) any specified minimum quantities
are certain to be ordered in the initial
fiscal year (see 37.106) and (2) the contract includes the clause at 52.232–19,
Availability of Funds for the Next Fiscal Year (see 32.705–1(b)).
(c) Acceptance of supplies or services.
The Government shall not accept supplies or services under a contract conditioned upon the availability of funds
until the contracting officer has given
the contractor notice, to be confirmed
in writing, that funds are available.
[48 FR 42328, Sept. 19, 1983, as amended at 67
FR 13054, Mar. 20, 2002]
32.703–3 Contracts
crossing
fiscal
years.
(a) A contract that is funded by annual appropriations may not cross fiscal years, except in accordance with
statutory authorization (e.g., 41 U.S.C.
11a, 31 U.S.C. 1308, 42 U.S.C. 2459a, 42
U.S.C. 3515, and paragraph (b) of this
subsection), or when the contract calls
for an end product that cannot feasibly
be subdivided for separate performance
in each fiscal year (e.g., contracts for
expert or consultant services).
(b) The head of an executive agency,
except NASA, may enter into a contract, exercise an option, or place an
order under a contract for severable
services for a period that begins in one
fiscal year and ends in the next fiscal
year if the period of the contract
awarded, option exercised, or order
placed does not exceed one year (10
U.S.C. 2410a and 41 U.S.C. 253l). Funds
made available for a fiscal year may be
obligated for the total amount of an
action entered into under this authority.
[63 FR 58601, Oct. 30, 1998]
32.704 Limitation of cost or funds.
(a)(1) When a contract contains the
clause at 52.232–20, Limitation of Cost;
52.232–21, Limitation of Cost (Facilities); or 52.232–22, Limitation of Funds,
the contracting officer, upon learning
that the contractor is approaching the
estimated cost of the contract or the
limit of the funds allotted, shall
promptly obtain funding and programming information pertinent to the contract’s continuation and notify the
contractor in writing that—
(i) Additional funds have been allotted, or the estimated cost has been increased, in a specified amount;
(ii) The contract is not to be further
funded and that the contractor should
submit a proposal for an adjustment of
fee, if any, based on the percentage of
work completed in relation to the total
work called for under the contract;
(iii) The contract is to be terminated;
or
(iv)(A) The Government is considering whether to allot additional funds
or increase the estimated cost, (B) the
contractor is entitled by the contract
terms to stop work when the funding or
cost limit is reached, and (C) any work
beyond the funding or cost limit will be
at the contractor’s risk.
(2) Upon learning that a partially
funded contract containing any of the
clauses referenced in subparagraph (1)
above will receive no further funds, the
contracting officer shall promptly give
the contractor written notice of the decision not to provide funds.
(b) Under a cost-reimbursement contract, the contracting officer may issue
a change order, a direction to replace
or repair defective items or work, or a
termination notice without immediately increasing the funds available.
Since a contractor is not obligated to
incur costs in excess of the estimated
cost in the contract, the contracting
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32.705
48 CFR Ch. 1 (10–1–03 Edition)
officer shall ensure availability of
funds for directed actions. The contracting officer may direct that any increase in the estimated cost or amount
allotted to a contract be used for the
sole purpose of funding termination or
other specified expenses.
(c) Government personnel encouraging a contractor to continue work in
the absence of funds will incur a violation of Revised Statutes Section 3679
(31 U.S.C. 1341) that may subject the violator to civil or criminal penalties.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986]
32.705
(c) The contracting officer shall insert the clause at 52.232–22, Limitation
of Funds, in solicitations and contracts
if an incrementally funded cost-reimbursement contract is contemplated.
Subpart 32.8—Assignment of
Claims
32.800
Scope of subpart.
This subpart prescribes policies and
procedures for the assignment of
claims under the Assignment of Claims
Act of 1940, as amended, 31 U.S.C. 3727
(hereafter referred to as the Act).
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986]
Contract clauses.
32.705–1 Clauses for contracting in advance of funds.
(a) Insert the clause at 52.232–18,
Availability of Funds, in solicitations
and contracts if the contract will be
chargeable to funds of the new fiscal
year and the contract action will be
initiated before the funds are available.
(b) The contracting officer shall insert the clause at 52.232–19, Availability
of Funds for the Next Fiscal Year, in
solicitations and contracts if a oneyear indefinite-quantity or requirements contract for services is contemplated and the contract—
(1) Is funded by annual appropriations; and
(2) Is to extend beyond the initial fiscal year (see 32.703–2(b)).
[48 FR 42328, Sept. 19, 1983, as amended at 63
FR 58602, Oct. 30, 1998; 67 FR 13054, Mar. 20,
2002]
32.705–2 Clauses for limitation of cost
or funds.
(a) The contracting officer shall insert the clause at 52.232–20, Limitation
of Cost, in solicitations and contracts
if a fully funded cost-reimbursement
contract is contemplated, except those
for consolidated facilities, facilities acquisition, or facilities use, whether or
not the contract provides for payment
of a fee.
(b) The contracting officer shall insert the clause at 52.232–21, Limitation
of Cost (Facilities), in solicitations and
contracts for consolidated facilities, facilities acquisition, or facilities use
(see 45.301).
32.801
Definitions.
Designated agency, as used in this
subpart, means any department or
agency of the executive branch of the
United
States
Government
(see
32.803(d)).
No-setoff commitment, as used in this
subpart, means a contractual undertaking that, to the extent permitted by
the Act, payments by the designated
agency to the assignee under an assignment of claims will not be reduced to
liquidate the indebtedness of the contractor to the Government.
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 49730, Sept. 26, 1995; 66 FR 2132, Jan. 10,
2001]
32.802
Conditions.
Under the Assignment of Claims Act,
a contractor may assign moneys due or
to become due under a contract if all
the following conditions are met:
(a) The contract specifies payments
aggregating $1,000 or more.
(b) The assignment is made to a
bank, trust company, or other financing institution, including any Federal
lending agency.
(c) The contract does not prohibit the
assignment.
(d) Unless otherwise expressly permitted in the contract, the assignment—
(1) Covers all unpaid amounts payable under the contract;
(2) Is made only to one party, except
that any assignment may be made to
one party as agent or trustee for two or
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Federal Acquisition Regulation
32.804
more parties participating in the financing of the contract; and
(3) Is not subject to further assignment.
(e) The assignee sends a written notice of assignment together with a true
copy of the assignment instrument to
the—
(1) Contracting officer or the agency
head;
(2) Surety on any bond applicable to
the contract; and
(3) Disbursing officer designated in
the contract to make payment.
32.803 Policies.
(a) Any assignment of claims that
has been made under the Act to any
type of financing institution listed in
32.802(b) may thereafter be further assigned and reassigned to any such institution if the conditions in 32.802(d)
and (e) continue to be met.
(b) A contract may prohibit the assignment of claims if the agency determines the prohibition to be in the Government’s interest.
(c) Under a requirements or indefinite quantity type contract that authorizes ordering and payment by multiple Government activities, amounts
due for individual orders for $1,000 or
more may be assigned.
(d) Any contract of a designated
agency (see FAR 32.801), except a contract under which full payment has
been made, may include a no-setoff
commitment only when a determination of need is made by the head of the
agency, in accordance with the Presidential delegation of authority dated
October 3, 1995, and after such determination has been published in the
FEDERAL REGISTER. The Presidential
delegation makes such determinations
of need subject to further guidance
issued by the Office of Federal Procurement Policy. The following guidance
has been provided: Use of the no-setoff
provision may be appropriate to facilitate the national defense; in the event
of a national emergency or natural disaster; or when the use of the no-setoff
provision may facilitate private financing of contract performance. However,
in the event an offeror is significantly
indebted to the United States, the contracting officer should consider whether the inclusion of the no-setoff com-
mitment in a particular contract is in
the best interests of the United States.
In such an event, the contracting officer should consult with the Government officer(s) responsible for collecting the debt(s).
(e) When an assigned contract does
not include a no-setoff commitment,
the Government may apply against
payments to the assignee any liability
of the contractor to the Government
arising independently of the assigned
contract if the liability existed at the
time notice of the assignment was received even though that liability had
not yet matured so as to be due and
payable.
[48 FR 42328, Sept. 19, 1983, as amended at 60
FR 49730, Sept. 26, 1995; 61 FR 18921, Apr. 29,
1996]
32.804
Extent of assignee’s protection.
(a) No payments made by the Government to the assignee under any contract assigned in accordance with the
Act may be recovered on account of
any liability of the contractor to the
Government. This immunity of the assignee is effective whether the contractor’s liability arises from or independently of the assigned contract.
(b) Except as provided in paragraph
(c) below, the inclusion of a no-setoff
commitment in an assigned contract
entitles the assignee to receive contract payments free of reduction or
setoff for—
(1) Any liability of the contractor to
the Government arising independently
of the contract; and
(2) Any of the following liabilities of
the contractor to the Government arising from the assigned contract:
(i) Renegotiation under any statute
or contract clause.
(ii) Fines.
(iii) Penalties, exclusive of amounts
that may be collected or witheld from
the contractor under, or for failure to
comply with, the terms of the contract.
(iv) Taxes or social security contributions.
(v) Withholding or nonwithholding of
taxes or social security contributions.
(c) In some circumstances, a setoff
may be appropriate even though the assigned contract includes a no-setoff
commitment, e.g.—
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32.805
48 CFR Ch. 1 (10–1–03 Edition)
(1) When the assignee has neither
made a loan under the assignment nor
made a commitment to do so; or
(2) To the extent that the amount
due on the contract exceeds the
amount of any loans made or expected
to be made under a firm commitment
for financing.
32.805
Procedure.
(a) Assignments. (1) Assignments by
corporations shall be—
(i) Executed by an authorized representative;
(ii) Attested by the secretary or the
assistant secretary of the corporation;
and
(iii) Impressed with the corporate
seal or accompanied by a true copy of
the resolution of the corporation’s
board of directors authorizing the signing representative to execute the assignment.
(2) Assignments by a partnership
may be signed by one partner, if the assignment is accompanied by adequate
evidence that the signer is a general
partner of the partnership and is authorized to execute assignments on behalf of the partnership.
(3) Assignments by an individual
shall be signed by that individual and
the signature acknowledged before a
notary public or other person authorized to administer oaths.
(b) Filing. The assignee shall forward
to each party specified in 32.802(e) an
original and three copies of the notice
of assignment, together with one true
copy of the instrument of assignment.
The true copy shall be a certified duplicate or photostat copy of the original
assignment.
(c) Format for notice of assignment.
The following is a suggested format for
use by an assignee in providing the notice of assignment required by 32.802(e).
NOTICE OF ASSIGNMENT
TO: lllll [address to one of the parties
specified in 32.802(e)].
This has reference to Contract No. lll
dated lll, entered into between llll
[contractor’s name and address] and llll
[government agency, name of office, and address], for llll [describe nature of the contract].
Moneys due or to become due under the
contract described above have been assigned
to the undersigned under the provisions of
the Assignment of Claims Act of 1940, as
amended, 31 U.S.C. 3727, 41 U.S.C. 15.
A true copy of the instrument of assignment executed by the Contractor on llll
[date], is attached to the original notice.
Payments due or to become due under this
contract should be made to the undersigned
assignee.
Please return to the undersigned the three
enclosed copies of this notice with appropriate notations showing the date and hour
of receipt, and signed by the person acknowledging receipt on behalf of the addressee.
Very truly yours,
llllllllllllllllllllllll
[name of assignee]
By llllllllllllllllllllll
[signature of signing officer
Title lllllllllllllllllllll
[title of signing officer]
llllllllllllllllllllllll
llllllllllllllllllllllll
[address of assignee]
ACKNOWLEDGEMENT
Receipt is acknowledged of the above notice and of a copy of the instrument of assignment. They were received at ll (a.m.)
(p.m.) on llll, 20ll.
llllllllllllllllllllllll
[signature]
llllllllllllllllllllllll
[title]
llllllllllllllllllllllll
On behalf of
llllllllllllllllllllllll
[name of addressee of this notice]
(d) Examination by the Government. In
examining and processing notices of assignment and before acknowleging
their receipt, contracting officers
should assure that the following conditions and any additional conditions
specified in agency regulations, have
been met:
(1) The contract has been properly
approved and executed.
(2) The contract is one under which
claims may be assigned.
(3) The assignment covers only
money due or to become due under the
contract.
(4) The assignee is registered separately in the Central Contractor Registration unless one of the exceptions
in 4.1102 applies.
(e) Release of assignment. (1) A release
of an assignment is required whenever—
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32.903
(i) There has been a further assignment or reassignment under the Act;
or
(ii) The contractor wishes to reestablish its right to receive further payments after the contractor’s obligations to the assignee have been satisfied and a balance remains due under
the contract.
(2) The assignee, under a further assignment or reassignment, in order to
establish a right to receive payment
from the Government, must file with
the addressees listed in 32.802(e) a—
(i) Written notice of release of the
contractor by the assigning financing
institution;
(ii) Copy of the release instrument;
(iii) Written notice of the further assignment or reassignment; and
(iv) Copy of the further assignment
or reassignment instrument.
(3) If the assignee releases the contractor from an assignment of claims
under a contract, the contractor, in
order to establish a right to receive
payment of the balance due under the
contract, must file a written notice of
release together with a true copy of the
release of assignment instrument with
the addressees noted in 32.802(e).
(4) The addressee of a notice of release of assignment or the official acting on behalf of that addressee shall acknowledge receipt of the notice.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986; 52 FR 9039, Mar. 20,
1987; 62 FR 237, Jan. 2, 1997; 64 FR 10533, Mar.
4, 1999; 65 FR 24325, Apr. 25, 2000; 68 FR 56673,
Oct. 1, 2003]
32.806
Contract clauses.
(a)(1) The contracting officer shall
insert the clause at 52.232–23, Assignment of Claims, in solicitations and
contracts expected to exceed the
micro-purchase threshold, unless the
contract will prohibit the assignment
of claims (see 32.803(b)). The use of the
clause is not required for purchase orders. However, the clause may be used
in purchase orders expected to exceed
the micro-purchase threshold, that are
accepted in writing by the contractor,
if such use is consistent with agency
policies and regulations.
(2) If a no-setoff commitment has
been authorized (see FAR 32.803(d)), the
contracting officer shall use the clause
with its Alternate I.
(b) The contracting officer shall insert the clause at 52.232–24, Prohibition
of Assignment of Claims, in solicitations and contracts for which a determination has been made under agency
regulations that the prohibition of assignment of claims is in the Government’s interest.
[48 FR 42328, Sept. 19, 1983, as amended at 51
FR 2665, Jan. 17, 1986; 60 FR 49730, Sept. 26,
1995; 61 FR 18921, Apr. 29, 1996]
Subpart 32.9—Prompt Payment
SOURCE: 66 FR 65355, Dec. 18, 2001, unless
otherwise noted.
32.900
Scope of subpart.
This subpart prescribes policies, procedures, and clauses for implementing
Office of Management and Budget
(OMB) prompt payment regulations at
5 CFR part 1315.
32.901
Applicability.
(a) This subpart applies to invoice
payments on all contracts, except contracts with payment terms and late
payment penalties established by other
governmental authority (e.g., tariffs).
(b) This subpart does not apply to
contract financing payments (see definition at 32.001).
32.902
Definitions.
As used in this subpart—
Discount for prompt payment means an
invoice payment reduction offered by
the contractor for payment prior to the
due date.
Mixed invoice means an invoice that
contains items with different payment
due dates.
Payment date means the date on
which a check for payment is dated or,
for an electronic funds transfer (EFT),
the settlement date.
Settlement date, as it applies to electronic funds transfer, means the date
on which an electronic funds transfer
payment is credited to the contractor’s
financial institution.
32.903
Responsibilities.
(a) Agency heads—
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32.904
48 CFR Ch. 1 (10–1–03 Edition)
(1) Must establish the policies and
procedures necessary to implement
this subpart;
(2) May prescribe additional standards for establishing invoice payment
due dates (see 32.904) necessary to support agency programs and foster
prompt payment to contractors;
(3) May adopt different payment procedures in order to accommodate
unique circumstances, provided that
such procedures are consistent with
the policies in this subpart;
(4) Must inform contractors of points
of contact within their cognizant payment offices to enable contractors to
obtain status of invoices; and
(5) May authorize the use of the accelerated payment methods specified
at 5 CFR 1315.5.
(b) When drafting solicitations and
contracts, contracting officers must
identify for each contract line item
number, subline item number, or exhibit line item number—
(1) The applicable Prompt Payment
clauses that apply to each item when
the solicitation or contract contains
items that will be subject to different
payment terms; and
(2) The applicable Prompt Payment
food category (e.g., which item numbers are meat or meat food products,
which are perishable agricultural commodities), when the solicitation or contract contains multiple payment terms
for various classes of foods and edible
products.
32.904 Determining
dates.
payment
due
(a) General. Agency procedures must
ensure that, when specifying due dates,
contracting officers give full consideration to the time reasonably required
by Government officials to fulfill their
administrative responsibilities under
the contract.
(b) Payment due dates. Except as prescribed in paragraphs (c) through (f) of
this section, or as authorized in
32.908(a)(2) or (c)(2), the due date for
making an invoice payment is as follows:
(1) The later of the following two
events:
(i) The 30th day after the designated
billing office receives a proper invoice
from the contractor (except as provided
in paragraph (b)(3) of this section).
(ii) The 30th day after Government
acceptance of supplies delivered or
services performed.
(A) For a final invoice, when the payment amount is subject to contract
settlement actions, acceptance is
deemed to occur on the effective date
of the contract settlement.
(B) For the sole purpose of computing
an interest penalty that might be due
the contractor—
(1) Government acceptance is deemed
to occur constructively on the 7th day
after the contractor delivers supplies
or performs services in accordance with
the terms and conditions of the contract, unless there is a disagreement
over quantity, quality, or contractor
compliance with a contract requirement;
(2) If actual acceptance occurs within
the constructive acceptance period, the
Government must base the determination of an interest penalty on the actual date of acceptance;
(3) The constructive acceptance requirement does not compel Government officials to accept supplies or
services, perform contract administration functions, or make payment prior
to fulfilling their responsibilities; and
(4) Except for a contract for the purchase of a commercial item, including
a brand-name commercial item for authorized
resale
(e.g.,
commissary
items), the contracting officer may
specify a longer period for constructive
acceptance in the solicitation and resulting contract, if required to afford
the Government a reasonable opportunity to inspect and test the supplies
furnished or to evaluate the services
performed. The contracting officer
must document in the contract file the
justification for extending the constructive acceptance period beyond 7
days. Extended acceptance periods
must not be a routine agency practice
and must be used only when necessary
to permit proper Government inspection and testing of the supplies delivered or services performed.
(2) If the contract does not require
submission of an invoice for payment
(e.g., periodic lease payments), the contracting officer must specify the due
date in the contract.
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(3) If the designated billing office
fails to annotate the invoice with the
actual date of receipt at the time of receipt, the invoice payment due date is
the 30th day after the date of the contractor’s invoice, provided the designated billing office receives a proper
invoice and there is no disagreement
over quantity, quality, or contractor
compliance with contract requirements.
(c) Architect-engineer contracts. (1) The
due date for making payments on contracts that contain the clause at 52.232–
10, Payments Under Fixed-Price Architect-Engineer Contracts, is as follows:
(i) The due date for work or services
completed by the contractor is the
later of the following two events:
(A) The 30th day after the designated
billing office receives a proper invoice
from the contractor.
(B) The 30th day after Government
acceptance of the work or services
completed by the contractor.
(1) For a final invoice, when the payment amount is subject to contract
settlement actions (e.g., release of
claims), acceptance is deemed to occur
on the effective date of the settlement.
(2) For the sole purpose of computing
an interest penalty that might be due
the contractor, Government acceptance is deemed to occur constructively
on the 7th day after the contractor
completes the work or services in accordance with the terms and conditions
of the contract (see also paragraph
(c)(2) of this section). If actual acceptance occurs within the constructive acceptance period, the Government must
base the determination of an interest
penalty on the actual date of acceptance.
(ii) The due date for progress payments is the 30th day after Government approval of contractor estimates
of work or services accomplished. For
the sole purpose of computing an interest penalty that might be due the contractor—
(A) Government approval is deemed
to occur constructively on the 7th day
after the designated billing office receives the contractor estimates (see
also paragraph (c)(2) of this section).
(B) If actual approval occurs within
the constructive approval period, the
Government must base the determina-
tion of an interest penalty on the actual date of approval.
(iii) If the designated billing office
fails to annotate the invoice or payment request with the actual date of
receipt at the time of receipt, the payment due date is the 30th day after the
date of the contractor’s invoice or payment request, provided the designated
billing office receives a proper invoice
or payment request and there is no disagreement over quantity, quality, or
contractor compliance with contract
requirements.
(2) The constructive acceptance and
constructive approval requirements described in paragraphs (c)(1)(i) and (ii) of
this section are conditioned upon receipt of a proper payment request and
no disagreement over quantity, quality, contractor compliance with contract requirements, or the requested
progress payment amount. These requirements do not compel Government
officials to accept work or services, approve contractor estimates, perform
contract administration functions, or
make payment prior to fulfilling their
responsibilities. The contracting officer may specify a longer period for constructive acceptance or constructive
approval, if required to afford the Government a reasonable opportunity to
inspect and test the supplies furnished
or to evaluate the services performed.
The contracting officer must document
in the contract file the justification for
extending the constructive acceptance
or approval period beyond 7 days.
(d) Construction contracts. (1) The due
date for making payments on construction contracts is as follows:
(i) The due date for making progress
payments based on contracting officer
approval of the estimated amount and
value of work or services performed,
including payments for reaching milestones in any project, is 14 days after
the designated billing office receives a
proper payment request.
(A) If the designated billing office
fails to annotate the payment request
with the actual date of receipt at the
time of receipt, the payment due date
is the 14th day after the date of the
contractor’s payment request, provided
the designated billing office receives a
proper payment request and there is no
disagreement over quantity, quality, or
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48 CFR Ch. 1 (10–1–03 Edition)
contractor compliance with contract
requirements.
(B) The contracting officer may
specify a longer period in the solicitation and resulting contract if required
to afford the Government a reasonable
opportunity to adequately inspect the
work and to determine the adequacy of
the contractor’s performance under the
contract. The contracting officer must
document in the contract file the justification for extending the due date
beyond 14 days.
(C) The contracting officer must not
approve progress payment requests unless the certification and substantiation of amounts requested are provided as required by the clause at
52.232–5, Payments Under Fixed-Price
Construction Contracts.
(ii) The due date for payment of any
amounts retained by the contracting
officer in accordance with the clause at
52.232–5, Payments Under Fixed-Price
Construction Contracts, will be as
specified in the contract or, if not specified, 30 days after approval by the contracting officer for release to the contractor. The contracting officer must
base the release of retained amounts on
the contracting officer’s determination
that satisfactory progress has been
made.
(iii) The due date for final payments
based on completion and acceptance of
all work (including any retained
amounts), and payments for partial deliveries that have been accepted by the
Government (e.g., each separate building, public work, or other division of
the contract for which the price is stated separately in the contract) is as follows:
(A) The later of the following two
events:
(1) The 30th day after the designated
billing office receives a proper invoice
from the contractor.
(2) The 30th day after Government
acceptance of the work or services
completed by the contractor. For a
final invoice, when the payment
amount is subject to contract settlement actions (e.g., release of contractor claims), acceptance is deemed
to occur on the effective date of the
contract settlement.
(B) If the designated billing office
fails to annotate the invoice with the
actual date of receipt at the time of receipt, the invoice payment due date is
the 30th day after the date of the contractor’s invoice, provided the designated billing office receives a proper
invoice and there is no disagreement
over quantity, quality, or contractor
compliance with contract requirements.
(2) For the sole purpose of computing
an interest penalty that might be due
the contractor for payments described
in paragraph (d)(1)(iii) of this section—
(i) Government acceptance or approval is deemed to occur constructively on the 7th day after the contractor completes the work or services
in accordance with the terms and conditions of the contract, unless there is
a disagreement over quantity, quality,
contractor compliance with a contract
requirement, or the requested amount;
(ii) If actual acceptance occurs within the constructive acceptance period,
the Government must base the determination of an interest penalty on the
actual date of acceptance;
(iii) The constructive acceptance requirement does not compel Government officials to accept work or services, approve contractor estimates,
perform contract administration functions, or make payment prior to fulfilling their responsibilities; and
(iv) The contracting officer may
specify a longer period for constructive
acceptance or constructive approval in
the solicitation and resulting contract,
if required to afford the Government a
reasonable opportunity to adequately
inspect the work and to determine the
adequacy of the contractor’s performance under the contract. The contracting officer must document in the
contract file the justification for extending the constructive acceptance or
approval beyond 7 days.
(3) Construction contracts contain
special provisions concerning contractor payments to subcontractors,
along with special contractor certification requirements. The Office of
Management and Budget has determined that these certifications must
not be construed as final acceptance of
the subcontractor’s performance. The
certification in 52.232–5(c) implements
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Federal Acquisition Regulation
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this determination; however, certificates are still acceptable if the contractor deletes paragraph (c)(4) of
52.232–5 from the certificate.
(4)(i) Paragraph (d) of the clause at
52.232–5, Payments under Fixed-Price
Construction Contracts, and paragraph
(e)(6) of the clause at 52.232–27, Prompt
Payment for Construction Contracts,
provide for the contractor to pay interest on unearned amounts in certain circumstances. The Government must recover this interest from subsequent
payments to the contractor. Therefore,
contracting officers normally must
make no demand for payment. Contracting officers must—
(A) Compute the amount in accordance with the clause;
(B) Provide the contractor with a
final decision; and
(C) Notify the payment office of the
amount to be withheld.
(ii) The payment office is responsible
for making the deduction of interest.
Amounts collected in accordance with
these provisions revert to the United
States Treasury.
(e) Cost-reimbursement contracts for
services. For purposes of computing late
payment interest penalties that may
apply, the due date for making interim
payments on cost-reimbursement contracts for services is 30 days after the
date of receipt of a proper invoice.
(f) Food and specified items.
Payment must be made as
close as possible to, but not
later than:
If the items delivered are:
(1) Meat or meat food products. As defined in section 2(a)(3) of the Packers and Stockyard
Act of 1921 (7 U.S.C. 182(3)), and as further defined in Public Law 98–181, including any
edible fresh or frozen poultry meat, any perishable poultry meat food product, fresh eggs,
and any perishable egg product.
(2) Fresh or frozen fish. As defined in section 204(3) of the Fish and Seafood Promotion Act of
1986 (16 U.S.C. 4003(3)).
(3) Perishable agricultural commodities. As defined in section 1(4) of the Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(4)).
(4) Dairy products. As defined in section 111(e) of the Dairy Production Stabilization Act of
1983 (7 U.S.C. 4502(e)), edible fats or oils, and food products prepared from edible fats or
oils. Liquid milk, cheese, certain processed cheese products, butter, yogurt, ice cream, mayonnaise, salad dressings, and other similar products fall within this classification. Nothing in
the Act limits this classification to refrigerated products. If questions arise regarding the
proper classification of a specific product, the contracting officer must follow prevailing industry practices in specifying a contract payment due date. The burden of proof that a classification of a specific product is, in fact, prevailing industry practice is upon the contractor
making the representation.
(g) Multiple payment due dates. Contracting officers may encourage, but
not require, contractors to submit separate invoices for products with different payment due dates under the
same contract or order. When an invoice contains items with different
payment due dates (i.e., a mixed invoice), the payment office will, subject
to agency policy—
(1) Pay the entire invoice on the earliest due date; or
(2) Split invoice payments, making
payments by the applicable due dates.
32.905 Payment
process.
documentation
and
(a) General. Payment will be based on
receipt of a proper invoice and satisfactory contract performance.
7th day after product delivery.
7th day after product delivery.
10th day after product delivery,
unless another date is specified in the contract.
10th day after a proper invoice
has been received.
(b) Content of invoices. (1) A proper invoice must include the following items
(except for interim payments on cost
reimbursement contracts for services):
(i) Name and address of the contractor.
(ii) Invoice date and invoice number.
(Contractors should date invoices as
close as possible to the date of mailing
or transmission.)
(iii) Contract number or other authorization for supplies delivered or
services performed (including order
number and contract line item number).
(iv) Description, quantity, unit of
measure, unit price, and extended price
of supplies delivered or services performed.
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32.905
48 CFR Ch. 1 (10–1–03 Edition)
(v) Shipping and payment terms (e.g.,
shipment number and date of shipment, discount for prompt payment
terms). Bill of lading number and
weight of shipment will be shown for
shipments on Government bills of lading.
(vi) Name and address of contractor
official to whom payment is to be sent
(must be the same as that in the contract or in a proper notice of assignment).
(vii) Name (where practicable), title,
phone number, and mailing address of
person to notify in the event of a defective invoice.
(viii) Taxpayer Identification Number (TIN). The contractor must include
its TIN on the invoice only if required
by agency procedures. (See 4.9 TIN requirements.)
(ix) Electronic funds transfer (EFT)
banking information.
(A) The contractor must include EFT
banking information on the invoice
only if required by agency procedures.
(B) If EFT banking information is
not required to be on the invoice, in
order for the invoice to be a proper invoice, the contractor must have submitted correct EFT banking information in accordance with the applicable
solicitation provision (e.g., 52.232–38,
Submission of Electronic Funds Transfer Information with Offer), contract
clause (e.g., 52.232–33, Payment by Electronic Funds Transfer—Central Contractor Registration, or 52.232–34, Payment by Electronic Funds Transfer—
Other Than Central Contractor Registration), or applicable agency procedures.
(C) EFT banking information is not
required if the Government waived the
requirement to pay by EFT.
(x) Any other information or documentation required by the contract
(e.g., evidence of shipment).
(2) An interim payment request
under a cost-reimbursement contract
for services constitutes a proper invoice for purposes of this subsection if
it includes all of the information required by the contract.
(3) If the invoice does not comply
with these requirements, the designated billing office must return it
within 7 days after receipt (3 days on
contracts for meat, meat food prod-
ucts, or fish; 5 days on contracts for
perishable agricultural commodities,
dairy products, edible fats or oils, and
food products prepared from edible fats
or oils), with the reasons why it is not
a proper invoice. If such notice is not
timely, then the designated billing office must adjust the due date for the
purpose of determining an interest penalty, if any.
(c) Authorization to pay. All invoice
payments, with the exception of interim payments on cost-reimbursement
contracts for services, must be supported by a receiving report or other
Government documentation authorizing payment (e.g., Government certified voucher). The agency receiving
official should forward the receiving
report or other Government documentation to the designated payment
office by the 5th working day after
Government acceptance or approval,
unless other arrangements have been
made. This period of time does not extend the due dates prescribed in this
section. Acceptance should be completed as expeditiously as possible. The
receiving report or other Government
documentation authorizing payment
must, as a minimum, include the following:
(1) Contract number or other authorization for supplies delivered or services performed.
(2) Description of supplies delivered
or services performed.
(3) Quantities of supplies received
and accepted or services performed, if
applicable.
(4) Date supplies delivered or services
performed.
(5) Date that the designated Government official—
(i) Accepted the supplies or services;
or
(ii) Approved the progress payment
request, if the request is being made
under the clause at 52.232–5, Payments
Under Fixed-Price Construction Contracts, or the clause at 52.232–10, Payments Under Fixed-Price Architect-Engineer Contracts.
(6) Signature, printed name, title,
mailing address, and telephone number
of the designated Government official
responsible for acceptance or approval
functions.
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Federal Acquisition Regulation
32.907
(d) Billing office. The designated billing office must immediately annotate
each invoice with the actual date it receives the invoice.
(e) Payment office. The designated
payment office will annotate each invoice and receiving report with the actual date it receives the invoice.
32.906 Making payments.
(a) General. The Government will not
make invoice payments earlier than 7
days prior to the due dates specified in
the contract unless the agency head determines—
(1) To make earlier payment on a
case-by-case basis; or
(2) That the use of accelerated payment methods are necessary (see
32.903(a)(5)).
(b) Payment office. The designated
payment office—
(1) Will mail checks on the same day
they are dated;
(2) For payments made by EFT, will
specify a date on or before the established due date for settlement of the
payment at a Federal Reserve Bank;
(3) When the due date falls on a Saturday, Sunday, or legal holiday when
Government offices are closed, may
make payment on the following working day without incurring a late payment interest penalty.
(4) When it is determined that the
designated billing office erroneously
rejected a proper invoice and upon resubmission of the invoice, will enter in
the payment system the original date
the invoice was received by the designated billing office for the purpose of
calculating the correct payment due
date and any interest penalties that
may be due.
(c) Partial deliveries. (1) Contracting
officers must, where the nature of the
work permits, write contract statements of work and pricing arrangements that allow contractors to deliver
and receive invoice payments for discrete portions of the work as soon as
completed and found acceptable by the
Government (see 32.102(d)).
(2) Unless specifically prohibited by
the contract, the clause at 52.232–1,
Payments, provides that the contractor is entitled to payment for accepted partial deliveries of supplies or
partial performance of services that
comply with all applicable contract requirements and for which prices can be
calculated from the contract terms.
(d) Contractor identifier. Each payment or remittance advice will use the
contractor invoice number in addition
to any Government or contract information in describing any payment
made.
(e) Discounts. When a discount for
prompt payment is taken, the designated payment office will make payment to the contractor as close as possible to, but not later than, the end of
the discount period. The discount period is specified by the contractor and
is calculated from the date of the contractor’s proper invoice. If the contractor has not placed a date on the invoice, the due date is calculated from
the date the designated billing office
receives a proper invoice, provided the
agency annotates such invoice with the
date of receipt at the time of receipt.
When the discount date falls on a Saturday, Sunday, or legal holiday when
Government offices are closed, the designated payment office may make payment on the following working day and
take a discount. Payment terms are
specified in the clause at 52.232–8, Discounts for Prompt Payment.
32.907
Interest penalties.
(a) Late payment. The designated payment office will pay an interest penalty automatically, without request
from the contractor, when all of the
following conditions, if applicable,
have been met:
(1) The designated billing office received a proper invoice.
(2) The Government processed a receiving report or other Government
documentation authorizing payment,
and there was no disagreement over
quantity, quality, or contractor compliance with any contract requirement.
(3) In the case of a final invoice, the
payment amount is not subject to further contract settlement actions between the Government and the contractor.
(4) The designated payment office
paid the contractor after the due date.
(5) In the case of interim payments
on cost-reimbursement contracts for
services, when payment is made more
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32.908
48 CFR Ch. 1 (10–1–03 Edition)
than 30 days after the designated billing office receives a proper invoice.
(b) Improperly taken discount. The designated payment office will pay an interest penalty automatically, without
request from the contractor, if the
Government takes a discount for
prompt payment improperly. The interest penalty is calculated on the
amount of discount taken for the period beginning with the first day after
the end of the discount period through
the date when the contractor is paid.
(c) Failure to pay interest. (1) The designated payment office will pay a penalty amount, in addition to the interest penalty amount, only if—
(i) The Government owes an interest
penalty of $1 or more;
(ii) The designated payment office
does not pay the interest penalty within 10 days after the date the invoice
amount is paid; and
(iii) The contractor makes a written
demand to the designated payment office for additional penalty payment in
accordance with paragraph (c)(2) of this
section, postmarked not later than 40
days after the date the invoice amount
is paid.
(2)(i) Contractors must support written demands for additional penalty
payments with the following data. The
Government must not request additional data. Contractors must—
(A) Specifically assert that late payment interest is due under a specific
invoice, and request payment of all
overdue late payment interest penalty
and such additional penalty as may be
required;
(B) Attach a copy of the invoice on
which the unpaid late payment interest
is due; and
(C) State that payment of the principal has been received, including the
date of receipt.
(ii) If there is no postmark or the
postmark is illegible—
(A) The designated payment office
that receives the demand will annotate
it with the date of receipt, provided the
demand is received on or before the
40th day after payment was made; or
(B) If the designated payment office
fails to make the required annotation,
the Government will determine the demand’s validity based on the date the
contractor has placed on the demand;
provided such date is no later than the
40th day after payment was made.
(d) Disagreements. (1) The payment office will not pay interest penalties if
payment delays are due to disagreement between the Government and
contractor concerning—
(i) The payment amount;
(ii) Contract compliance; or
(iii) Amounts temporarily withheld
or retained in accordance with the
terms of the contract.
(2) The Government and the contractor must resolve claims involving
disputes, and any interest that may be
payable in accordance with the Disputes clause.
(e) Computation of interest penalties.
The Government will compute interest
penalties in accordance with OMB
prompt payment regulations at 5 CFR
part 1315. These regulations are available via the Internet at http://
www.fms.treas.gov/prompt/.
(f) Unavailability of funds. The temporary unavailability of funds to make
a timely payment does not relieve an
agency from the obligation to pay interest penalties.
32.908 Contract clauses.
(a) Insert the clause at 52.232–26,
Prompt Payment for Fixed-Price Architect-Engineer Contracts, in solicitations and contracts that contain the
clause at 52.232–10, Payments Under
Fixed-Price Architect-Engineer Contracts.
(1) As authorized in 32.904(c)(2), the
contracting officer may modify the
date in paragraph (a)(4)(i) of the clause
to specify a period longer than 7 days
for constructive acceptance or constructive approval, if required to afford
the Government a practicable opportunity to inspect and test the supplies
furnished or evaluate the services performed.
(2) As provided in 32.903, agency policies and procedures may authorize
amendment of paragraphs (a)(1)(i) and
(ii) of the clause to insert a period
shorter than 30 days (but not less than
7 days) for making contract invoice
payments.
(b) Insert the clause at 52.232–27,
Prompt Payment for Construction Contracts, in all solicitations and contracts for construction (see part 36).
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32.1001
(1) As authorized in 32.904(d)(1)(i)(B),
the contracting officer may modify the
date in paragraph (a)(1)(i)(A) of the
clause to specify a period longer than
14 days if required to afford the Government a reasonable opportunity to
adequately inspect the work and to determine the adequacy of the Contractor’s performance under the contract.
(2) As authorized in 32.904(d)(2)(iv),
the contracting officer may modify the
date in paragraph (a)(4)(i) of the clause
to specify a period longer than 7 days
for constructive acceptance or constructive approval if required to afford
the Government a reasonable opportunity to inspect and test the supplies
furnished or evaluate the services performed.
(c) Insert the clause at 52.232–25,
Prompt Payment, in all other solicitations and contracts, except when the
clause at 52.212–4, Contract Terms and
Conditions—Commercial Items, applies, or when payment terms and late
payment penalties are established by
other governmental authority (e.g.,
tariffs).
(1)
As
authorized
in
32.904(b)(1)(ii)(B)(4), the contracting officer may modify the date in paragraph
(a)(5)(i) of the clause to specify a period
longer than 7 days for constructive acceptance, if required to afford the Government a reasonable opportunity to
inspect and test the supplies furnished
or to evaluate the services performed,
except in the case of a contract for the
purchase of a commercial item, including a brand-name commercial item for
authorized resale (e.g., commissary
items).
(2) As provided in 32.903, agency policies and procedures may authorize
amendment of paragraphs (a)(1)(i) and
(ii) of the clause to insert a period
shorter than 30 days (but not less than
7 days) for making contract invoice
payments.
(3) If the contract is a cost-reimbursement contract for services, use
the clause with its Alternate I.
32.909
Contractor inquiries.
(a) Direct questions involving—
(1) Delinquent payments to the designated billing office or designated
payment office; and
(2)
Disagreements
in
payment
amount or timing to the contracting
officer for resolution. The contracting
officer must coordinate within appropriate contracting channels and seek
the advice of other offices as necessary
to resolve disagreements.
(b) Small business concerns may contact the agency’s local small business
specialist or representative from the
Office of Small and Disadvantaged
Business Utilization to obtain additional assistance related to payment
issues, late payment interest penalties,
and information on the Prompt Payment Act.
Subpart 32.10—PerformanceBased Payments
SOURCE: 60 FR 49715, Sept. 26, 1995, unless
otherwise noted.
32.1000
Scope of subpart.
This subpart provides policy and procedures for performance-based payments under noncommercial purchases
pursuant to subpart 32.1. This subpart
does not apply to—
(a) Payments under cost-reimbursement contracts;
(b) Contracts for architect-engineer
services or construction, or for shipbuilding or ship conversion, alteration,
or repair, when the contracts provide
for progress payments based upon a
percentage or stage of completion; or
(c) Contracts awarded through sealed
bid procedures.
[60 FR 49715, Sept. 26, 1995, as amended at 65
FR 16281, Mar. 27, 2000]
32.1001
Policy.
(a) Performance-based payments are
the preferred Government financing
method when the contracting officer
finds them practical, and the contractor agrees to their use.
(b) Performance-based payments are
contract financing payments that are
not payment for accepted items.
(c) Performance-based payments are
fully recoverable, in the same manner
as progress payments, in the event of
default.
Except
as
provided
in
32.1003(c), the contracting officer must
not use performance-based payments
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48 CFR Ch. 1 (10–1–03 Edition)
when other forms of contract financing
are provided.
(d) For Government accounting purposes, the Government should treat
performance-based
payments
like
progress payments based on costs
under subpart 32.5.
(e) Performance-based payments are
contract financing payments and,
therefore, are not subject to the interest-penalty provisions of prompt payment (see subpart 32.9). However, each
agency must make these payments in
accordance with the agency’s policy for
prompt payment of contract financing
payments.
[65 FR 16281, Mar. 27, 2000]
32.1002 Bases for performance-based
payments.
Performance-based payments may be
made on any of the following bases:
(a) Performance measured by objective, quantifiable methods;
(b)
Accomplishment
of
defined
events; or
(c) Other quantifiable measures of results.
32.1003
Criteria for use.
The contracting officer may use performance-based payments only if the
following conditions are met:
(a) The contracting officer and offeror are able to agree on the performance-based payment terms;
(b) The contract is a fixed-price type
contract; and
(c) The contract does not provide for
other methods of contract financing,
except that advance payments in accordance with subpart 32.4, or guaranteed loans in accordance with subpart
32.3 may be used.
[60 FR 49715, Sept. 26, 1995, as amended at 65
FR 16282, Mar. 27, 2000; 67 FR 70521, Nov. 22,
2002]
32.1004 Procedures.
Performance-based payments may be
made either on a whole contract or on
a deliverable item basis, unless otherwise prescribed by agency regulations.
Financing payments to be made on a
whole contract basis are applicable to
the entire contract, and not to specific
deliverable items. Financing payments
to be made on a deliverable item basis
are applicable to a specific individual
deliverable item. (A deliverable item
for these purposes is a separate item
with a distinct unit price. Thus, a contract line item for 10 airplanes, with a
unit price of $1,000,000 each, has 10 deliverable items—the separate planes. A
contract line item for 1 lot of 10 airplanes, with a lot price of $10,000,000,
has only one deliverable item—the lot.)
(a) Establishing performance bases. (1)
The basis for performance-based payments may be either specifically described events (e.g., milestones) or
some measurable criterion of performance. Each event or performance criterion that will trigger a finance payment must be an integral and necessary part of contract performance
and must be identified in the contract,
along with a description of what constitutes successful performance of the
event or attainment of the performance criterion. The signing of contracts
or modifications, the exercise of options, or other such actions must not
be events or criteria for performancebased payments. An event need not be
a critical event in order to trigger a
payment, but the Government must be
able to readily verify successful performance of each such event or performance criterion.
(2) Events or criteria may be either
severable or cumulative. The successful completion of a severable event or
criterion is independent of the accomplishment of any other event or criterion. Conversely, the successful accomplishment of a cumulative event or
criterion is dependent upon the previous accomplishment of another
event. A contract may provide for more
than one series of severable and/or cumulative performance events or criteria performed in parallel. The contracting officer must include the following in the contract:
(i) The contract must not permit
payment for a cumulative event or criterion until the dependent event or criterion has been successfully completed.
(ii) The contract must specifically
identify severable events or criteria.
(iii) The contract must identify
which events or criteria are preconditions for the successful achievement of each cumulative event or criterion.
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(iv) Because performance-based payments are contract financing, events or
criteria must not serve as a vehicle to
reward the contractor for completion
of performance levels over and above
what is required for successful completion of the contract.
(v) If payment of performance-based
finance amounts is on a deliverable
item basis, each event or performance
criterion must be part of the performance necessary for that deliverable
item and must be identified to a specific contract line item or subline
item.
(b) Establishing performance-based finance payment amounts. (1) The contracting officer must establish a complete, fully defined schedule of events
or performance criteria and payment
amounts when negotiating contract
terms. If a contract action significantly affects the price, or event or
performance criterion, the contracting
officer responsible for pricing the contract modification must adjust the performance-based payment schedule appropriately.
(2) Total performance-based payments must—
(i) Reflect prudent contract financing
provided only to the extent needed for
contract performance (see 32.104(a));
and
(ii) Not exceed 90 percent of the contract price if on a whole contract basis,
or 90 percent of the delivery item price
if on a delivery item basis.
(3) The contract must specifically
state the amount of each performancebased payment either as a dollar
amount or as a percentage of a specifically identified price (e.g., contract
price, or unit price of the deliverable
item). The payment of contract financing has a cost to the Government in
terms of interest paid by the Treasury
to borrow funds to make the payment.
Because the contracting officer has
wide discretion as to the timing and
amount of the performance-based payments, the contracting officer must ensure that—
(i) The total contract price is fair and
reasonable, all factors considered; and
(ii)
Performance-based
payment
amounts are commensurate with the
value of the performance event or performance criterion, and are not ex-
pected to result in an unreasonably low
or negative level of contractor investment in the contract. To confirm sufficient investment, the contracting officer may request expenditure profile information from offerors, but only if
other information in the proposal, or
information otherwise available to the
contracting officer, is expected to be
insufficient.
(4) Unless agency procedures prescribe the bases for establishing performance-based
payment
amounts,
contracting officers may establish
them on any rational basis, including
(but not limited to)—
(i) Engineering estimates of stages of
completion;
(ii) Engineering estimates of hours or
other measures of effort to be expended
in performance of an event or achievement of a performance criterion; or
(iii) The estimated projected cost of
performance of particular events.
(5) When subsequent contract modifications are issued, the contracting officer must adjust the performancebased payment schedule as necessary
to reflect the actions required by those
contract modifications.
(c) Instructions for multiple appropriations. If there is more than one appropriation account (or subaccount) funding payments on the contract, the contracting officer must provide instructions to the Government payment office for distribution of financing payments to the respective funds accounts.
Distribution instructions must be consistent with the contract’s liquidation
provisions.
(d) Liquidating performance-based finance payments. Performance-based
amounts must be liquidated by deducting a percentage or a designated dollar
amount from the delivery payments.
The contracting officer must specify
the liquidation rate or designated dollar amount in the contract. The method of liquidation must ensure complete
liquidation no later than final payment.
(1) If the contracting officer establishes the performance-based payments
on a delivery item basis, the liquidation amount for each line item is the
percent of that delivery item price that
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32.1005
48 CFR Ch. 1 (10–1–03 Edition)
was previously paid under performance-based finance payments or the
designated dollar amount.
(2) If the performance-based finance
payments are on a whole contract
basis, liquidation is by predesignated
liquidation amounts or liquidation percentages.
(e) Competitive negotiated solicitations.
(1) If a solicitation requests offerors to
propose performance-based payments,
the solicitation must specify—
(i) What, if any, terms must be included in all offers; and
(ii) The extent to which and how offeror-proposed performance-based payment terms will be evaluated. Unless
agencies prescribe other evaluation
procedures, if the contracting officer
anticipates that the cost of providing
performance-based payments would
have a significant impact on determining the best value offer, the solicitation should include an adjustment of
proposed prices to reflect the estimated cost to the Government of providing each offeror’s proposed performance-based payments (see Alternate I
to the provision at 52.232–28).
(2) The contracting officer must—
(i) Review the proposed terms to ensure they comply with this section; and
(ii) Use the adjustment method in
32.205(c) if the price is to be adjusted
for evaluation purposes in accordance
with paragraph (e)(1)(ii) of this section.
[65 FR 16282, Mar. 27, 2000]
32.1005 Solicitation provision and contract clause.
(a) Insert the clause at 52.232–32, Performance-Based Payments, with the
description of the basis for payment
and liquidation as required in 32.1004
in—
(1) Solicitations that may result in
contracts providing for performancebased payments; and
(2) Fixed-price contracts under which
the Government will provide performance-based payments.
(b)(1) Insert the solicitation provision
at 52.232–28, Invitation to Propose Performance-Based Payments, in negotiated solicitations that invite offerors
to propose performance-based payments.
(2) Use the provision with its Alternate I in competitive negotiated solici-
tations if the Government intends to
adjust proposed prices for proposal
evaluation purposes (see 32.1004(e)).
[65 FR 16283, Mar. 27, 2000]
32.1006
[Reserved]
32.1007 Administration and payment
of performance-based payments.
(a) Responsibility. The contracting officer responsible for administration of
the contract shall be responsible for review and approval of performancebased payments.
(b) Approval of financing requests. Unless otherwise provided in agency regulations, or by agreement with the appropriate payment official—
(1) The contracting officer shall be
responsible for receiving, approving,
and transmitting all performancebased payment requests to the appropriate payment office; and
(2) Each approval shall specify the
amount to be paid, necessary contractual information, and the appropriation account(s) (see 32.1004(c)) to be
charged for the payment.
(c) Reviews. The contracting officer is
responsible for determining what reviews are required for protection of the
Government’s interests. The contracting officer should consider the
contractor’s 0experience, performance
record, reliability, financial strength,
and the adequacy of controls established by the contractor for the administration of performance-based payments. Based upon the risk to the Government, post-payment reviews and
verifications should normally be arranged as considered appropriate by
the contracting officer. If considered
necessary by the contracting officer,
pre-payment reviews may be required.
(d) Incomplete performance. The contracting officer shall not approve a performance-based payment until the
specified event or performance criterion has been successfully accomplished in accordance with the contract. If an event is cumulative, the
contracting officer shall not approve
the performance-based payment unless
all identified preceding events or criteria are accomplished.
(e) Government-caused delay. Entitlement to a performance-based payment
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32.1101
is solely on the basis of successful performance of the specified events or performance criteria. However, if there is
a Government-caused delay, the contracting officer may renegotiate the
performance-based payment schedule,
to facilitate contractor billings for any
successfully accomplished portions of
the delayed event or criterion.
32.1008 Suspension or reduction
performance-based payments.
of
The contracting officer shall apply
the policy and procedures in paragraphs (a), (b), (c), and (e) of 32.503–6,
Suspension or reduction of payments,
whenever exercising the Government’s
rights to suspend or reduce performance-based payments in accordance
with paragraph (e) of the clause at
52.232–32,
Performance-Based
Payments.
32.1009
Title.
(a) Since the clause at 52.232–32, Performance-Based Payments, gives the
Government title to the property described in paragraph (f) of the clause,
the contracting officer must ensure
that the Government title is not compromised by other encumbrances. Ordinarily, the contracting officer, in the
absence of reason to believe otherwise,
may rely upon the contractor’s certification contained in the payment request.
(b) If the contracting officer becomes
aware of any arrangement or condition
that would impair the Government’s
title to the property affected by the
Performance-Based Payments clause,
the contracting officer shall require
additional protective provisions.
(c) The existence of any such encumbrance is a violation of the contractor’s obligations under the contract,
and the contracting officer may, if necessary, suspend or reduce payments
under the terms of the PerformanceBased Payments clause covering failure to comply with a material requirement of the contract. In addition, if
the contractor fails to disclose an existing encumbrance in the certification, the contracting officer should
consult with legal counsel concerning
possible violation of 31 U.S.C. 3729, the
False Claims Act.
32.1010
Risk of loss.
(a) Under the clause at 52.232–32, Performance-Based Payments, and except
for normal spoilage, the contractor
bears the risk for loss, theft, destruction, or damage to property affected by
the clause, even though title is vested
in the Government, unless the Government has expressly assumed this risk.
The clauses prescribed in this regulation related to performance-based payments, default, and terminations do
not constitute a Government assumption of risk.
(b) If a loss occurs in connection with
property for which the contractor
bears the risk, and the property is
needed for performance, the contractor
is obligated to repay the Government
the performance-based payments related to the property.
(c) The contractor is not obligated to
pay for the loss of property for which
the Government has assumed the risk
of loss. However, a serious loss may impede the satisfactory progress of contract performance, so that the contracting officer may need to act under
paragraph (e)(2) of the PerformanceBased Payments clause. In addition,
while the contractor is not required to
repay previous performance-based payments in the event of a loss for which
the Government has assumed the risk,
such a loss may prevent the contractor
from making the certification required
by the Performance-Based Payments
clause.
Subpart 32.11—Electronic Funds
Transfer
SOURCE: 64 FR 10540, Mar. 4, 1999, unless
otherwise noted.
32.1100
Scope of subpart.
This subpart provides policy and procedures for contract financing and delivery payments to contractors by electronic funds transfer (EFT).
32.1101
Statutory requirements.
31 U.S.C. 3332 requires, subject to implementing regulations of the Secretary of the Treasury at 31 CFR part
208, that EFT be used to make all contract payments.
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32.1102
32.1102
48 CFR Ch. 1 (10–1–03 Edition)
Definitions.
As used in this subpart—
Electron Funds Transfer information
(EFT) means information necessary for
making a payment by EFT through
specified EFT mechanisms.
Governmentwide commercial purchase
card means a card that is similar in nature to a commercial credit card that
is used to make financing and delivery
payments for supplies and services. The
purchase card is an EFT method and it
may be used as a means to meet the requirement to pay by EFT, to the extent that purchase card limits do not
preclude such payments.
Payment information means the payment advice provided by the Government to the contractor that identifies
what the payment is for, any computations or adjustments made by the Government, and any information required
by the Prompt Payment Act.
[64 FR 10540, Mar. 4, 1999, as amended at 66
FR 2132, Jan. 10, 2001]
32.1103
Applicability.
The Government shall provide all
contract payments through EFT except
if—
(a) The office making payment under
a contract that requires payment by
EFT, loses the ability to release payment by EFT. To the extent authorized
by 31 CFR part 208, the payment office
shall make necessary payments pursuant to paragraph (a)(2) of the clause at
either 52.232–33 or 52.232–34 until such
time as it can make EFT payments;
(b) The payment is to be received by
or on behalf of the contractor outside
the United States and Puerto Rico (but
see 32.1106(b));
(c) A contract is paid in other than
United States currency (but see
32.1106(b));
(d) Payment by EFT under a classified contract could compromise the
safeguarding of classified information
or national security, or arrangements
for appropriate EFT payments would
be impractical due to security considerations;
(e) A contract is awarded by a deployed contracting officer in the course
of military operations, including, but
not limited to, contingency operations
as defined in 2.101, or a contract is
awarded by any contracting officer in
the conduct of emergency operations,
such as responses to natural disasters
or national or civil emergencies, if—
(1) EFT is not known to be possible;
or
(2) EFT payment would not support
the objectives of the operation;
(f) The agency does not expect to
make more than one payment to the
same recipient within a one-year period;
(g) An agency’s need for supplies and
services is of such unusual and compelling urgency that the Government
would be seriously injured unless payment is made by a method other than
EFT;
(h) There is only one source for supplies and services and the Government
would be seriously injured unless payment is made by a method other than
EFT; or
(i) Otherwise authorized by Department of the Treasury Regulations at 31
CFR part 208.
[64 FR 10540, Mar. 4, 1999, as amended at 67
FR 6114, Feb. 8, 2002; 68 FR 13203, Mar. 18,
2003; 68 FR 56673, Oct. 1, 2003]
32.1104 Protection of EFT information.
The
Government
shall
protect
against improper disclosure of contractors’ EFT information.
32.1105 Assignment of claims.
The use of EFT payment methods is
not a substitute for a properly executed assignment of claims in accordance with Subpart 32.8. EFT information that shows the ultimate recipient
of the transfer to be other than the
contractor, in the absence of a proper
assignment of claims, is considered to
be incorrect EFT information within
the meaning of the ‘‘Suspension of
Payment’’ paragraphs of the EFT
clauses at 52.232–33 and 52.232–34.
32.1106 EFT mechanisms.
(a) Domestic EFT mechanisms. The
EFT clauses at 52.232–33 and 52.232–34
are designed for use with the domestic
United States banking system, using
United States currency, and only the
specified mechanisms (U.S. Automated
Clearing House, and Fedwire Transfer
System) of EFT. However, the head of
an agency may authorize the use of
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Federal Acquisition Regulation
32.1110
any other EFT mechanism for domestic EFT with the concurrence of the office or agency responsible for making
payments.
(b) Nondomestic EFT mechanisms and
other than United States currency. The
Government shall provide payment by
other than EFT for payments received
by or on behalf of the contractor outside the United States and Puerto Rico
or for contracts paid in other than
United States currency. However, the
head of an agency may authorize appropriate use of EFT with the concurrence of the office or agency responsible for making payments if—
(1) The political, financial, and communications infrastructure in a foreign
country supports payment by EFT; or
(2) Payments of other than United
States currency may be made safely.
32.1107 Payment information.
The payment or disbursing office
shall forward to the contractor available payment information that is suitable for transmission as of the date of
release of the EFT instruction to the
Federal Reserve System.
32.1108 Payment by Governmentwide
commercial purchase card.
A Governmentwide commercial purchase card charge authorizes the third
party (e.g., financial institution) that
issued the purchase card to make immediate payment to the contractor.
The Government reimburses the third
party at a later date for the third party’s payment to the contractor.
(a) The clause at 52.232–36, Payment
by Third Party, governs when a contractor submits a charge against the
purchase card for contract payment.
The clause provides that the contractor shall make such payment requests by a charge to a Government account with the third party at the time
the payment clause(s) of the contract
authorizes the contractor to submit a
request for payment, and for the
amount due in accordance with the
terms of the contract. To the extent
that such a payment would otherwise
be approved, the charge against the
purchase card should not be disputed
when the charge is reported to the Government by the third party. To the extent that such payment would other-
wise not have been approved, an authorized individual (see 1.603–3) shall
take action to remove the charge, such
as by disputing the charge with the
third party or by requesting that the
contractor credit the charge back to
the Government under the contract.
(b) Written contracts to be paid by
purchase card should include the clause
at 52.232–36, Payment by Third Party,
as prescribed by 32.1110(d). However,
payment by a purchase card also may
be made under a contract that does not
contain the clause to the extent the
contractor agrees to accept that method of payment.
(c) The clause at 52.232–36, Payment
by Third Party, requires that the contract—
(1) Identify the third party and the
particular purchase card to be used;
and
(2) Not include the purchase card account number. The purchase card account number should be provided separately to the contractor.
32.1109 EFT information submitted by
offerors.
If offerors are required to submit
EFT information prior to award, the
successful offeror is not responsible for
resubmitting this information after
award of the contract except to make
changes, or to place the information on
invoices if required by agency procedures. Therefore, contracting officers
shall forward EFT information provided by the successful offeror to the
appropriate office.
32.1110 Solicitation
contract clauses.
provision
(a) The contracting officer shall insert the clause at—
(1) 52.232–33, Payment by Electronic
Funds Transfer—Central Contractor
Registration, in solicitations and contracts that include the clause at 52.204–
7 or an agency clause that requires a
contractor to be registered in the CCR
database and maintain registration
until final payment, unless—
(i) Payment will be made through a
third party arrangement (see 13.301 and
paragraph (d) of this section); or
(ii) An exception listed in 32.1103(a)
through (i) applies.
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48 CFR Ch. 1 (10–1–03 Edition)
(2)(i) 52.232–34, Payment by Electronic Funds Transfer Other than Central Contractor Registration, in solicitations and contracts that require EFT
as the method for payment but do not
include the clause at 52.204–7, Central
Contractor Registration, or a similar
agency clause that requires the contractor to be registered in the CCR
database.
(ii)(A) If permitted by agency procedures, the contracting officer may insert in paragraph (b)(1) of the clause, a
particular time after award, such as a
fixed number of days, or event such as
the submission of the first request for
payment.
(B) If no agency procedures are prescribed, the time period inserted in
paragraph (b)(1) of the clause shall be
‘‘no later than 15 days prior to submission of the first request for payment.’’
(b) If the head of the agency has authorized, in accordance with 32.1106, to
use a nondomestic EFT mechanism,
the contracting officer shall insert in
solicitations and contracts a clause
substantially the same as 52.232–33 or
52.232–34 that clearly addresses the
nondomestic EFT mechanism.
(c) If EFT information is to be submitted to other than the payment office in accordance with agency procedures, the contracting officer shall insert in solicitations and contracts the
clause at 52.232–35, Designation of Office for Government Receipt of Electronic Funds Transfer Information, or
a clause substantially the same as
52.232–35 that clearly informs the contractor where to send the EFT information.
(d) If payment under a written contract will be made by a charge to a
Government account with a third party
such as a Governmentwide commercial
purchase card, then the contracting officer shall insert the clause at 52.232–36,
Payment by Third Party, in solicitations and contracts. Payment by a purchase card may also be made under a
contract that does not contain the
clause at 52.232–36, to the extent the
contractor agrees to accept that method of payment.
(e) If the contract or agreement provides for the use of delivery orders, and
provides that the ordering office designate the method of payment for indi-
vidual orders, the contracting officer
shall insert, in the solicitation and
contract or agreement, the clause at
52.232–37, Multiple Payment Arrangements, and, to the extent they are applicable, the clauses at—
(1) 52.232–33, Payment by Electronic
Funds Transfer—Central Contractor
Registration;
(2) 52.232–34, Payment by Electronic
Funds Transfer—Other than Central
Contractor Registration; and
(3) 52.232–36, Payment by Third
Party.
(f) If more than one disbursing office
will make payment under a contract or
agreement, the contracting officer, or
ordering office (if the contract provides
for choices between EFT clauses on individual orders or classes of orders),
shall include or identify the EFT
clause appropriate for each office and
shall identify the applicability by disbursing office and contract line item.
(g) If the solicitation contains the
clause at 52.232–34, Payment by Electronic Funds Transfer—Other than
Central Contractor Registration, and
an offeror is required to submit EFT
information prior to award—
(1) The contracting officer shall insert in the solicitation the provision at
52.232–38, Submission of Electronic
Funds Transfer Information with Offer,
or a provision substantially the same;
and
(2) For sealed bid solicitations, the
contracting officer shall amend 52.232–
38 to ensure that a bidder’s EFT information—
(i) Is not a part of the bid to be
opened at the public opening; and
(ii) May not be released to members
of the general public who request a
copy of the bid.
[64 FR 10540, Mar. 4, 1999, as amended at 68
FR 56673, Oct. 1, 2003]
PART 33—PROTESTS, DISPUTES, AND
APPEALS
Sec.
33.000
Scope of part.
33.101
33.102
33.103
33.104
Definitions.
General.
Protests to the agency.
Protests to GAO.
Subpart 33.1—Protests
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Federal Acquisition Regulation
33.102
33.105 [Reserved]
33.106 Solicitation provision and contract
clause.
Subpart 33.2—Disputes and Appeals
33.201 Definitions.
33.202 Contract Disputes Act of 1978.
33.203 Applicability.
33.204 Policy.
33.205 Relationship of the Act to Pub. L. 85–
804.
33.206 Initiation of a claim.
33.207 Contractor certification.
33.208 Interest on claims.
33.209 Suspected fraudulent claims.
33.210 Contracting officer’s authority.
33.211 Contracting officer’s decision.
33.212 Contracting officer’s duties upon appeal.
33.213 Obligation to continue performance.
33.214 Alternative dispute resolution (ADR).
33.215 Contract clause.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
33.000 Scope of part.
This part prescribes policies and procedures for filing protests and for processing contract disputes and appeals.
[50 FR 2270, Jan. 15, 1985]
Subpart 33.1—Protests
33.101 Definitions.
As used in this subpart—
Day means a calendar day, unless
otherwise specified. In the computation of any period—
(1) The day of the act, event, or default from which the designated period
of time begins to run is not included;
and
(2) The last day after the act, event,
or default is included unless—
(i) The last day is a Saturday, Sunday, or Federal holiday; or
(ii) In the case of a filing of a paper
at any appropriate administrative
forum, the last day is a day on which
weather or other conditions cause the
closing of the forum for all or part of
the day, in which event the next day on
which the appropriate administrative
forum is open is included.
Filed means the complete receipt of
any document by an agency before its
close of business. Documents received
after close of business are considered
filed as of the next day. Unless otherwise stated, the agency close of busi-
ness is presumed to be 4:30 p.m., local
time.
Interested Party for the purpose of filing a protest means an actual or prospective offeror whose direct economic
interest would be affected by the award
of a contract or by the failure to award
a contract.
Protest means a written objection by
an interested party to any of the following:
(1) A solicitation or other request by
an agency for offers for a contract for
the procurement of property or services.
(2) The cancellation of the solicitation or other request.
(3) An award or proposed award of the
contract.
(4) A termination or cancellation of
an award of the contract, if the written
objection contains an allegation that
the termination or cancellation is
based in whole or in part on improprieties concerning the award of the contract.
[50 FR 2270, Jan. 15, 1985, as amended at 53
FR 43391, Oct. 26, 1988; 54 FR 19827, May 8,
1989; 60 FR 48225, Sept. 18, 1995; 62 FR 64933,
Dec. 9, 1997; 66 FR 2132, Jan. 10, 2001]
33.102 General.
(a) Contracting officers shall consider all protests and seek legal advice,
whether protests are submitted before
or after award and whether filed directly with the agency or the General
Accounting Office (GAO). (See 19.302 for
protests of small business status, and
19.305 for protests of disadvantaged
business status.)
(b) If, in connection with a protest,
the head of an agency determines that
a solicitation, proposed award, or
award does not comply with the requirements of law or regulation, the
head of the agency may—
(1) Take any action that could have
been recommended by the Comptroller
General had the protest been filed with
the General Accounting Office; and
(2) Pay appropriate costs as stated in
33.104(h).
(3) Require the awardee to reimburse
the Government’s costs, as provided in
this paragraph, where a postaward protest is sustained as the result of an
awardee’s intentional or negligent
misstatement, misrepresentation, or
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33.103
48 CFR Ch. 1 (10–1–03 Edition)
miscertification. In addition to any
other remedy available, and pursuant
to the requirements of Subpart 32.6,
the Government may collect this debt
by offsetting the amount against any
payment due the awardee under any
contract between the awardee and the
Government.
(i) When a protest is sustained by
GAO under circumstances that may
allow the Government to seek reimbursement for protest costs, the contracting officer will determine whether
the protest was sustained based on the
awardee’s negligent or intentional misrepresentation. If the protest was sustained on several issues, protest costs
shall be apportioned according to the
costs attributable to the awardee’s actions.
(ii) The contracting officer shall review the amount of the debt, degree of
the awardee’s fault, and costs of collection, to determine whether a demand
for reimbursement ought to be made. If
it is in the best interests of the Government to seek reimbursement, the
contracting officer shall notify the
contractor in writing of the nature and
amount of the debt, and the intention
to collect by offset if necessary. Prior
to issuing a final decision, the contracting officer shall afford the contractor an opportunity to inspect and
copy agency records pertaining to the
debt to the extent permitted by statute
and regulation, and to request review
of the matter by the head of the contracting activity.
(iii) When appropriate, the contracting officer shall also refer the
matter to the agency debarment official for consideration under Subpart
9.4.
(c) In accordance with 31 U.S.C. 1558,
with respect to any protest filed with
the GAO, if the funds available to the
agency for a contract at the time a
protest is filed in connection with a solicitation for, proposed award of, or
award of such a contract would otherwise expire, such funds shall remain
available for obligation for 100 days
after the date on which the final ruling
is made on the protest. A ruling is considered final on the date on which the
time allowed for filing an appeal or request for reconsideration has expired,
or the date on which a decision is ren-
dered on such appeal or request, whichever is later.
(d) Protest likely after award. The contracting officer may stay performance
of a contract within the time period
contained in 33.104(c)(1) if the contracting officer makes a written determination that—
(1) A protest is likely to be filed; and
(2) Delay of performance is, under the
circumstances, in the best interests of
the United States.
(e) An interested party wishing to
protest is encouraged to seek resolution within the agency (see 33.103) before filing a protest with the GAO, but
may protest to the GAO in accordance
with GAO regulations (4 CFR part 21).
(f) No person may file a protest at
GAO for a procurement integrity violation unless that person reported to the
contracting officer the information
constituting evidence of the violation
within 14 days after the person first
discovered the possible violation (41
U.S.C. 423(g)).
[50 FR 2270, Jan. 15, 1985, as amended at 55
FR 38517, Sept. 18, 1990; 55 FR 52795, Dec. 21,
1990; 60 FR 48226, 48275, Sept. 18, 1995; 61 FR
41470, Aug. 8, 1996; 61 FR 67411, Dec. 20, 1996;
62 FR 233, Jan. 2, 1997; 63 FR 35724, June 30,
1998]
33.103
Protests to the agency.
(a) Reference. Executive Order 12979,
Agency Procurement Protests, establishes policy on agency procurement
protests.
(b) Prior to submission of an agency
protest, all parties shall use their best
efforts to resolve concerns raised by an
interested party at the contracting officer level through open and frank discussions.
(c) The agency should provide for inexpensive, informal, procedurally simple, and expeditious resolution of protests. Where appropriate, the use of alternative dispute resolution techniques, third party neutrals, and another agency’s personnel are acceptable protest resolution methods.
(d) The following procedures are established to resolve agency protests effectively, to build confidence in the
Government’s acquisition system, and
to reduce protests outside of the agency:
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(1) Protests shall be concise and logically presented to facilitate review by
the agency. Failure to substantially
comply with any of the requirements of
paragraph (d)(2) of this section may be
grounds for dismissal of the protest.
(2) Protests shall include the following information:
(i) Name, address, and fax and telephone numbers of the protester.
(ii) Solicitation or contract number.
(iii) Detailed statement of the legal
and factual grounds for the protest, to
include a description of resulting prejudice to the protester.
(iv) Copies of relevant documents.
(v) Request for a ruling by the agency.
(vi) Statement as to the form of relief requested.
(vii) All information establishing
that the protester is an interested
party for the purpose of filing a protest.
(viii) All information establishing
the timeliness of the protest.
(3) All protests filed directly with the
agency will be addressed to the contracting officer or other official designated to receive protests.
(4) In accordance with agency procedures, interested parties may request
an independent review of their protest
at a level above the contracting officer;
solicitations should advise potential
bidders and offerors that this review is
available. Agency procedures and/or solicitations shall notify potential bidders and offerors whether this independent review is available as an alternative to consideration by the contracting officer of a protest or is available as an appeal of a contracting officer decision on a protest. Agencies
shall designate the official(s) who are
to conduct this independent review,
but the official(s) need not be within
the contracting officer’s supervisory
chain. When practicable, officials designated to conduct the independent review should not have had previous personal involvement in the procurement.
If there is an agency appellate review
of the contracting officer’s decision on
the protest, it will not extend GAO’s
timeliness requirements. Therefore,
any subsequent protest to the GAO
must be filed within 10 days of knowl-
edge of initial adverse agency action (4
CFR 21.2(a)(3)).
(e) Protests based on alleged apparent improprieties in a solicitation shall
be filed before bid opening or the closing date for receipt of proposals. In all
other cases, protests shall be filed no
later than 10 days after the basis of
protest is known or should have been
known, whichever is earlier. The agency, for good cause shown, or where it
determines that a protest raises issues
significant to the agency’s acquisition
system, may consider the merits of any
protest which is not timely filed.
(f) Action upon receipt of protest. (1)
Upon receipt of a protest before award,
a contract may not be awarded, pending agency resolution of the protest,
unless contract award is justified, in
writing, for urgent and compelling reasons or is determined, in writing, to be
in the best interest of the Government.
Such justification or determination
shall be approved at a level above the
contracting officer, or by another official pursuant to agency procedures.
(2) If award is withheld pending agency resolution of the protest, the contracting officer will inform the offerors
whose offers might become eligible for
award of the contract. If appropriate,
the offerors should be requested, before
expiration of the time for acceptance
of their offers, to extend the time for
acceptance to avoid the need for resolicitation. In the event of failure to
obtain such extension of offers, consideration should be given to proceeding
with award pursuant to paragraph (f)(1)
of this section.
(3) Upon receipt of a protest within 10
days after contract award or within 5
days after a debriefing date offered to
the protester under a timely debriefing
request in accordance with 15.505 or
15.506, whichever is later, the contracting officer shall immediately suspend performance, pending resolution
of the protest within the agency, including any review by an independent
higher level official, unless continued
performance is justified, in writing, for
urgent and compelling reasons or is determined, in writing, to be in the best
interest of the Government. Such justification or determination shall be approved at a level above the contracting
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33.104
48 CFR Ch. 1 (10–1–03 Edition)
officer, or by another official pursuant
to agency procedures.
(4) Pursuing an agency protest does
not extend the time for obtaining a
stay at GAO. Agencies may include, as
part of the agency protest process, a
voluntary suspension period when
agency protests are denied and the protester subsequently files at GAO.
(g) Agencies shall make their best efforts to resolve agency protests within
35 days after the protest is filed. To the
extent permitted by law and regulation, the parties may exchange relevant information.
(h) Agency protest decisions shall be
well-reasoned, and explain the agency
position. The protest decision shall be
provided to the protester using a method that provides evidence of receipt.
[61 FR 39219, July 29, 1996, as amended at 61
FR 69289, Dec. 31, 1996; 62 FR 270, Jan. 2, 1997;
62 FR 10710, Mar. 10, 1997; 62 FR 51271, Sept.
30, 1997]
33.104 Protests to GAO.
Procedures for protests to GAO are
found at 4 CFR Part 21 (GAO Bid Protest Regulations). In the event guidance concerning GAO procedure in this
section conflicts with 4 CFR Part 21, 4
CFR Part 21 governs.
(a) General procedures. (1) A protester
is required to furnish a copy of its complete protest to the official and location designated in the solicitation or,
in the absence of such a designation, to
the contracting officer, so it is received
no later than 1 day after the protest is
filed with the GAO. The GAO may dismiss the protest if the protester fails
to furnish a complete copy of the protest within 1 day.
(2) Immediately after receipt of the
GAO’s written notice that a protest has
been filed, the agency shall give notice
of the protest to the contractor if the
award has been made, or, if no award
has been made, to all parties who appear to have a reasonable prospect of
receiving award if the protest is denied.
The agency shall furnish copies of the
protest submissions to such parties
with instructions to (i) communicate
directly with the GAO, and (ii) provide
copies of any such communication to
the agency and to other participating
parties when they become known. However, if the protester has identified sen-
sitive information and requests a protective order, then the contracting officer shall obtain a redacted version
from the protester to furnish to other
interested parties, if one has not already been provided.
(3)(i) Upon notice that a protest has
been filed with the GAO, the contracting officer shall immediately
begin compiling the information necessary for a report to the GAO. The
agency shall submit a complete report
to the GAO within 30 days after the
GAO notifies the agency by telephone
that a protest has been filed, or within
20 days after receipt from the GAO of a
determination to use the express option, unless the GAO—
(A) Advises the agency that the protest has been dismissed; or
(B) Authorizes a longer period in response to an agency’s request for an extension. Any new date is documented
in the agency’s file.
(ii) When a protest is filed with the
GAO, and an actual or prospective offeror so requests, the procuring agency
shall, in accordance with any applicable protective orders, provide actual or
prospective offerors reasonable access
to the protest file. However, if the GAO
dismisses the protest before the documents are submitted to the GAO, then
no protest file need be made available.
Information exempt from disclosure
under 5 U.S.C. 552 may be redacted
from the protest file. The protest file
shall be made available to non-intervening actual or prospective offerors
within a reasonable time after submittal of an agency report to the GAO.
The protest file shall include an index
and as appropriate—
(A) The protest;
(B) The offer submitted by the protester;
(C) The offer being considered for
award or being protested;
(D) All relevant evaluation documents;
(E) The solicitation, including the
specifications or portions relevant to
the protest;
(F) The abstract of offers or relevant
portions; and
(G) Any other documents that the
agency determines are relevant to the
protest, including documents specifically requested by the protester.
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Federal Acquisition Regulation
33.104
(iii) At least 5 days prior to the filing
of the report, in cases in which the protester has filed a request for specific
documents, the agency shall provide to
all parties and the GAO a list of those
documents, or portions of documents,
that the agency has released to the
protester or intends to produce in its
report, and those documents that the
agency intends to withhold from the
protester and the reasons for the proposed withholding. Any objection to
the scope of the agency’s proposed disclosure or nondisclosure of the documents must be filed with the GAO and
the other parties within 2 days after receipt of this list.
(iv) The agency report to the GAO
shall include—
(A) A copy of the documents described in 33.104(a)(3)(ii);
(B) The contracting officer’s signed
statement of relevant facts, including a
best estimate of the contract value,
and a memorandum of law. The contracting officer’s statement shall set
forth findings, actions, and recommendations, and any additional evidence or information not provided in
the protest file that may be necessary
to determine the merits of the protest;
and
(C) A list of parties being provided
the documents.
(4)(i) At the same time the agency
submits its report to the GAO, the
agency shall furnish copies of its report
to the protester and any intervenors. A
party shall receive all relevant documents, except—
(A) Those that the agency has decided to withhold from that party for
any reason, including those covered by
a protective order issued by the GAO.
Documents covered by a protective
order shall be released only in accordance with the terms of the order. Examples of documents the agency may
decide to exclude from a copy of the report include documents previously furnished to or prepared by a party; classified information; and information
that would give the party a competitive advantage; and
(B) Protester’s documents which the
agency determines, pursuant to law or
regulation, to withhold from any interested party.
(ii)(A) If the protester requests additional documents within 2 days after
the protester knew the existence or relevance of additional documents, or
should have known, the agency shall
provide the requested documents to the
GAO within 2 days of receipt of the request.
(B) The additional documents shall
also be provided to the protester and
other interested parties within this 2day period unless the agency has decided to withhold them for any reason
(see subdivision (a)(4)(i) of this section). This includes any documents
covered by a protective order issued by
the GAO. Documents covered by a protective order shall be provided only in
accordance with the terms of the order.
(C) The agency shall notify the GAO
of any documents withheld from the
protester and other interested parties
and shall state the reasons for withholding them.
(5) The GAO may issue protective orders which establish terms, conditions,
and restrictions for the provision of
any document to an interested party.
Protective orders prohibit or restrict
the disclosure by the party of procurement sensitive information, trade secrets or other proprietary or confidential research, development or commercial information that is contained in
such document. Protective orders do
not authorize withholding any documents or information from the United
States Congress or an executive agency.
(i) Requests for protective orders. Any
party seeking issuance of a protective
order shall file its request with the
GAO as soon as practicable after the
protest is filed, with copies furnished
simultaneously to all parties.
(ii) Exclusions and rebuttals. Within 2
days after receipt of a copy of the protective order request, any party may
file with the GAO a request that particular documents be excluded from
the coverage of the protective order, or
that particular parties or individuals
be included in or excluded from the
protective order. Copies of the request
shall be furnished simultaneously to
all parties.
(iii) Additional documents. If the existence or relevance of additional documents first becomes evident after a
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33.104
48 CFR Ch. 1 (10–1–03 Edition)
protective order has been issued, any
party may request that these additional documents be covered by the
protective order. Any party to the protective order also may request that individuals not already covered by the
protective order be included in the
order. Requests shall be filed with the
GAO, with copies furnished simultaneously to all parties.
(iv) Sanctions and remedies. The GAO
may impose appropriate sanctions for
any violation of the terms of the protective order. Improper disclosure of
protected information will entitle the
aggrieved party to all appropriate remedies under law or equity. The GAO
may also take appropriate action
against an agency which fails to provide documents designated in a protective order.
(6) The protester and other interested
parties are required to furnish a copy
of any comments on the agency report
directly to the GAO within 10 days, or
5 days if express option is used, after
receipt of the report, with copies provided to the contracting officer and to
other participating interested parties.
If a hearing is held, these comments
are due within 5 days after the hearing.
(7) Agencies shall furnish the GAO
with the name, title, and telephone
number of one or more officials (in
both field and headquarters offices, if
desired) whom the GAO may contact
who are knowledgeable about the subject matter of the protest. Each agency
shall be responsible for promptly advising the GAO of any change in the designated officials.
(b) Protests before award. (1) When the
agency has received notice from the
GAO of a protest filed directly with the
GAO, a contract may not be awarded
unless authorized, in accordance with
agency procedures, by the head of the
contracting activity, on a nondelegable
basis, upon a written finding that—
(i) Urgent and compelling circumstances which significantly affect
the interest of the United States will
not permit awaiting the decision of the
GAO; and
(ii) Award is likely to occur within 30
days of the written finding.
(2) A contract award shall not be authorized until the agency has notified
the GAO of the finding in subparagraph
(b)(1) of this section.
(3) When a protest against the making of an award is received and award
will be withheld pending disposition of
the protest, the contracting officer
should inform the offerors whose offers
might become eligible for award of the
protest. If appropriate, those offerors
should be requested, before expiration
of the time for acceptance of their
offer, to extend the time for acceptance
to avoid the need for resolicitation. In
the event of failure to obtain such extensions of offers, consideration should
be given to proceeding under subparagraph (b)(1) of this section.
(c) Protests after award. (1) When the
agency receives notice of a protest
from the GAO within 10 days after contract award or within 5 days after a debriefing date offered to the protester
for any debriefing that is required by
15.505 or 15.506, whichever is later, the
contracting officer shall immediately
suspend performance or terminate the
awarded contract, except as provided in
paragraphs (c) (2) and (3) of this section.
(2) In accordance with agency procedures, the head of the contracting activity may, on a nondelegable basis,
authorize contract performance, notwithstanding the protest, upon a written finding that—
(i) Contract performance will be in
the best interests of the United States;
or
(ii) Urgent and compelling circumstances that significantly affect
the interests of the United States will
not permit waiting for the GAO’s decision.
(3) Contract performance shall not be
authorized until the agency has notified the GAO of the finding in subparagraph (c)(2) of this section.
(4) When it is decided to suspend performance or terminate the awarded
contract, the contracting officer should
attempt to negotiate a mutual agreement on a no-cost basis.
(5) When the agency receives notice
of a protest filed with the GAO after
the dates contained in subparagraph
(c)(1), the contracting officer need not
suspend contract performance or terminate the awarded contract unless
the contracting officer believes that an
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Federal Acquisition Regulation
33.104
award may be invalidated and a delay
in receiving the supplies or services is
not prejudicial to the Government’s interest.
(d) Findings and notice. If the decision
is to proceed with contract award, or
continue contract performance under
paragraphs (b) or (c) of this section, the
contracting officer shall include the
written findings or other required documentation in the file. The contracting
officer also shall give written notice of
the decision to the protester and other
interested parties.
(e) Hearings. The GAO may hold a
hearing at the request of the agency, a
protester, or other interested party
who has responded to the notice in
paragraph (a)(2) of this section. A recording or transcription of the hearing
will normally be made, and copies may
be obtained from the GAO. All parties
may file comments on the hearing and
the agency report within 5 days of the
hearing.
(f) GAO decision time. GAO issues its
recommendation on a protest within
100 days from the date of filing of the
protest with the GAO, or within 65 days
under the express option. The GAO attempts to issue its recommendation on
an amended protest that adds a new
ground of protest within the time limit
of the initial protest. If an amended
protest cannot be resolved within the
initial time limit, the GAO may resolve the amended protest through an
express option.
(g) Notice to GAO. If the agency has
not fully implemented the GAO recommendations with respect to a solicitation for a contract or an award or a
proposed award of a contract within 60
days of receiving the GAO recommendations, the head of the contracting activity responsible for that
contract shall report the failure to the
GAO not later than 5 days after the expiration of the 60-day period. The report shall explain the reasons why the
GAO’s recommendation, exclusive of
costs, has not been followed by the
agency.
(h) Award of costs. (1) If the GAO determines that a solicitation for a contract, a proposed award, or an award of
a contract does not comply with a statute or regulation, the GAO may recommend that the agency pay to an ap-
propriate protester the cost, exclusive
of profit, of filing and pursuing the protest, including reasonable attorney,
consultant, and expert witness fees,
and bid and proposal preparation costs.
The agency shall use funds available
for the procurement to pay the costs
awarded.
(2) The protester shall file its claim
for costs with the contracting agency
within 60 days after receipt of the
GAO’s recommendation that the agency pay the protester its costs. Failure
to file the claim within that time may
result in forfeiture of the protester’s
right to recover its costs.
(3) The agency shall attempt to reach
an agreement on the amount of costs
to be paid. If the agency and the protester are unable to agree on the
amount to be paid, the GAO may, upon
request of the protester, recommend to
the agency the amount of costs that
the agency should pay.
(4) Within 60 days after the GAO recommends the amount of costs the
agency should pay the protester, the
agency shall notify the GAO of the action taken by the agency in response to
the recommendation.
(5) No agency shall pay a party, other
than a small business concern within
the meaning of section 3(a) of the
Small Business Act (see 19.001, ‘‘Small
business concern’’), costs under paragraph (h)(2) of this section—
(i) For consultant and expert witness
fees that exceed the highest rate of
compensation for expert witnesses paid
by the Government pursuant to 5
U.S.C. 3109 and 5 CFR 304.105; or
(ii) For attorney’s fees that exceed
$150 per hour, unless the agency determines, based on the recommendation of
the Comptroller General on a case-bycase basis, that an increase in the cost
of living or a special factor, such as the
limited availability of qualified attorneys for the proceedings involved, justifies a higher fee. The cap placed on
attorneys’ fees for businesses, other
than small businesses, constitutes a
benchmark as to a ‘‘reasonable’’ level
for attorney’s fees for small businesses.
(6) Before paying a recommended
award of costs, agency personnel
should consult legal counsel. Section
33.104(h) applies to all recommended
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33.105
48 CFR Ch. 1 (10–1–03 Edition)
awards of costs that have not yet been
paid.
(7) Any costs the contractor receives
under this section shall not be the subject of subsequent proposals, billings,
or claims against the Government, and
those exclusions should be reflected in
the cost agreement.
(8) If the Government pays costs, as
provided in paragraph (h)(1) of this section, where a postaward protest is sustained as the result of an awardee’s intentional or negligent misstatement,
misrepresentation, or miscertification,
the Government may require the
awardee to reimburse the Government
the amount of such costs. In addition
to any other remedy available, and
pursuant to the requirements of subpart 32.6, the Government may collect
this debt by offsetting the amount
against any payment due the awardee
under any contract between the awardee and the Government.
[57 FR 60585, Dec. 21, 1992, as amended at 60
FR 48227, 48275, Sept. 18, 1995; 61 FR 41470,
Aug. 8, 1996; 61 FR 69289, Dec. 31, 1996; 62 FR
12718, Mar. 17, 1997; 62 FR 51271, Sept. 30, 1997;
62 FR 64933, Dec. 9, 1997; 63 FR 1532, Jan. 9,
1998; 63 FR 58603, Oct. 30, 1998]
33.105
[Reserved]
33.106 Solicitation provision and contract clause.
(a) The contracting officer shall insert the provision at 52.233–2, Service of
Protest, in solicitations for contracts
expected to exceed the simplified acquisition threshold.
(b) The contracting officer shall insert the clause at 52.233–3, Protest
After Award, in all solicitations and
contracts. If a cost reimbursement contract is contemplated, the contracting
officer shall use the clause with its Alternate I.
[50 FR 25681, June 20, 1985, as amended at 60
FR 34759, July 3, 1995]
Subpart 33.2—Disputes and
Appeals
SOURCE: 48 FR 42349, Sept. 19, 1983, unless
otherwise noted. Redesignated at 50 FR 2270,
Jan. 15, 1985.
33.201 Definitions.
As used in this subpart—
Accrual of a claim means the date
when all events, that fix the alleged liability of either the Government or the
contractor and permit assertion of the
claim, were known or should have been
known. For liability to be fixed, some
injury must have occurred. However,
monetary damages need not have been
incurred.
Alternative dispute resolution (ADR)
means any type of procedure or combination of procedures voluntarily used
to resolve issues in controversy. These
procedures may include, but are not
limited to, conciliation, facilitation,
mediation, fact-finding, minitrials, arbitration, and use of ombudsmen.
Defective certification means a certificate which alters or otherwise deviates
from the language in 33.207(c) or which
is not executed by a person duly authorized to bind the contractor with respect to the claim. Failure to certify
shall not be deemed to be a defective
certification.
Issue in controversy means a material
disagreement between the Government
and the contractor that (1) may result
in a claim or (2) is all or part of an existing claim.
Misrepresentation of fact means a false
statement of substantive fact, or any
conduct which leads to the belief of a
substantive fact material to proper understanding of the matter in hand,
made with intent to deceive or mislead.
[48 FR 42349, Sept. 19, 1983. Redesignated and
amended at 50 FR 2270, Jan. 15, 1985; 56 FR
67417, Dec. 30, 1991; 59 FR 11381, Mar. 10, 1994;
60 FR 48230, Sept. 18, 1995; 63 FR 58594, Oct.
30, 1998; 66 FR 2132, Jan. 10, 2001; 67 FR 43514,
June 27, 2002]
33.202
Contract Disputes Act of 1978.
The Contract Disputes Act of 1978, as
amended (41 U.S.C. 601–613) (the Act),
establishes procedures and requirements for asserting and resolving
claims subject to the Act. In addition,
the Act provides for: (a) the payment of
interest on contractor claims; (b) certification of contractor claims; and (c)
a civil penalty for contractor claims
that are fraudulent or based on a misrepresentation of fact.
[56 FR 67417, Dec. 30, 1991, as amended at 59
FR 11381, Mar. 10, 1994]
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Federal Acquisition Regulation
33.203
33.205
Applicability.
(a) Except as specified in paragraph
(b) below, this part applies to any express or implied contract covered by
the Federal Acquisition Regulation.
(b) This subpart does not apply to
any contract with (1) a foreign government or agency of that government, or
(2) an international organization or a
subsidiary body of that organization, if
the agency head determines that the
application of the Act to the contract
would not be in the public interest.
(c) This part applies to all disputes
with respect to contracting officer decisions on matters arising under or relating to a contract. Agency Boards of
Contract Appeals (BCA’s) authorized
under the Act continue to have all of
the authority they possessed before the
Act with respect to disputes arising
under a contract, as well as authority
to decide disputes relating to a contract. The clause at 52.233–1, Disputes,
recognizes the all disputes authority established by the Act and states certain
requirements and limitations of the
Act for the guidance of contractors and
contracting agencies. The clause is not
intended to affect the rights and obligations of the parties as provided by
the Act or to constrain the authority
of the statutory agency BCA’s in the
handling and deciding of contractor appeals under the Act.
[48 FR 42349, Sept. 19, 1983. Redesignated and
amended at 50 FR 2270, Jan. 15, 1985]
33.204
Policy.
The Government’s policy is to try to
resolve all contractual issues in controversy by mutual agreement at the
contracting officer’s level. Reasonable
efforts should be made to resolve controversies prior to the submission of a
claim. Agencies are encouraged to use
ADR procedures to the maximum extent practicable. Certain factors, however, may make the use of ADR inappropriate (see 5 U.S.C. 572(b)). Except
for arbitration conducted pursuant to
the Administrative Dispute Resolution
Act (ADRA), (5 U.S.C. 571, et seq.), agencies have authority which is separate
from that provided by the ADRA to use
ADR procedures to resolve issues in
controversy. Agencies may also elect
to proceed under the authority and requirements of the ADRA.
[59 FR 11381, Mar. 10, 1994, as amended at 63
FR 58595, Oct. 30, 1998]
33.205 Relationship of the Act to Pub.
L. 85–804.
(a) Requests for relief under Pub. L.
85–804 (50 U.S.C. 1431–1435) are not
claims within the Contract Disputes
Act of 1978 or the Disputes clause at
52.233–1, Disputes, and shall be processed under part 50, Extraordinary Contractual Actions. However, relief formerly available only under Pub. L. 85–
804; i.e., legal entitlement to rescission
or reformation for mutual mistake, is
now available within the authority of
the contracting officer under the Contract Disputes Act of 1978 and the Disputes clause. In case of a question
whether the contracting officer has authority to settle or decide specific
types of claims, the contracting officer
should seek legal advice.
(b) A contractor’s allegation that it
is entitled to rescission or reformation
of its contract in order to correct or
mitigate the effect of a mistake shall
be treated as a claim under the Act. A
contract may be reformed or rescinded
by the contracting officer if the contractor would be entitled to such remedy or relief under the law of Federal
contracts. Due to the complex legal
issues likely to be associated with allegations of legal entitlement, contracting officers shall make written decisions, prepared with the advice and
assistance of legal counsel, either
granting or denying relief in whole or
in part.
(c) A claim that is either denied or
not approved in its entirety under
paragraph (b) above may be cognizable
as a request for relief under Pub. L. 85–
804 as implemented by part 50. However, the claim must first be submitted
to the contracting officer for consideration under the Contract Disputes Act
of 1978 because the claim is not cognizable under Public Law 85–804, as implemented by part 50, unless other
legal authority in the agency concerned is determined to be lacking or
inadequate.
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33.206
48 CFR Ch. 1 (10–1–03 Edition)
33.206 Initiation of a claim.
(a) Contractor claims shall be submitted, in writing, to the contracting
officer for a decision within 6 years
after accrual of a claim, unless the contracting parties agreed to a shorter
time period. This 6-year time period
does not apply to contracts awarded
prior to October 1, 1995. The contracting officer shall document the
contract file with evidence of the date
of receipt of any submission from the
contractor deemed to be a claim by the
contracting officer.
(b) The contracting officer shall issue
a written decision on any Government
claim initiated against a contractor
within 6 years after accrual of the
claim, unless the contracting parties
agreed to a shorter time period. The 6year period shall not apply to contracts awarded prior to October 1, 1995,
or to a Government claim based on a
contractor claim involving fraud.
[60 FR 48230, Sept. 18, 1995]
33.207 Contractor certification.
(a) Contractors shall provide the certification specified in paragraph (c) of
this section when submitting any
claim exceeding $100,000.
(b) The certification requirement
does not apply to issues in controversy
that have not been submitted as all or
part of a claim.
(c) The certification shall state as
follows:
I certify that the claim is made in good
faith; that the supporting data are accurate
and complete to the best of my knowledge
and belief; that the amount requested accurately reflects the contract adjustment for
which the contractor believes the Government is liable; and that I am duly authorized
to certify the claim on behalf of the contractor.
(d) The aggregate amount of both increased and decreased costs shall be
used in determining when the dollar
thresholds requiring certification are
met (see example in 15.403–4(a)(1)(iii)
regarding cost or pricing data).
(e) The certification may be executed
by any person duly authorized to bind
the contractor with respect to the
claim.
(f) A defective certification shall not
deprive a court or an agency BCA of ju-
risdiction over that claim. Prior to the
entry of a final judgment by a court or
a decision by an agency BCA, however,
the court or agency BCA shall require
a defective certification to be corrected.
[59 FR 11381, Mar. 10, 1994, as amended at 60
FR 48218, 48230, Sept. 18, 1995; 62 FR 51271,
Sept. 30, 1997; 63 FR 58595, Oct. 30, 1998]
33.208
Interest on claims.
(a) The Government shall pay interest on a contractor’s claim on the
amount found due and unpaid from the
date that—
(1) The contracting officer receives
the claim (certified if required by
33.207(a)); or
(2) Payment otherwise would be due,
if that date is later, until the date of
payment.
(b) Simple interest on claims shall be
paid at the rate, fixed by the Secretary
of the Treasury as provided in the Act,
which is applicable to the period during
which the contracting officer receives
the claim and then at the rate applicable for each 6-month period as fixed by
the Treasury Secretary during the
pendency of the claim. (See 32.614 for
the right of the Government to collect
interest on its claims against a contractor).
(c) With regard to claims having defective certifications, interest shall be
paid from either the date that the contracting officer initially receives the
claim or October 29, 1992, whichever is
later. However, if a contractor has provided a proper certificate prior to October 29, 1992, after submission of a defective certificate, interest shall be paid
from the date of receipt by the Government of a proper certificate.
[59 FR 11381, Mar. 10, 1994, as amended at 60
FR 48230, Sept. 18, 1995]
33.209
Suspected fraudulent claims.
If the contractor is unable to support
any part of the claim and there is evidence that the inability is attributable
to misrepresentation of fact or to fraud
on the part of the contractor, the contracting officer shall refer the matter
to the agency official responsible for
investigating fraud.
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Federal Acquisition Regulation
33.211
33.210 Contracting officer’s authority.
Except as provided in this section,
contracting officers are authorized,
within any specific limitations of their
warrants, to decide or resolve all
claims arising under or relating to a
contract subject to the Act. In accordance with agency policies and 33.214,
contracting officers are authorized to
use ADR procedures to resolve claims.
The authority to decide or resolve
claims does not extend to—
(a) A claim or dispute for penalties or
forfeitures prescribed by statute or regulation that another Federal agency is
specifically authorized to administer,
settle, or determine; or
(b) The settlement, compromise, payment or adjustment of any claim involving fraud.
[48 FR 42349, Sept. 19, 1983. Redesignated and
amended at 50 FR 2270, Jan. 15, 1985; 51 FR
36972, Oct. 16, 1986; 59 FR 11381, Mar. 10, 1994]
33.211 Contracting officer’s decision.
(a) When a claim by or against a contractor cannot be satisfied or settled
by mutual agreement and a decision on
the claim is necessary, the contracting
officer shall—
(1) Review the facts pertinent to the
claim;
(2) Secure assistance from legal and
other advisors;
(3) Coordinate with the contract administration office or contracting office, as appropriate; and
(4) Prepare a written decision that
shall include a—
(i) Description of the claim or dispute;
(ii) Reference to the pertinent contract terms;
(iii) Statement of the factual areas of
agreement and disagreement;
(iv) Statement of the contracting officer’s decision, with supporting rationale;
(v) Paragraph substantially as follows:
‘‘This is the final decision of the Contracting Officer. You may appeal this
decision to the agency board of contract appeals. If you decide to appeal,
you must, within 90 days from the date
you receive this decision, mail or otherwise furnish written notice to the
agency board of contract appeals and
provide a copy to the Contracting Officer from whose decision this appeal is
taken. The notice shall indicate that
an appeal is intended, reference this
decision, and identify the contract by
number. With regard to appeals to the
agency board of contract appeals, you
may, solely at your election, proceed
under the board’s small claim procedure for claims of $50,000 or less or its
accelerated procedure for claims of
$100,000 or less. Instead of appealing to
the agency board of contract appeals,
you may bring an action directly in the
United States Court of Federal Claims
(except as provided in the Contract
Disputes Act of 1978, 41 U.S.C. 603, regarding Maritime Contracts) within 12
months of the date you receive this decision’’; and
(vi) Demand for payment prepared in
accordance with 32.610(b) in all cases
where the decision results in a finding
that the contractor is indebted to the
Government.
(b) The contracting officer shall furnish a copy of the decision to the contractor by certified mail, return receipt requested, or by any other method that provides evidence of receipt.
This requirement shall apply to decisions on claims initiated by or against
the contractor.
(c) The contracting officer shall issue
the decision within the following statutory time limitations:
(1) For claims of $100,000 or less, 60
days after receiving a written request
from the contractor that a decision be
rendered within that period, or within
a reasonable time after receipt of the
claim if the contractor does not make
such a request.
(2) For claims over $100,000, 60 days
after receiving a certified claim; provided, however, that if a decision will
not be issued within 60 days, the contracting officer shall notify the contractor, within that period, of the time
within which a decision will be issued.
(d) The contracting officer shall issue
a decision within a reasonable time,
taking into account—
(1) The size and complexity of the
claim;
(2) The adequacy of the contractor’s
supporting data; and
(3) Any other relevant factors.
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33.212
48 CFR Ch. 1 (10–1–03 Edition)
(e) The contracting officer shall have
no obligation to render a final decision
on any claim exceeding $100,000 which
contains a defective certification, if
within 60 days after receipt of the
claim, the contracting officer notifies
the contractor, in writing, of the reasons why any attempted certification
was found to be defective.
(f) In the event of undue delay by the
contracting officer in rendering a decision on a claim, the contractor may request the tribunal concerned to direct
the contracting officer to issue a decision in a specified time period determined by the tribunal.
(g) Any failure of the contracting officer to issue a decision within the required time periods will be deemed a
decision by the contracting officer denying the claim and will authorize the
contractor to file an appeal or suit on
the claim.
(h) The amount determined payable
under the decision, less any portion already paid, should be paid, if otherwise
proper, without awaiting contractor
action concerning appeal. Such payment shall be without prejudice to the
rights of either party.
[48 FR 42349, Sept. 19, 1983. Redesignated at
50 FR 2270, Jan. 15, 1985, and amended at 54
FR 34755, Aug. 21, 1989; 59 FR 11382, Mar. 10,
1994; 60 FR 48230, Sept. 18, 1995]
33.212 Contracting
officer’s
duties
upon appeal.
To the extent permitted by any agency procedures controlling contacts
with agency BCA personnel, the contracting officer shall provide data, documentation, information, and support
as may be required by the agency BCA
for use on a pending appeal from the
contracting officer’s decision.
33.213 Obligation to continue performance.
(a) In general, before passage of the
Act, the obligation to continue performance applied only to claims arising under a contract. However, the Act,
at 41 U.S.C. 605(b), authorizes agencies
to require a contractor to continue
contract performance in accordance
with the contracting officer’s decision
pending a final resolution of any claim
arising under, or relating to, the contract. (A claim arising under a con-
tract is a claim that can be resolved
under a contract clause, other than the
clause at 52.233–1, Disputes, that provides for the relief sought by the claimant; however, relief for such claim can
also be sought under the clause at
52.233–1. A claim relating to a contract
is a claim that cannot be resolved
under a contract clause other than the
clause at 52.233–1.) This distinction is
recognized by the clause with its Alternate I (see 33.215).
(b) In all contracts that include the
clause at 52.233–1, Disputes, with its Alternate I, in the event of a dispute not
arising under, but relating to, the contract, the contracting officer shall consider providing, through appropriate
agency procedures, financing of the
continued performance; provided, that
the Government’s interest is properly
secured.
[48 FR 42349, Sept. 19, 1983. Redesignated at
50 FR 2270, Jan. 15, 1985, as amended at 64 FR
72451, Dec. 27, 1999; 67 FR 43514, June 27, 2002]
33.214 Alternative dispute resolution
(ADR).
(a) The objective of using ADR procedures is to increase the opportunity for
relatively inexpensive and expeditious
resolution of issues in controversy. Essential elements of ADR include—
(1) Existence of an issue in controversy;
(2) A voluntary election by both parties to participate in the ADR process;
(3) An agreement on alternative procedures and terms to be used in lieu of
formal litigation; and
(4) Participation in the process by officials of both parties who have the authority to resolve the issue in controversy.
(b) If the contracting officer rejects a
contractor’s request for ADR proceedings, the contracting officer shall
provide the contractor a written explanation citing one or more of the conditions in 5 U.S.C. 572(b) or such other
specific reasons that ADR procedures
are inappropriate for the resolution of
the dispute. In any case where a contractor rejects a request of an agency
for ADR proceedings, the contractor
shall inform the agency in writing of
the contractor’s specific reasons for rejecting the request.
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Federal Acquisition Regulation
33.215
(c) ADR procedures may be used at
any time that the contracting officer
has authority to resolve the issue in
controversy. If a claim has been submitted, ADR procedures may be applied to all or a portion of the claim.
When ADR procedures are used subsequent to the issuance of a contracting
officer’s final decision, their use does
not alter any of the time limitations or
procedural requirements for filing an
appeal of the contracting officer’s final
decision and does not constitute a reconsideration of the final decision.
(d) When appropriate, a neutral person may be used to facilitate resolution of the issue in controversy using
the procedures chosen by the parties.
(e) The confidentiality of ADR proceedings shall be protected consistent
with 5 U.S.C. 574.
(f)(1) A solicitation shall not require
arbitration as a condition of award, unless arbitration is otherwise required
by law. Contracting officers should
have flexibility to select the appropriate ADR procedure to resolve the
issues in controversy as they arise.
(2) An agreement to use arbitration
shall be in writing and shall specify a
maximum award that may be issued by
the arbitrator, as well as any other
conditions limiting the range of possible outcomes.
(g) Binding arbitration, as an ADR
procedure, may be agreed to only as
specified in agency guidelines. Such
guidelines shall provide advice on the
appropriate use of binding arbitration
and when an agency has authority to
settle an issue in controversy through
binding arbitration.
[56 FR 67417, Dec. 30, 1991, as amended at 59
FR 11382, Mar. 10, 1994; 60 FR 48230, Sept. 18,
1995; 63 FR 58595, Oct. 30, 1998]
33.215
Contract clause.
The contracting officer shall insert
the clause at 52.233–1, Disputes, in solicitations and contracts, unless the
conditions in 33.203(b) apply. If it is determined under agency procedures that
continued performance is necessary
pending resolution of any claim arising
under or relating to the contract, the
contracting officer shall use the clause
with its Alternate I.
[48 FR 42349, Sept. 19, 1983. Redesignated and
amended at 50 FR 2270, Jan. 15, 1985. Redesignated at 56 FR 67417, Dec. 30, 1991; 57 FR
60610, Dec. 21, 1992]
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SUBCHAPTER F—SPECIAL CATEGORIES OF CONTRACTING
PART 34—MAJOR SYSTEM
ACQUISITION
Subpart 34.0—General
Sec.
34.000 Scope of part.
34.001 Definition.
34.002 Policy.
34.003 Responsibilities.
34.004 Acquisition strategy.
34.005 General requirements.
34.005–1 Competition.
34.005–2 Mission-oriented solicitation.
34.005–3 Concept exploration contracts.
34.005–4 Demonstration contracts.
34.005–5 Full-scale development contracts.
34.005–6 Full production.
Subpart 34.1—Testing, Qualification and
Use of Industrial Resources Developed
Under Title III, Defense Production Act
34.100
34.101
34.102
34.103
34.104
Scope of subpart.
Definitions.
Policy.
Testing and qualification.
Contract clause.
[48 FR 42351, Sept. 19, 1983, as amended at 50
FR 52434, Dec. 23, 1985]
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42351, Sept. 19, 1983, unless
otherwise noted.
Subpart 34.0—General
34.000
Scope of part.
This part describes acquisition policies and procedures for use in acquiring
major systems consistent with OMB
Circular No. A–109, Major System Acquisitions (A–109) (see 34.003).
34.001
34.002 Policy.
The policies of this part are designed
to ensure that agencies acquire major
systems in the most effective, economical, and timely manner. Agencies
acquiring major systems shall—
(a) Promote innovation and full and
open competition as required by part 6
in the development of major system
concepts by (1) expressing agency needs
and major system acquisition program
objectives in terms of the agency’s
mission and not in terms of specified
systems to satisfy needs, and (2) focusing agency resources and special management attention on activities conducted in the initial stage of major
programs; and
(b) Sustain effective competition between alternative system concepts and
sources for as long as it is beneficial.
Definition.
Effective competition, as used in this
part, is a market condition that exists
when two or more contractors, acting
independently, actively contend for the
Government’s business in a manner
that ensures that the Government will
be offered the lowest cost or price alternative or best technical design
meeting its minimum needs.
[50 FR 27562, July 3, 1985, as amended at 51
FR 52434, Dec. 23, 1985; 51 FR 27116, July 29,
1986; 61 FR 41470, Aug. 8, 1996; 66 FR 2132, Jan.
10, 2001]
34.003 Responsibilities.
(a) As required by A–109, the agency
head or designee shall establish written
procedures for its implementation.
(b) The agency procedures shall identify the key decision points of each
major system acquisition and the agency official(s) for making those decisions.
(c) Systems acquisitions normally
designated as major are those programs that, as determined by the agency head, (1) are directed at and critical
to fulfilling an agency mission need, (2)
entail allocating relatively large resources for the particular agency, and
(3) warrant special management attention, including specific agency-head decisions. The agency procedures may establish additional criteria, as specified
in A–109, for designating major programs system acquisitions.
34.004 Acquisition strategy.
The program manager, as specified in
agency procedures, shall develop an acquisition strategy tailored to the particular major system acquisition program. This strategy is the program
manager’s overall plan for satisfying
the mission need in the most effective,
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Federal Acquisition Regulation
34.005–3
economical, and timely manner. The
strategy shall be in writing and prepared in accordance with the requirements of subpart 7.1, except where inconsistent with this part, and shall
qualify as the acquisition plan for the
major system acquisition, as required
by that subpart.
34.005
General requirements.
34.005–1 Competition.
(a) The program manager shall,
throughout the acquisition process,
promote full and open competition and
sustain effective competition between
alternative major system concepts and
sources, as long as it is economically
beneficial and practicable to do so. Notice of the proposed acquisition shall
be given the broadest and most effective circulation practicable throughout
the business, academic, and Government communities. Foreign contractors, technology, and equipment may
be considered when it is feasible and
permissible to do so.
(b) The contracting officer should
time solicitation issuance and contract
award to maintain continuity of concept development during the transition
from withdrawing concept proposer to
new contractor.
[48 FR 42351, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
34.005–2 Mission-oriented solicitation.
(a) Before issuing the solicitation,
whenever practicable and consistent
with agency procedures, the contracting officer should take the actions
outlined in subparagraphs (1) and (2):
(1) Advance notification of the acquisition should be given the widest practicable dissemination, including publicizing through the Governmentwide
point of entry (see subpart 5.2) and
should be sent to as wide a selection of
potential sources as practicable, including smaller and newer firms, Government laboratories, federally funded
research and development centers, educational institutions and other not-forprofit organizations, and, if it would be
beneficial and is not prohibited, foreign
sources.
(2)
If
appropriate,
hold
a
presolicitation conference (see 15.201)
and/or send copies of the proposed solicitation to all prospective offerors for
their comments. After evaluation of
these
comments,
the
solicitation
should be revised, if appropriate.
(b) The contracting officer shall send
the final solicitation to all prospective
offerors. It shall—
(1) Describe the nature of the need in
terms of mission capabilities required,
without reference to any specific systems to satisfy the need;
(2) Indicate, and explain when appropriate, the schedule, capability, and
cost objectives and any known constraints in the acquisition;
(3) Provide, or indicate how access
can be obtained to, all Government
data related to the acquisition;
(4) Include selection requirements
consistent with the acquisition strategy; and
(5) Clearly state that each offeror is
free to propose its own technical approach, main design features, subsystems, and alternatives to schedule,
cost, and capability goals.
(c) To the extent practicable, the solicitation shall not reference or mandate Government specifications or
standards, unless the agency is mandating a subsystem or other component
as approved under agency procedure.
[48 FR 42351, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 62 FR 51271, Sept. 30, 1997; 66 FR 27414,
May 16, 2001]
34.005–3 Concept
tracts.
exploration
Whenever practicable, contracts to
be performed during the concept exploration phase shall be for relatively
short periods, at planned dollar levels.
These contracts are to refine the proposed concept and to reduce the concept’s technical uncertainties. The
scope of work for this phase of the program shall be consistent with the Government’s planned budget for the
phase. Follow-on contracts for such
tasks in the exploration phase shall be
awarded as long as the concept approach remains promising, the contractor’s progress is acceptable, and it is
economically practicable to do so.
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34.005–4
34.005–4
48 CFR Ch. 1 (10–1–03 Edition)
Demonstration contracts.
34.101
Definitions.
Whenever practicable, contracts for
the demonstration phase should provide for contractors to submit, by the
end of the phase, priced proposals, totally funded by the Government, for
full-scale
development.
The
contracting officer should provide contractors with operational test conditions,
performance criteria, life cycle cost
factors, and any other selection criteria necessary for the contractors to
prepare their proposals.
Item of supply, as used in this subpart,
means any individual part, component,
subassembly, assembly, or subsystem
integral to a major system, and other
property which may be replaced during
the service life of the system. The term
includes spare parts and replenishment
parts, but does not include packaging
or labeling associated with shipment or
identification of an ‘‘item.’’
34.005–5 Full-scale development contracts.
34.102
Whenever practicable, the full-scale
development contracts should provide
for the contractors to submit priced
proposals for production that are based
on the latest quantity, schedule, and
logistics requirements and other considerations that will be used in making
the production decision.
34.005–6
Full production.
Contracts for full production of successfully tested major systems selected
from the full-scale development phase
may be awarded if the agency head (a)
reaffirms the mission need and program objectives and (b) grants approval
to proceed with production.
Subpart 34.1—Testing, Qualification and Use of Industrial Resources Developed Under Title
III, Defense Production Act
SOURCE: 59 FR 67048, Dec. 28, 1994, unless
otherwise noted.
34.100
Scope of subpart.
This subpart prescribes policies and
procedures for the testing, qualification, and use of industrial resources
manufactured or developed with assistance provided under section 301, 302, or
303 of the Defense Production Act (50
U.S.C. App. 2091–2093). Title III of the
Defense Production Act authorizes various forms of Government assistance to
encourage expansion of production capacity and supply of industrial resources essential to national defense.
[48 FR 42351, Sept. 19, 1983, as amended at 66
FR 2132, Jan. 10, 2001]
Policy.
It is the policy of the Government, as
required by section 126 of Public Law
102–558, to pay for any testing and qualification required for the use or incorporation of the industrial resources
manufactured or developed with assistance provided under Title III of the Defense Production Act of 1950.
34.103
Testing and qualification.
(a) Contractors receiving requests
from a Title III project contractor for
testing and qualification of a Title III
industrial resource shall refer such requests to the contracting officer. The
contracting officer shall evaluate the
request in accordance with agency procedures to determine whether: (1) the
Title III industrial resource is being or
potentially may be used in the development or manufacture of a major system or item of supply; and (2) for major
systems in production, remaining
quantities to be acquired are sufficient
to justify incurring the cost of testing
and qualification. In evaluating this request, the contracting officer shall consult with the Defense Production Act
Office, Title III Program, located at
Wright Patterson Air Force Base, Ohio
45433–7739.
(b) If the determination at 34.103(a) is
affirmative, the contracting officer
shall modify the contract to require
the contractor to test the Title III industrial resource for qualification.
(c) The Defense Production Act Office, Title III Program, shall provide to
the contractor the industrial resource
produced by the Title III project contractor in sufficient amounts to meet
testing needs.
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34.104
35.002
Contract clause.
35.001
Insert the clause at 52.234–1, Industrial Resources Developed under Defense Production Act, Title III, in all
contracts for major systems and items
of supply.
PART 35—RESEARCH AND
DEVELOPMENT CONTRACTING
Sec.
35.000 Scope of part.
35.001 Definitions.
35.002 General.
35.003 Policy.
35.004 Publicizing requirements and expanding research and development sources.
35.005 Work statement.
35.006 Contracting methods and contract
type.
35.007 Solicitations.
35.008 Evaluation for award.
35.009 Subcontracting research and development effort.
35.010 Scientific and technical reports.
35.011 Data.
35.012 Patent rights.
35.013 Insurance.
35.014 Government property and title.
35.015 Contracts for research with educational institutions and nonprofit organizations.
35.016 Broad agency announcement.
35.017 Federally Funded Research and Development Centers.
35.017–1 Sponsoring agreements.
35.017–2 Establishing
or
changing
an
FFRDC.
35.017–3 Using an FFRDC.
35.017–4 Reviewing FFRDC’s.
35.017–5 Terminating FFRDC.
35.017–6 Master list of FFRDC’s.
35.017–7 Limitation on the creation of new
FFRDC’S.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42352, Sept. 19, 1983, unless
otherwise noted.
35.000
Scope of part.
(a) This part prescribes policies and
procedures of special application to research and development (R&D) contracting.
(b) R&D integral to acquisition of
major systems is covered in part 34.
Independent research and development
(IR&D) is covered at 31.205–18.
[48 FR 42352, Sept. 19, 1983, as amended at 55
FR 3884, Feb. 5, 1990; 65 FR 36014, June 6, 2000]
Definitions.
Applied research means the effort that
(a) normally follows basic research, but
may not be severable from the related
basic research; (b) attempts to determine and exploit the potential of scientific discoveries or improvements in
technology,
materials,
processes,
methods, devices, or techniques; and (c)
attempts to advance the state of the
art. When being used by contractors in
cost principle applications, this term
does not include efforts whose principal
aim is the design, development, or testing of specific items or services to be
considered for sale; these efforts are
within the definition of development,
given below.
Development, as used in this part,
means the systematic use of scientific
and technical knowledge in the design,
development, testing, or evaluation of
a potential new product or service (or
of an improvement in an existing product or service) to meet specific performance requirements or objectives.
It includes the functions of design engineering, prototyping, and engineering
testing; it excludes subcontracted technical effort that is for the sole purpose
of developing an additional source for
an existing product.
Recoupment, as used in this part,
means the recovery by the Government
of Government-funded nonrecurring
costs from contractors that sell, lease,
or license the resulting products or
technology to buyers other than the
Federal Government.
[48 FR 42352, Sept. 19, 1983, as amended at 53
FR 27467, July 20, 1988; 55 FR 3884, Feb. 5,
1990; 66 FR 2132, Jan. 10, 2001]
35.002
General.
The primary purpose of contracted
R&D programs is to advance scientific
and technical knowledge and apply
that knowledge to the extent necessary
to achieve agency and national goals.
Unlike contracts for supplies and services, most R&D contracts are directed
toward objectives for which the work
or methods cannot be precisely described in advance. It is difficult to
judge the probabilities of success or required effort for technical approaches,
some of which offer little or no early
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35.003
48 CFR Ch. 1 (10–1–03 Edition)
assurance of full success. The contracting process shall be used to encourage the best sources from the scientific and industrial community to
become involved in the program and
must provide an environment in which
the work can be pursued with reasonable flexibility and minimum administrative burden.
35.003 Policy.
(a) Use of contracts. Contracts shall be
used only when the principal purpose is
the acquisition of supplies or services
for the direct benefit or use of the Federal Government. Grants or cooperative agreements should be used when
the principal purpose of the transaction is to stimulate or support research and development for another
public purpose.
(b) Cost sharing. Cost sharing policies
(which are not otherwise required by
law) under Government contracts shall
be in accordance with 16.303, 42.707(a)
and agency procedures.
(c) Recoupment. Recoupment not otherwise required by law shall be in accordance with agency procedures.
35.004 Publicizing requirements and
expanding research and development sources.
(a) In order to obtain a broad base of
the best contractor sources from the
the scientific and industrial community, agencies must, in addition to following the requirements of part 5, continually search for and develop information on sources (including small
business concerns) competent to perform R&D work. These efforts should
include—
(1) Early identification and publication of agency R&D needs and requirements, including publicizing through
the Governmentwide point of entry
(GPE) (see part 5);
(2) Cooperation among technical personnel, contracting officers, and Government small business personnel early
in the acquisition process; and
(3) Providing agency R&D points of
contact for potential sources.
(b) See subpart 9.7 for information regarding R&D pools and subpart 9.6 for
teaming arrangements.
[48 FR 42352, Set. 19, 1983, as amended at 66
FR 27414, May 16, 2001]
35.005
Work statement.
(a) A clear and complete work statement concerning the area of exploration (for basic research) or the end
objectives (for development and applied
research) is essential. The work statement should allow contractors freedom
to exercise innovation and creativity.
Work statements must be individually
tailored by technical and contracting
personnel to attain the desired degree
of flexibility for contractor creativity
and the objectives of the R&D.
(b) In basic research the emphasis is
on achieving specified objectives and
knowledge rather than on achieving
predetermined end results prescribed in
a statement of specific performance
characteristics. This emphasis applies
particularly during the early or conceptual phases of the R&D effort.
(c) In reviewing work statements,
contracting officers should ensure that
language suitable for a level-of-effort
approach, which requires the furnishing of technical effort and a report
on the results, is not intermingled with
language suitable for a task-completion approach, which often requires the
development of a tangible end item designed to achieve specific performance
characteristics. The wording of the
work statement should also be consistent with the type and form of contract to be negotiated (see 16.207 and
16.306(d)). For example, the work statement for a cost-reimbursement contract promising the contractor’s best
efforts for a fixed term would be
phrased differently than a work statement for a cost-reimbursement completion contract promising the contractor’s best efforts for a defined task.
Differences between work statements
for fixed-price contracts and cost-reimbursement contracts should be even
clearer.
(d) In preparing work statements,
technical and contracting personnel
shall consider and, as appropriate, provide in the solicitation—
(1) A statement of the area of exploration, tasks to be performed, and objectives of the research or development
effort;
(2) Background information helpful
to a clear understanding of the objective or requirement (e.g., any known
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Federal Acquisition Regulation
35.007
phenomena, techniques, methodology,
or results of related work);
(3) Information on factors such as
personnel, environment, and interfaces
that may constrain the results of the
effort;
(4) Reporting requirements and information on any additional items that
the contractor is required to furnish
(at specified intervals) as the work progresses;
(5) The type and form of contract
contemplated by the Government and,
for level-of-effort work statements, an
estimate of applicable professional and
technical effort involved; and
(6) Any other considerations peculiar
to the work to be performed; for example, any design-to-cost requirements.
35.006 Contracting methods and contract type.
(a) In R&D acquisitions, the precise
specifications necessary for sealed bidding are generally not available, thus
making negotiation necessary. However, the use of negotiation in R&D
contracting does not change the obligation to comply with part 6.
(b) Selecting the appropriate contract type is the responsibility of the
contracting officer. However, because
of the importance of technical considerations in R&D, the choice of contract
type should be made after obtaining
the recommendations of technical personnel. Although the Government ordinarily prefers fixed-price arrangements
in contracting, this preference applies
in R&D contracting only to the extent
that goals, objectives, specifications,
and cost estimates are sufficient to
permit such a preference. The precision
with which the goals, performance objectives, and specifications for the
work can be defined will largely determine the type of contract employed.
The contract type must be selected to
fit the work required.
(c) Because the absence of precise
specifications and difficulties in estimating costs with accuracy (resulting
in a lack of confidence in cost estimates) normally precludes using fixedprice contracting for R&D, the use of
cost-reimbursement contracts is usually appropriate (see subpart 16.3). The
nature of development work often requires a cost-reimbursement comple-
tion arrangement (see 16.306(d)). When
the use of cost and performance incentives is desirable and practicable,
fixed-price incentive and cost-plus-incentive-fee contracts should be considered in that order of preference.
(d) When levels of effort can be specified in advance, a short-duration fixedprice contract may be useful for developing system design concepts, resolving potential problems, and reducing
Government risks. Fixed-price contracting may also be used in minor
projects when the objectives of the research are well defined and there is sufficient confidence in the cost estimate
for price negotiations. (See 16.207.)
(e) Projects having production requirements as a follow-on to R&D efforts normally should progress from
cost-reimbursement contracts to fixedprice contracts as designs become more
firmly established, risks are reduced,
and production tooling, equipment, and
processes are developed and proven.
When possible, a final commitment to
undertake specific product development and testing should be avoided
until (1) preliminary exploration and
studies have indicated a high degree of
probability that development is feasible and (2) the Government has determined both its minimum requirements
and desired objectives for product performance and schedule completion.
[48 FR 42352, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
35.007
Solicitations.
(a) The submission and subsequent
evaluation of an inordinate number of
R&D proposals from sources lacking
appropriate qualifications is costly and
time-consuming to both industry and
the
Government.
Therefore,
contracting officers should initially distribute solicitations only to sources
technically qualified to perform research or development in the specific
field of science or technology involved.
Cognizant technical personnel should
recommend potential sources that appear qualified, as a result of—
(1) Present and past performance of
similar work;
(2) Professional stature and reputation;
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35.007
48 CFR Ch. 1 (10–1–03 Edition)
(3) Relative position in a particular
field of endeavor;
(4) Ability to acquire and retain the
professional and technical capability,
including facilities, required to perform the work; and
(5) Other relevant factors.
(b) Proposals generally shall be solicited from technically qualified sources,
including sources that become known
as a result of synopses or other means
of publicizing requirements. If it is not
practicable to initially solicit all apparently qualified sources, only a reasonable number need be solicited. In
the interest of competition, contracting officers shall furnish copies of
the solicitation to other apparently
qualified sources.
(c)
Solicitations
shall
require
offerors to describe their technical and
management approach, identify technical uncertainties, and make specific
proposals for the resolution of any uncertainties. The solicitation should require offerors to include in the proposal any planned subcontracting of
scientific or technical work (see 35.009).
(d) Solicitations may require that
proposals be organized so that the
technical portions can be efficiently
evaluated by technical personnel (see
15.204–5(b)). Solicitation and evaluation
of proposals should be planned to minimize offerors’ and Government expense.
(e) R&D solicitations should contain
evaluation factors to be used to determine the most technically competent
(see 15.304), such as—
(1) The offeror’s understanding of the
scope of the work;
(2) The approach proposed to accomplish the scientific and technical objectives of the contract or the merit of
the ideas or concepts proposed;
(3) The availability and competence
of experienced engineering, scientific,
or other technical personnel;
(4) The offeror’s experience;
(5) Pertinent novel ideas in the specific branch of science and technology
involved; and
(6) The availability, from any source,
of necessary research, test, laboratory,
or shop facilities.
(f) In addition to evaluation factors
for technical competence, the contracting officer shall consider, as ap-
propriate, management capability (including cost management techniques),
experience and past performance, subcontracting practices, and any other
significant evaluation criteria (e.g.,
unrealistically low cost estimates in
proposals for cost-reimbursement or
fixed-price incentive contracts). Although cost or price is not normally
the controlling factor in selecting a
contractor to perform R&D, it should
not be disregarded in arriving at a selection that best satisfies the Government’s requirement at a fair and reasonable cost.
(g) The contracting officer should ensure that potential offerors fully understand the details of the work, especially the Government interpretation
of the work statement. If the effort is
complex, the contracting officer should
provide potential offerors an opportunity to comment on the details of
the requirements as contained in the
work statement, the contract Schedule, and any related specifications.
This may be done at a preproposal conference (see 15.201).
(h) If it is appropriate to do so, solicitations should permit offerors to propose an alternative contract type (see
16.103).
(i) In circumstances when a concern
has a new idea or product to discuss
that incorporates the results of independent R&D work funded by the concern in the private sector and is of interest to the Government, there should
be no hesitancy to discuss it; however,
the concern should be warned that the
Government will not be obligated by
the
discussion.
Under
such
circumstances, it may be appropriate to
negotiate directly with the concern
without competition. Also see subpart
15.6 concerning unsolicited proposals.
(j) The Government may issue an exploratory request to determine the existence of ideas or prior work in a specific field of research. Any such request
shall clearly state that it does not impose any obligation on the Government
or signify a firm intention to enter
into a contract.
[48 FR 42352, Sept.19, 1983, as amended at 62
FR 5271, Sept. 30, 1997; 67 FR 13056, Mar. 20,
2002]
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Federal Acquisition Regulation
35.008
35.011
Evaluation for award.
(a) Generally, an R&D contract
should be awarded to that organization, including any educational institution, that proposes the best ideas or
concepts and has the highest competence in the specific field of science
or technology involved. However, an
award should not be made to obtain capabilities that exceed those needed for
successful performance of the work.
(b) In R&D contracting, precise specifications are ordinarily not available.
The contracting officer should therefore take special care in reviewing the
solicitation evaluation factors to assure that they are properly presented
and consistent with the solicitation.
(c) When a small business concern
would otherwise be selected for award
but is considered not responsible, the
SBA Certificate of Competency procedure shall be followed (see subpart
19.6).
(d) The contracting officer should use
the procedures in subpart 15.5 to notify
and debrief offerors.
(e) It is important to evaluate a proposed contractor’s cost or price estimate, not only to determine whether
the estimate is reasonable but also to
provide valuable insight into the
offeror’s understanding of the project,
perception of risks, and ability to organize and perform the work. Cost or
price analysis, as appropriate (see
15.404–1(c)), is a useful tool.
[48 FR 42352, Sept. 19, 1983, as amended at 62
FR 51271, Sept. 30, 1997]
35.009 Subcontracting
development effort.
research
and
Since the selection of R&D contractors is substantially based on the best
scientific and technological sources, it
is important that the contractor not
subcontract technical or scientific
work without the contracting officer’s
advance knowledge. During the negotiation of a cost-reimbursement R&D
contract, the contracting officer shall
obtain complete information concerning the contractor’s plans for subcontracting any portion of the experimental, research, or development effort (see also 35.007(c)). Also when negotiating a fixed-price contract, the contracting officer should evaluate this in-
formation and may obtain an agreement that protects the Government’s
interests. The clause at 52.244–2, Subcontracts, prescribed for certain types
of contracts at 44.204(a), requires the
contracting officer’s prior approval for
the placement of certain subcontracts.
[48 FR 42352, Sept. 19, 1983, as amended at 63
FR 34060, June 22, 1998]
35.010
Scientific and technical reports.
(a) R&D contracts shall require contractors to furnish scientific and technical reports, consistent with the objectives of the effort involved, as a permanent record of the work accomplished under the contract.
(b) Agencies should make R&D contract results available to other Government activities and the private sector.
Contracting officers shall follow agency regulations regarding such matters
as national security, protection of
data, and new-technology dissemination policy. Reports should be sent to
the National Technical Information
Service (NTIS), 5285 Port Royal Road,
Springfield, VA 22161. When agencies
require that completed reports be covered by a report documentation page,
Standard Form (SF) 298, Report Documentation Page, the contractor should
submit a copy with the report.
[48 FR 42352, Sept. 19, 1983, as amended at 55
FR 3884, Feb. 5, 1990; 59 FR 67049, Dec. 28,
1994]
35.011
Data.
(a) R&D contracts shall specify the
technical data to be delivered under
the contract, since the data clauses required by part 27 do not require the delivery of any such data.
(b) In planning a developmental program when subsequent production contracts are contemplated, consideration
should be given to the need and time
required to obtain a technical package
(plans, drawings, specifications, and
other descriptive information) that can
be used to achieve competition in production contracts. In some situations,
the developmental contractor may be
in the best position to produce such a
technical package.
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35.012
35.012
48 CFR Ch. 1 (10–1–03 Edition)
Patent rights.
For a discussion of patent rights, see
agency regulations and part 27.
35.013
Insurance.
Nonprofit, educational, or State institutions performing cost-reimbursement contracts often do not carry insurance. They may claim immunity
from liability for torts, or, as State institutions, they may be prohibited by
State law from expending funds for insurance. When this is the case, see
28.311 for appropriate clause coverage.
35.014
Government property and title.
(a) The requirements in part 45 for
establishing and maintaining control
over Government property apply to all
R&D contracts.
(b) In implementing 31 U.S.C. 6306,
and unless an agency head provides
otherwise, the policies in subparagraphs (1) through (4) following, regarding title to equipment (and other
tangible personal property) purchased
by the contractor using Government
funds provided for the conduct of basic
or applied scientific research, apply to
contracts with nonprofit institutions
of higher education and nonprofit organizations whose primary purpose is the
conduct of scientific research:
(1) If the contractor obtains the contracting officer’s advance approval, the
contractor shall automatically acquire
and retain title to any item of equipment costing less than $5,000 (or a lesser amount established by agency regulations) acquired on a reimbursable
basis.
(2) If purchased equipment costs
$5,000 (or a lesser amount established
by agency regulations) or more, and as
the parties specifically agree in the
contract, title may—
(i) Vest in the contractor upon acquisition without further obligation to the
Government;
(ii) Vest in the contractor, subject to
the Government’s right to direct transfer of the title to the Government or to
a third party within 12 months after
the contract’s completion or termination (transfer of title to the Government or third party shall not be the
basis for any claim by the contractor);
or
(iii) Vest in the Government, if the
contracting officer determines that
vesting of title in the contractor would
not further the objectives of the agency’s research program.
(3) If title to equipment is vested in
the contractor, depreciation, amortization, or use charges are not allowable
with respect to that equipment under
any existing or future Government
contract or subcontract.
(4) If the contract is performed at a
Government installation and there is a
continuing need for the equipment following contract completion, title need
not be transferred to the contractor.
(c) The absence of an agreement covering title to equipment acquired by
the contractor with Government funds
that cost $1,000 or more does not limit
an agency’s right to act to vest title in
a contractor as authorized by 31 U.S.C.
6306.
(d)(1) Vesting title under paragraph
(b) above is subject to civil rights legislation, 42 U.S.C. 2000d. Before title is
vested, the contractor must agree
that—
‘‘No person in the United States or its outlying areas shall, on the ground of race,
color, or national origin, be excluded from
participation in, be denied the benefits of, or
be otherwise subjected to discrimination
under this contemplated financial assistance
(title to equipment).’’
(2) By signing the contract, the contractor accepts and agrees to comply
with this requirement.
(e) The policies in subparagraphs
(b)(1) through (b)(3) and paragraph (d)
above are implemented in the Government property clauses (Alternate II of
the clause at 52.245–2, Government
Property (Fixed-Price); Alternate I of
the clause at 52.245–5, Government
Property (Cost-Reimbursement, Timeand-Material, or Labor-Hour Contracts); Alternate I of the clause at
52.245–11, Government Property (Facilities Use); and the clause at 52.245–15,
Transfer of Title to the Facilities),
which are prescribed in part 45 (at
45.106 for fixed-price and cost-reimbursement contracts and at 45.302–6 and
45.302–7 for facilities contracts).
[48 FR 42352, Sept. 19, 1983, as amended at 50
FR 26903, June 28, 1985; 68 FR 28083, May 22,
2003]
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Federal Acquisition Regulation
35.016
35.015 Contracts for research with
educational institutions and nonprofit organizations.
(a) General. (1) When the R&D work is
not defined precisely and the contract
states only a period during which work
is conducted (that is, a specific time
for achievement of results is not required), research contracts with educational institutions and nonprofit organizations shall—
(i) State that the contractor bears
primary responsibility for the research;
(ii) Give (A) the name of the principal investigator (or project leader), if
the decision to contract is based on
that particular individual’s research effort and management capabilities, and
(B) the contractor’s estimate of the
amount of time that individual will devote to the work;
(iii) Provide that the named individual shall be closely involved and
continuously responsible for the conduct of the work;
(iv) Provide that the contractor must
obtain the contracting officer’s approval to change the principal investigator (or project leader);
(v) Require that the contractor advise the contracting officer if the principal investigator (or project leader)
will, or plans to, devote substantially
less effort to the work than anticipated; and
(vi) Require that the contractor obtain the contracting officer’s approval
to change the phenomenon under
study, the stated objectives of the research, or the methodology.
(2) If a research contract does provide
precise objectives or a specific date for
achievement of results, the contracting
officer may include in the contract the
requirements set forth in subparagraph
(1) above, if it is necessary for the Government to exercise oversight and approval over the avenues of approach,
methods, or schedule of work.
(b) Basic agreements. (1) A basic agreement should be negotiated if the number of contracts warrants such an
agreement (see 16.702). Basic agreements should be reviewed and updated
at least annually.
(2) To promote uniformity and consistency in dealing with educational institutions and nonprofit organizations,
agencies are encouraged to use basic
agreements of other agencies.
[48 FR 42352, Sept. 19, 1983, as amended at 56
FR 15153, Apr. 15, 1991]
35.016
Broad agency announcement.
(a) General. This paragraph prescribes
procedures for the use of the broad
agency announcement (BAA) with Peer
or Scientific Review (see 6.102(d)(2)) for
the acquisition of basic and applied research and that part of development
not related to the development of a
specific system or hardware procurement. BAA’s may be used by agencies
to fulfill their requirements for scientific study and experimentation directed toward advancing the state-ofthe-art or increasing knowledge or understanding rather than focusing on a
specific system or hardware solution.
The BAA technique shall only be used
when meaningful proposals with varying technical/scientific approaches can
be reasonably anticipated.
(b) The BAA, together with any supporting documents, shall—
(1) Describe the agency’s research interest, either for an individual program
requirement or for broadly defined
areas of interest covering the full
range of the agency’s requirements;
(2) Describe the criteria for selecting
the proposals, their relative importance and the method of evaluation;
(3) Specify the period of time during
which proposals submitted in response
to the BAA will be accepted; and
(4) Contain instructions for the preparation and submission of proposals.
(c) The availability of the BAA must
be publicized through the Governmentwide point of entry (GPE) and, if authorized pursuant to subpart 5.5, may
also be published in noted scientific,
technical, or engineering periodicals.
The notice must be published no less
frequently than annually.
(d) Proposals received as a result of
the BAA shall be evaluated in accordance with evaluation criteria specified
therein through a peer or scientific review process. Written evaluation reports on individual proposals will be
necessary but proposals need not be
evaluated against each other since
they are not submitted in accordance
with a common work statement.
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35.017
48 CFR Ch. 1 (10–1–03 Edition)
(e) The primary basis for selecting
proposals for acceptance shall be technical, importance to agency programs,
and fund availability. Cost realism and
reasonableness shall also be considered
to the extent appropriate.
(f) Synopsis under subpart 5.2, Synopses of Proposed Contract Actions, of
individual contract actions based upon
proposals received under the BAA is
not required. The notice published pursuant to subparagraph (c), of this section, fulfills the synopsis requirement.
[53 FR 27467, July 20, 1988, as amended at 66
FR 27414, May 16, 2001; 68 FR 56679, Oct. 1,
2003]
35.017 Federally Funded Research and
Development Centers.
(a) Policy.
(1) This section sets forth Federal
policy regarding the establishment,
use, review, and termination of Federally Funded Research and Development
Centers (FFRDC’s) and related sponsoring agreements.
(2) An FFRDC meets some special
long-term research or development
need which cannot be met as effectively by existing in-house or contractor resources. FFRDC’s enable
agencies to use private sector resources
to accomplish tasks that are integral
to the mission and operation of the
sponsoring agency. An FFRDC, in
order to discharge its responsibilities
to the sponsoring agency, has access,
beyond that which is common to the
normal contractual relationship, to
Government and supplier data, including sensitive and proprietary data, and
to employees and facilities. The
FFRDC is required to conduct its business in a manner befitting its special
relationship with the Government, to
operate in the public interest with objectivity and independence, to be free
from organizational conflicts of interest, and to have full disclosure of its affairs to the sponsoring agency. It is not
the Government’s intent that an
FFRDC use its privileged information
or access to facilities to compete with
the private sector. However, an FFRDC
may perform work for other than the
sponsoring agency under the Economy
Act, or other applicable legislation,
when the work is not otherwise available from the private sector.
(3) FFRDC’s are operated, managed,
and/or administered by either a university or consortium of universities,
other not-for-profit or nonprofit organization, or an industrial firm, as an
autonomous organization or as an identifiable separate operating unit of a
parent organization.
(4) Long-term relationships between
the Government and FFRDC’s are encouraged in order to provide the continuity that will attract high-quality
personnel to the FFRDC. This relationship should be of a type to encourage
the FFRDC to maintain currency in its
field(s) of expertise, maintain its objectivity and independence, preserve its
familiarity with the needs of its sponsor(s), and provide a quick response capability.
(b) Definitions. As used in this section—
Nonsponsor means any other organization, in or outside of the Federal
Government, which funds specific work
to be performed by the FFRDC and is
not a party to the sponsoring agreement.
Primary sponsor means the lead agency responsible for managing, administering, or monitoring overall use of
the FFRDC under a multiple sponsorship agreement.
Sponsor means the executive agency
which manages, administers, monitors,
funds, and is responsible for the overall
use of an FFRDC. Multiple agency
sponsorship is possible as long a one
agency agrees to act as the ‘‘primary
sponsor.’’ In the event of multiple
sponsors, ‘‘sponsor’’ refers to the primary sponsor.
[55 FR 3885, Feb. 5, 1990 as amended at 66 FR
2132, Jan. 10, 2001]
35.017–1
Sponsoring agreements.
(a) In order to facilitate a long-term
relationship between the Government
and an FFRDC, establish the FFRDC’s
mission, and ensure a periodic reevaluation of the FFRDC, a written agreement of sponsorship between the Government and the FFRDC shall be prepared when the FFRDC is established.
The sponsoring agreement may take
various forms; it may be included in a
contract between the Government and
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Federal Acquisition Regulation
35.017–2
the FFRDC, or in another legal instrument under which an FFRDC accomplishes effort, or it may be in a separate written agreement. Notwithstanding its form, the sponsoring
agreement shall be clearly designated
as such by the sponsor.
(b) While the specific content of any
sponsoring agreement will vary depending on the situation, the agreement shall contain, as a minimum, the
requirements of paragraph (c) of this
subsection. The requirements for, and
the contents of, sponsoring agreements
may be as further specified in sponsoring agencies’ policies and procedures.
(c) As a minimum, the following requirements must be addressed in either
a sponsoring agreement or sponsoring
agencies’ policies and procedures:
(1) A statement of the purpose and
mission of the FFRDC.
(2) Provisions for the orderly termination or nonrenewal of the agreement,
disposal of assets, and settlement of liabilities. The responsibility for capitalization of an FFRDC must be defined in
such a manner that ownership of assets
may be readily and equitably determined
upon
termination
of
the
FFRDC’s relationship with its sponsor(s).
(3) A provision for the identification
of retained earnings (reserves) and the
development of a plan for their use and
disposition.
(4) A prohibition against the FFRDC
competing with any non-FFRDC concern in response to a Federal agency
request for proposal for other than the
operation of an FFRDC. This prohibition is not required to be applied to
any parent organization or other subsidiary of the parent organization in
its non-FFRDC operations. Requests
for information, qualifications or capabilities can be answered unless otherwise restricted by the sponsor.
(5) A delineation of whether or not
the FFRDC may accept work from
other than the sponsor(s). If nonsponsor work can be accepted, a delineation of the procedures to be followed,
along with any limitations as to the
nonsponsors form which work can be
accepted (other Federal agencies, State
or local governments, nonprofit or
profit organizations, etc.).
(d) The sponsoring agreement or
sponsoring agencies’ policies and procedures may also contain, as appropriate, other provisions, such as identification of—(1) Any cost elements
which will require advance agreement
if cost-type contracts are used; and (2)
Considerations which will affect negotiation of fees where payment of fees is
determined by the sponsor(s) to be appropriate.
(e) The term of the agreement will
not exceed 5 years, but can be renewed,
as a result of periodic review, in increments not to exceed 5 years.
[55 FR 3885, Feb. 5, 1990]
35.017–2 Establishing or changing an
FFRDC.
To establish an FFRDC, or change its
basic purpose and mission, the sponsor
shall ensure the following:
(a) Existing alternative sources for
satisfying agency requirements cannot
effectively meet the special research or
development needs.
(b) The notices required for publication (see 5.205(b)) are placed as required.
(c) There is sufficient Government
expertise available to adequately and
objectively evaluate the work to be
performed by the FFRDC.
(d) The Executive Office of the President, Office of Science and Technology
Policy, Washington, DC 20506, is notified.
(e) Controls are established to ensure
that the costs of the services being provided to the Government are reasonable.
(f) The basic purpose and mission of
the FFRDC is stated clearly enough to
enable differentiation between work
which should be performed by the
FFRDC and that which should be performed by non-FFRDC’s.
(g) A reasonable continuity in the
level of support to the FFRDC is maintained, consistent with the agency’s
need for the FFRDC and the terms of
the sponsoring agreement.
(h) The FFRDC is operated, managed,
or administered by an autonomous organization or as an identifiably separate operating unit of a parent organization, and is required to operate in
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35.017–3
48 CFR Ch. 1 (10–1–03 Edition)
the public interest, free from organizational conflict of interest, and to disclose its affairs (as an FFRDC) to the
primary sponsor.
(i) Quantity prodution or manufacturing is not performed unless authorized by legislation.
(j) Approval is received from the head
of the sponsoring agency.
[55 FR 3885, Feb. 5, 1990, as amended at 62 FR
12694, Mar. 17, 1997]
35.017–3 Using an FFRDC.
(a) All work placed with the FFRDC
must be within the purpose, mission,
general scope of effort, or special competency of the FFRDC.
(b) Where the use of the FFRDC by a
nonsponsor is permitted by the sponsor, the sponsor shall be responsible for
compliance with paragraph (a) of this
subsection. The nonsponsoring agency
is responsible for making the determination required by 17.504 and providing the documentation required by
17.504(e). When permitted by the sponsor, a Federal agency may contract directly with the FFRDC in which case
that Federal agency is responsible for
compliance with part 6.
FFRDC to determine if and at what
level they continue to exist.
(2) Consideration of alternative
sources to meet the sponsor’s needs.
(3) An assessment of the efficiency
and effectiveness of the FFRDC in
meeting the sponsor’s needs, including
the FFRDC’s ability to maintain its
objectivity, independence, quick response capability, currency in its
field(s) of expertise, and familiarity
with the needs of its sponsor.
(4) An assessment of the adequacy of
the FFRDC management in ensuring a
cost-effective operation.
(5) A determination that the criteria
for establishing the FFRDC continue
to be satisfied and that the sponsoring
agreement is in compliance with 35.017–
1.
[55 FR 3886, Feb. 5, 1990]
35.017–5 Terminating FFRDC.
When a sponsor’s need for the FFRDC
no longer exists, the sponsorship may
be transferred to one or more Government agencies, if appropriately justified. If the FFRDC is not transferred to
another Government agency, it shall be
phased out.
[55 FR 3886, Feb. 5, 1990]
[55 FR 3886, Feb. 5, 1990]
35.017–4 Reviewing FFRDC’s.
(a) The sponsor, prior to extending
the contract or agreement with an
FFRDC, shall conduct a comprehensive
review of the use and need for the
FFRDC. The review will be coordinated
with any co-sponsors and may be performed in conjunction with the budget
process. If the sponsor determines that
its sponsorship is no longer appropriate, it shall apprise other agencies
which use the FFRDC of the determination and afford them an opportunity to assume sponsorship.
(b) Approval to continue or terminate the sponsorship shall rest with
the head of the sponsoring agency. This
determination shall be based upon the
results of the review conducted in accordance with paragraph (c) of this
subsection.
(c) An FFRDC review should include
the following:
(1) An examination of the sponsor’s
special technical needs and mission requirements that are performed by the
35.017–6 Master list of FFRDC’s.
The National Science Foundation
(NSF) maintains a master Government
list of FFRDC’s. Primary sponsors will
provide information on each FFRDC,
including sponsoring agreements, mission statements, funding data, and
type of R&D being performed, to the
NSF upon its request for such information.
[55 FR 3886, Feb. 5, 1990]
35.017–7 Limitation on the creation of
new FFRDC’s.
Pursuant to 10 U.S.C. 2367, the Secretary of Defense, the Secretary of the
Army, the Secretary of the Navy, the
Secretary of the Air Force, the Secretary of Transportation, and the Administrator of the National Aeronautics and Space Administration may
not obligate or expend amounts appropriated to the Department of Defense
for purposes of operating an FFRDC
that was not in existence before June 2,
1986, until (a) the head of the agency
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Federal Acquisition Regulation
Pt. 36
submits to Congress a report with respect to such center that describes the
purpose, mission, and general scope of
effort of the center; and (b) a period of
60 days, beginning on the date such report is received by Congress, has
elapsed.
[55 FR 3886, Feb. 5, 1990]
PART 36—CONSTRUCTION AND
ARCHITECT–ENGINEER CONTRACTS
Sec.
36.000
Scope of part.
36.101
36.102
36.103
36.104
Applicability.
Definitions.
Methods of contracting.
Policy.
Subpart 36.1—General
Subpart 36.2—Special Aspects of
Contracting for Construction
36.201 Evaluation of contractor performance.
36.202 Specifications.
36.203 Government estimate of construction
costs.
36.204 Disclosure of the magnitude of construction projects.
36.205 Statutory cost limitations.
36.206 Liquidated damages.
36.207 Pricing fixed-price construction contracts.
36.208 Concurrent performance of firmfixed-price and other types of construction contracts.
36.209 Construction contracts with architect-engineer firms.
36.210 Inspection of site and examination of
data.
36.211 Distribution of advance notices and
solicitations.
36.212 Preconstruction orientation.
36.213 Special procedures for sealed bidding
in construction contracting.
36.213–1 General.
36.213–2 Presolicitation notices.
36.213–3 Invitations for bids.
36.213–4 Notice of award.
36.214 Special procedures for price negotiation in construction contracting.
36.215 Special procedures for cost-reimbursement contracts for construction.
Subpart 36.3—Two-Phase Design Build
Selection Procedures
36.300 Scope of subpart.
36.301 Use of two-phase design-build selection procedures.
36.302 Scope of work.
36.303 Procedures.
36.303–1
36.303–2
Phase One.
Phase Two.
Subpart 36.4—Commercial Practices
[Reserved]
Subpart 36.5—Contract Clauses
36.500 Scope of subpart.
36.501 Performance of work by the contractor.
36.502 Differing site conditions.
36.503 Site investigation and conditions affecting the work.
36.504 Physical data.
36.505 Material and workmanship.
36.506 Superintendence by the contractor.
36.507 Permits and responsibilities.
36.508 Other contracts.
36.509 Protection of existing vegetation,
structures, equipment, utilities, and improvements.
36.510 Operations and storage areas.
36.511 Use and possession prior to completion.
36.512 Cleaning up.
36.513 Accident prevention.
36.514 Availability and use of utility services.
36.515 Schedules for construction contracts.
36.516 Quantity surveys.
36.517 Layout of work.
36.518 Work oversight in cost-reimbursement construction contracts.
36.519 Organization and direction of the
work.
36.520 Contracting by negotiation.
36.521 Specifications and drawings for construction.
36.522 Preconstruction conference.
36.523 Site visit.
Subpart 36.6—Architect-Engineer Services
36.600 Scope of subpart.
36.601 Policy.
36.601–1 Public announcement.
36.601–2 Competition.
36.601–3 Applicable contracting procedures.
36.601–4 Implementation.
36.602 Selection of firms for architect-engineer contracts.
36.602–1 Selection criteria.
36.602–2 Evaluation boards.
36.602–3 Evaluation board functions.
36.602–4 Selection authority.
36.602–5 Short selection process for contracts not to exceed the simplified acquisition threshold.
36.603 Collecting data on and appraising
firms’ qualifications.
36.604 Performance evaluation.
36.605 Government cost estimate for architect-engineer work.
36.606 Negotiations.
36.607 Release of information on firm selection.
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36.000
48 CFR Ch. 1 (10–1–03 Edition)
36.608 Liability for Government costs resulting from design errors or deficiencies.
36.609 Contract clauses.
36.609–1 Design within funding limitations.
36.609–2 Redesign responsibility for design
errors or deficiencies.
36.609–3 Work oversight in architect-engineer contracts.
36.609–4 Requirements for registration of designers.
Subpart 36.7—Standard and Optional
Forms for Contracting for Construction,
Architect-Engineer Services, and Dismantling, Demolition, or Removal of
Improvements.
36.700 Scope of subpart.
36.701 Standard and optional forms for use
in contracting for construction or dismantling, demolition, or removal of improvements.
36.702 Forms for use in contracting for architect-engineer services.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42356, Sept. 19, 1983, unless
otherwise noted.
36.000
Scope of part.
This part prescribes policies and procedures peculiar to contracting for construction and architect-engineer services. It includes requirements for using
certain clauses and standard forms
that apply also to contracts for dismantling, demolition, or removal of
improvements.
Subpart 36.1—General
36.101
Applicability.
(a) Construction and architect-engineer contracts are subject to the requirements in other parts of this regulation, which shall be followed when
applicable.
(b) When a requirement in this part
is inconsistent with a requirement in
another part of this regulation, this
part 36 shall take precedence if the acquisition of construction or architectengineer services is involved.
(c) A contract for both construction
and supplies or services shall include
(1) clauses applicable to the predominant part of the work (see subpart 22.4),
or (2) if the contract is divided into
parts, the clauses applicable to each
portion.
[48 FR 42356, Sept. 19, 1983, as amended at 57
FR 55471, Nov. 25, 1992; 58 FR 12140, Mar. 2,
1993]
36.102
Definitions.
As used in this part—
Contract is intended to refer to a contract for construction or a contract for
architect-engineer services, unless another meaning is clearly intended.
Design means defining the construction requirement (including the functional relationships and technical systems to be used, such as architectural,
environmental, structural, electrical,
mechanical, and fire protection), producing the technical specifications and
drawings, and preparing the construction cost estimate.
Design-bid-build means the traditional delivery method where design
and construction are sequential and
contracted for separately with two contracts and two contractors.
Design-build means combining design
and construction in a single contract
with one contractor.
Firm in conjunction with architectengineer services, means any individual, partnership, corporation, association, or other legal entity permitted
by law to practice the professions of architecture or engineering.
Plans and specifications means drawings, specifications, and other data for
and preliminary to the construction.
Record drawings means drawings submitted by a contractor or subcontractor at any tier to show the construction of a particular structure or
work as actually completed under the
contract.
Two-phase design-build selection procedures is a selection method in which a
limited number of offerors (normally
five or fewer) is selected during Phase
One to submit detailed proposals for
Phase Two (see subpart 36.3).
[48 FR 42356, Sept. 19, 1983, as amended at 51
FR 36972, Oct. 16, 1986; 54 FR 13336, Mar. 31,
1989; 54 FR 19827, May 8, 1989; 56 FR 29128,
June 25, 1991; 62 FR 272, Jan. 2, 1997; 64 FR
72432, Dec. 27, 1999; 66 FR 2132, Jan. 10, 2001]
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Federal Acquisition Regulation
36.202
36.103 Methods of contracting.
(a) The contracting officer shall use
sealed bid procedures for a construction contract if the conditions in
6.401(a) apply, unless the contract will
be performed outside the United States
and its outlying areas. (See 6.401(b)(2).)
(b) Contracting officers shall acquire
architect-engineer services by negotiation, and select sources in accordance
with applicable law, subpart 36.6, and
agency regulations.
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 68 FR 28083, May 22, 2003]
36.104 Policy.
Unless the traditional acquisition approach of design-bid-build established
under the Brooks Architect-Engineers
Act (40 U.S.C. 541, et seq.) or another
acquisition procedure authorized by
law is used, the contracting officer
shall use the two-phase selection procedures authorized by 10 U.S.C. 2305a or
41 U.S.C. 253m when entering into a
contract for the design and construction of a public building, facility, or
work, if the contracting officer makes
a determination that the procedures
are appropriate for use (see subpart
36.3). Other acquisition procedures authorized by law include the procedures
established in this part and other parts
of this chapter and, for DoD, the design-build process described in 10
U.S.C. 2862.
[62 FR 272, Jan. 2, 1997, as amended at 64 FR
72451, Dec. 27, 1999]
Subpart 36.2—Special Aspects of
Contracting for Construction
36.201 Evaluation of contractor performance.
(a) Preparation of performance evaluation reports. (1) The contracting activity shall evaluate contractor performance and prepare a performance report
using the SF 1420, Performance Evaluation (Construction Contracts), for each
construction contract of—
(i) $500,000 or more; or
(ii) More than $10,000, if the contract
was terminated for default.
(2) The report shall be prepared at
the time of final acceptance of the
work, at the time of contract termi-
nation, or at other times, as appropriate, in accordance with agency procedures. Ordinarily, the evaluating official who prepares the report should be
the person responsible for monitoring
contract performance.
(3) If the evaluating official concludes that a contractor’s overall performance was unsatisfactory, the contractor shall be advised in writing that
a report of unsatisfactory performance
is being prepared and the basis for the
report. If the contractor submits any
written comments, the evaluating official shall include them in the report,
resolve any alleged factual discrepancies, and make appropriate changes
in the report.
(4) The head of the contracting activity shall establish procedures which ensure that fully qualified personnel prepare and review performance reports.
(b) Review of performance reports. Each
performance report shall be reviewed
to ensure that it is accurate and fair.
The reviewing official should have
knowledge of the contractor’s performance and should normally be at an organizational level above that of the
evaluating official.
(c) Distribution and use of performance
reports. (1) Each performance report
shall be distributed in accordance with
agency procedures. One copy shall be
included in the contract file. The contracting activity shall retain the report for at least six years after the
date of the report.
(2) Before making a determination of
responsibility in accordance with subpart 9.1, the contracting officer may
consider performance reports in accordance with agency instructions.
[48 FR 42356, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 54 FR 48989, Nov. 28,
1989]
36.202 Specifications.
(a) Construction specifications shall
conform to the requirements in part 11
of this regulation.
(b) Whenever possible, contracting
officers shall ensure that references in
specifications are to widely recognized
standards or specifications promulgated by governments, industries, or
technical societies.
(c) When brand name or equal descriptions are necessary, specifications
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36.203
48 CFR Ch. 1 (10–1–03 Edition)
must clearly identify and describe the
particular physical, functional, or
other characteristics of the brandname items which are considered essential to satisfying the requirement.
(d) In accordance with Executive
Order 13202, of February 17, 2001, Preservation of Open Competition and Government Neutrality Towards Government Contractors’ Labor Relations on
Federal and Federally Funded Construction Projects, as amended on
April 6, 2001—
(1) The Government, or any construction manager acting on behalf of the
Government, must not—
(i) Require or prohibit offerors, contractors, or subcontractors to enter
into or adhere to agreements with one
or more labor organizations (as defined
in 42 U.S.C. 2000e(d)) on the same or
other related construction projects; or
(ii) Otherwise discriminate against
offerors, contractors, or subcontractors
for becoming, refusing to become, or
remaining signatories or otherwise adhering to agreements with one or more
labor organizations, on the same or
other related construction projects.
(2) Nothing in this paragraph prohibits offerors, contractors, or subcontractors from voluntarily entering
into project labor agreements.
(3) The head of the agency may exempt a construction project from this
policy if the agency head finds that, as
of February 17, 2001—
(i) The agency or a construction
manager acting on behalf of the Government had issued or was a party to
bid specifications, project agreements,
agreements with one or more labor organizations, or other controlling documents with respect to that particular
project, which contained any of the requirements or prohibitions in paragraph (d)(1) of this section; and
(ii) One or more construction contracts subject to such requirements or
prohibitions had been awarded.
(4) The head of the agency may exempt a particular project, contract, or
subcontract from this policy upon a
finding that special circumstances require an exemption in order to avert an
imminent threat to public health or
safety, or to serve the national security. A finding of ‘‘special circumstances’’ may not be based on the
possibility or presence of a labor dispute concerning the use of contractors
or subcontractors who are nonsignatories to, or otherwise do not adhere to,
agreements with one or more labor organizations, or concerning employees
on the project who are not members of
or affiliated with a labor organization.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 48249, Sept. 18, 1995; 66 FR 27415, May 16,
2001]
36.203 Government estimate of construction costs.
(a) An independent Government estimate of construction costs shall be prepared and furnished to the contracting
officer at the earliest practicable time
for each proposed contract and for each
contract modification anticipated to
cost $100,000 or more. The contracting
officer may require an estimate when
the cost of required work is anticipated
to be less than $100,000. The estimate
shall be prepared in as much detail as
though the Government were competing for award.
(b) When two-step sealed bidding is
used, the independent Government estimate shall be prepared when the contract requirements are definitized.
(c) Access to information concerning
the Government estimate shall be limited to Government personnel whose
official duties require knowledge of the
estimate. An exception to this rule
may be made during contract negotiations to allow the contracting officer
to identify a specialized task and disclose the associated cost breakdown
figures in the Government estimate,
but only to the extent deemed necessary to arrive at a fair and reasonable price. The overall amount of the
Government’s estimate shall not be
disclosed except as permitted by agency regulations.
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 62 FR 44829, Aug. 22, 1997]
36.204 Disclosure of the magnitude of
construction projects.
Advance notices and solicitations
shall state the magnitude of the requirement in terms of physical characteristics and estimated price range. In
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Federal Acquisition Regulation
36.208
no event shall the statement of magnitude disclose the Government’s estimate. Therefore, the estimated price
should be described in terms of one of
the following price ranges:
(a) Less than $25,000.
(b) Between $25,000 and $100,000.
(c) Between $100,000 and $250,000.
(d) Between $250,000 and $500,000.
(e) Between $500,000 and $1,000,000.
(f) Between $1,000,000 and $5,000,000.
(g) Between $5,000,000 and $10,000,000.
(h) More than $10,000,000.
36.205 Statutory cost limitations.
(a) Contracts for construction shall
not be awarded at a cost to the Government—
(1) In excess of statutory cost limitations, unless applicable limitations can
be and are waived in writing for the
particular contract; or
(2) Which, with allowances for Government-imposed contingencies and
overhead, exceeds the statutory authorization.
(b) Solicitations containing one or
more items subject to statutory cost
limitations shall state (1) the applicable cost limitation for each affected
item in a separate schedule; (2) that an
offer which does not contain separately-priced schedules will not be considered; and (3) that the price on each
schedule shall include an approximate
apportionment of all estimated direct
costs, allocable indirect costs, and
profit.
(c) The Government shall reject an
offer if its prices exceed applicable
statutory limitations, unless laws or
agency procedures provide pertinent
exemptions. However, if it is in the
Government’s interest, the contracting
officer may include a provision in the
solicitation which permits the award of
separate contracts for individual items
whose prices are within or not subject
to applicable statutory limitations.
(d) The Government shall also reject
an offer if its prices are within statutory limitations only because it is materially unbalanced. An offer is unbalanced if its prices are significantly less
than cost for some work, and overstated for other work.
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 62 FR 237, Jan. 2, 1997]
36.206 Liquidated damages.
The contracting officer must evaluate the need for liquidated damages in
a construction contract in accordance
with 11.502 and agency regulations.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 48249, Sept. 18, 1995; 65 FR 46066, July 26,
2000]
36.207 Pricing fixed-price construction
contracts.
(a) Generally, firm-fixed-price contracts shall be used to acquire construction. They may be priced (1) on a
lump-sum basis (when a lump sum is
paid for the total work or defined parts
of the work), (2) on a unit-price basis
(when a unit price is paid for a specified quantity of work units), or (3)
using a combination of the two methods.
(b) Lump-sum pricing shall be used in
preference to unit pricing except
when—
(1) Large quantities of work such as
grading, paving, building outside utilities, or site preparation are involved;
(2) Quantities of work, such as excavation, cannot be estimated with sufficient confidence to permit a lump-sum
offer without a substantial contingency;
(3) Estimated quantities of work required may change significantly during
construction; or
(4) Offerors would have to expend unusual effort to develop adequate estimates.
(c) Fixed-price contracts with economic price adjustment may be used if
such a provision is customary in contracts for the type of work being acquired, or when omission of an adjustment provision would preclude a significant number of firms from submitting offers or would result in offerors
including unwarranted contingencies
in proposed prices.
36.208 Concurrent
performance
of
firm-fixed-price and other types of
construction contracts.
In view of potential labor and administrative problems, cost-plus-fixed-fee,
price-incentive, or other types of contracts with cost variation or cost adjustment features shall not be permitted concurrently, at the same work
site, with firm-fixed-price, lump sum,
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36.209
48 CFR Ch. 1 (10–1–03 Edition)
or unit price contracts except with the
prior approval of the head of the contracting activity.
mine the geographical extent of distribution of advance notices and solicitations on a case-by-case basis.
36.209 Construction contracts with architect-engineer firms.
No contract for the construction of a
project shall be awarded to the firm
that designed the project or its subsidiaries or affiliates, except with the approval of the head of the agency or authorized representative.
36.212 Preconstruction orientation.
(a) The contracting officer will inform the successful offeror of significant matters of interest, including—(1)
statutory matters such as labor standards (subpart 22.4), and subcontracting
plan requirements (subpart 19.7); and
(2) other matters of significant interest, including who has authority to decide matters such as contractual, administrative (e.g., security, safety, and
fire and environmental protection), and
construction responsibilities.
(b) As appropriate, the contracting
officer may issue an explanatory letter
or conduct a preconstruction conference.
(c) If a preconstruction conference is
to be held, the contracting officer
shall—
(1) Conduct the conference prior to
the start of construction at the work
site;
(2) Notify the successful offeror of
the date, time, and location of the conference (see 36.522); and
(3) Inform the successful offeror of
the proposed agenda and any need for
attendance by subcontractors.
36.210 Inspection of site and examination of data.
The contracting officer should make
appropriate arrangements for prospective offerors to inspect the work site
and to have the opportunity to examine data available to the Government
which may provide information concerning the performance of the work,
such as boring samples, original boring
logs, and records and plans of previous
construction. The data should be assembled in one place and made available for examination. The solicitation
should notify offerors of the time and
place for the site inspection and data
examination. If it is not feasible for
offerors to inspect the site or examine
the data on their own, the solicitation
should also designate an individual
who will show the site or data to the
offerors. Significant site information
and the data should be made available
to all offerors in the same manner, including information regarding any utilities to be furnished during construction. A record should be kept of the
identity and affiliation of all offerors’
representatives who inspect the site or
examine the data.
36.211 Distribution of advance notices
and solicitations.
Advance notices and solicitations
should be distributed to reach as many
prospective offerors as practicable.
Contracting officers may send notices
and solicitations to organizations that
maintain, without charge to the public,
display rooms for the benefit of prospective offerors, subcontractors, and
material suppliers. If requested by such
organizations, this may be done for all
or a stated class of construction
projects on an annual or semiannual
basis. Contracting officers may deter-
[59 FR 67049, Dec. 28, 1994]
36.213 Special procedures for sealed
bidding
in
construction
contracting.
36.213–1 General.
Contracting officers shall follow the
procedures for sealed bidding in part 14,
as modified and supplemented by the
requirements in this subpart.
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985. Redesignated at 62 FR 272, Jan. 2, 1997]
36.213–2 Presolicitation notices.
(a) Unless the requirement is waived
by the head of the contracting activity
or a designee, the contracting officer
shall send presolicitation notices to
prospective bidders on any construction requirement when the proposed
contract is expected to equal or exceed
$100,000. Presolicitation notices may
also be used when the proposed contract is expected to be less than
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Federal Acquisition Regulation
36.213–4
$100,000. These notices shall be issued
sufficiently in advance of the invitation for bids to stimulate the interest
of the greatest number of prospective
bidders.
(b) Presolicitation notices must—
(1) Describe the proposed work in sufficient detail to disclose the nature and
volume of work (in terms of physical
characteristics and estimated price
range)(see 36.204);
(2) State the location of the work;
(3) Include tentative dates for issuing
invitations, opening bids, and completing contract performance;
(4) State where plans will be available for inspection without charge;
(5) Specify a date by which requests
for the invitation for bids should be
submitted;
(6) Notify recipients that if they do
not submit a bid they should advise the
issuing office as to whether they want
to receive future presolicitation notices;
(7) State whether award is restricted
to small businesses; and
(8) Specify any amount to be charged
for solicitation documents.
(9) Be publicized through the Governmentwide point of entry in accordance
with 5.204.
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 19716, May 30, 1986. Redesignated
at 62 FR 272, Jan. 2, 1997, as amended at 66
FR 27414, May 16, 2001]
36.213–3 Invitations for bids.
(a) Invitations for bids for construction shall allow sufficient time for bid
preparation (i.e., the period of time between the date invitations are distributed and the date set for opening of
bids) (but see 5.203 and 14.202–1) to
allow bidders an adequate opportunity
to prepare and submit their bids, giving due regard to the construction season and the time necessary for bidders
to inspect the site, obtain subcontract
bids, examine data concerning the
work, and prepare estimates based on
plans and specifications.
(b) Invitations for bids shall be prepared in accordance with subpart 14.2
and this section using the forms prescribed in part 53.
(c) Contracting officers should assure
that each invitation for bids includes
the following information, when applicable:
(1) The appropriate wage determination of the Secretary of Labor (see subpart 22.4), or, if the invitation for bids
must be issued before the wage determination is received, a notice that the
schedule of minimum wage rates to be
paid under the contract will be issued
as an amendment to the invitation for
bids before the opening date for bids
(see 14.208 and 22.404–3(b)).
(2) The Performance of Work by the
Contractor clause (see 36.501 and 52.236–
1).
(3) The magnitude of the proposed
construction project (see 36.204).
(4) The period of performance (see
subpart 11.4).
(5) Arrangements made for bidders to
inspect the site and examine the data
concerning performance of the work
(see 36.210).
(6) Information concerning any facilities, such as utilities, office space, and
warehouse space, to be furnished during construction.
(7) Information concerning the prebid
conference (see 14.207).
(8) Any special qualifications or experience requirements that will be considered in determining the responsibility of bidders (see subpart 9.1).
(9) Any special instructions concerning bids, alternate bids, and award.
(10) Any instructions concerning reporting requirements.
(d) The contracting officer shall send
invitations for bids to prospective bidders who requested them in response to
the presolicitation notice, and should
send them to other prospective bidders
upon their specific request (see
5.102(a)).
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 48249, Sept. 18, 1995. Redesignated
at 62 FR 272, Jan. 2, 1997, as amended at 68
FR 43856, July 24, 2003]
36.213–4
Notice of award.
When a notice of award is issued, it
shall be done in writing or electronically, shall contain information required by 14.408, and shall—
(a) Identify the invitation for bids;
(b) Identify the contractor’s bid;
(c) State the award price;
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36.214
48 CFR Ch. 1 (10–1–03 Edition)
(d) Advise the contractor that any required payment and performance bonds
must be promptly executed and returned to the contracting officer;
(e) Specify the date of commencement of work, or advise that a notice
to proceed will be issued.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34739, July 3, 1995; 60 FR 42657, Aug. 16,
1995. Redesignated at 62 FR 272, Jan. 2, 1997]
36.214 Special procedures for price negotiation in construction contracting.
(a) Agencies shall follow the policies
and procedures in part 15 when negotiating prices for construction.
(b) The contracting officer shall
evaluate proposals and associated cost
or pricing data or information other
than cost or pricing data and shall
compare them to the Government estimate.
(1) When submission of cost or pricing data is not required (see 15.403–1
and 15.403–2), and any element of proposed cost differs significantly from
the Government estimate, the contracting officer should request the offeror to submit cost information concerning that element (e.g., wage rates
or fringe benefits, significant materials, equipment allowances, and subcontractor costs).
(2) When a proposed price is significantly lower than the Government estimate, the contracting officer shall
make sure both the offeror and the
Government estimator completely understand the scope of the work. If negotiations reveal errors in the Government estimate, the estimate shall be
corrected and the changes shall be documented in the contract file.
(c) When appropriate, additional pricing tools may be used. For example,
proposed prices may be compared to
current prices for similar types of
work, adjusted for differences in the
work site and the specifications. Also,
rough yardsticks may be developed and
used, such as cost per cubic foot for
structures, cost per linear foot for utilities, and cost per cubic yard for excavation or concrete.
[48 FR 42356, Sept. 19, 1983, as amended at 53
FR 34228, Sept. 2, 1988; 60 FR 48218, Sept. 18,
1995. Redesignated at 62 FR 272, Jan. 2, 1997,
as amended at 62 FR 51271, Sept. 30, 1997]
36.215 Special procedures for cost-reimbursement contracts for construction.
Contracting officers may use a costreimbursement contract to acquire
construction only when its use is consistent with subpart 16.3 and part 15
(see 15.404(c)(4)(i) for fee limitation on
cost-reimbursement contracts).
[48 FR 42356, Sept. 19, 1983. Redesignated at
62 FR 272, Jan. 2, 1997; 62 FR 51271, Sept. 30,
1997]
Subpart 36.3—Two-Phase DesignBuild Selection Procedures
SOURCE: 62 FR 272, Jan. 2, 1997, unless otherwise noted.
36.300
Scope of subpart.
This subpart prescribes policies and
procedures for the use of the two-phase
design-build selection procedures authorized by 10 U.S.C. 2305a and 41
U.S.C. 253m.
36.301 Use of two-phase design-build
selection procedures.
(a) During formal or informal acquisition planning (see part 7), if considering the use of two-phase design-build
selection procedures, the contracting
officer shall conduct the evaluation in
paragraph (b) of this section.
(b) The two-phase design-build selection procedures shall be used when the
contracting officer determines that
this method is appropriate, based on
the following:
(1) Three or more offers are anticipated.
(2) Design work must be performed
by offerors before developing price or
cost proposals, and offerors will incur a
substantial amount of expense in preparing offers.
(3) The following criteria have been
considered:
(i) The extent to which the project
requirements have been adequately defined.
(ii) The time constraints for delivery
of the project.
(iii) The capability and experience of
potential contractors.
(iv) The suitability of the project for
use of the two-phase selection method.
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Federal Acquisition Regulation
36.501
(v) The capability of the agency to
manage the two-phase selection process.
(vi) Other criteria established by the
head of the contracting activity.
36.302
Scope of work.
The agency shall develop, either inhouse or by contract, a scope of work
that defines the project and states the
Government’s requirements. The scope
of work may include criteria and preliminary design, budget parameters,
and schedule or delivery requirements.
If the agency contracts for development of the scope of work, the procedures in subpart 36.6 shall be used.
36.303
Procedures.
One solicitation may be issued covering both phases, or two solicitations
may be issued in sequence. Proposals
will be evaluated in Phase One to determine which offerors will submit proposals for Phase Two. One contract will
be awarded using competitive negotiation.
36.303–1
Phase One.
(a) Phase One of the solicitation(s)
shall include—
(1) The scope of work;
(2) The phase-one evaluation factors,
including—
(i) Technical approach (but not detailed design or technical information);
(ii) Technical qualifications, such
as—
(A) Specialized experience and technical competence;
(B) Capability to perform;
(C) Past performance of the offeror’s
team (including the architect-engineer
and construction members); and
(iii) Other appropriate factors (excluding cost or price related factors,
which are not permitted in Phase One);
(3) Phase-two evaluation factors (see
36.303–2); and
(4) A statement of the maximum
number of offerors that will be selected
to submit phase-two proposals. The
maximum number specified shall not
exceed five unless the contracting officer determines, for that particular solicitation, that a number greater than
five is in the Government’s interest
and is consistent with the purposes and
objectives of two-phase design-build
contracting).
(b) After evaluating phase-one proposals, the contracting officer shall select the most highly qualified offerors
(not to exceed the maximum number
specified in the solicitation in accordance with 36.303–1(a)(4)) and request
that only those offerors submit phasetwo proposals.
[62 FR 272, Jan. 2, 1997; 62 FR 10710, Mar. 10,
1997]
36.303–2 Phase Two.
(a) Phase Two of the solicitation(s)
shall be prepared in accordance with
part 15, and include phase-two evaluation factors, developed in accordance
with 15.304. Examples of potential
phase-two technical evaluation factors
include design concepts, management
approach, key personnel, and proposed
technical solutions.
(b) Phase Two of the solicitation(s)
shall require submission of technical
and price proposals, which shall be
evaluated separately, in accordance
with part 15.
[62 FR 272, Jan. 2, 1997, as amended at 62 FR
51271, Sept. 30, 1997]
Subpart 36.4—Commercial
Practices [Reserved]
Subpart 36.5—Contract Clauses
36.500 Scope of subpart.
This subpart prescribes clauses for
insertion in solicitations and contracts
for (a) construction and (b) dismantling, demolition, or removal of improvements contracts. Provisions and
clauses prescribed elsewhere in the
Federal Acquisition Regulation (FAR)
shall also be used in such solicitations
and contracts when the conditions
specified in the prescriptions for the
provisions and clauses are applicable.
36.501 Performance of work by the
contractor.
(a) To assure adequate interest in
and supervision of all work involved in
larger projects, the contractor shall be
required to perform a significant part
of the contract work with its own
forces. The contract shall express this
requirement in terms of a percentage
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36.502
48 CFR Ch. 1 (10–1–03 Edition)
that reflects the minimum amount of
work the contractor must perform with
its own forces. This percentage is (1) as
high as the contracting officer considers appropriate for the project, consistent with customary or necessary
specialty subcontracting and the complexity and magnitude of the work, and
(2) ordinarily not less than 12 percent
unless a greater percentage is required
by law or agency regulation. Specialties such as plumbing, heating, and
electrical work are usually subcontracted, and should not normally be
considered in establishing the amount
of work required to be performed by
the contractor.
(b) The contracting officer shall insert the clause at 52.236–1, Performance
of Work by the Contractor, in solicitations and contracts, except those
awarded pursuant to subparts 19.5 or
19.8, when a fixed-price construction
contract is contemplated and the contract amount is expected to exceed
$1,000,000. The contracting officer may
insert the clause on solicitations and
contracts when a fixed-price construction contract is contemplated and the
contract amount is expected to be
$1,000,000 or less.
[48 FR 42356, Sept. 19, 1983, as amended at 53
FR 43392, Oct. 26, 1988]
36.502
Differing site conditions.
The contracting officer shall insert
the clause at 52.236–2, Differing Site
Conditions, in solicitations and contracts when a fixed-price construction
contract or a fixed-price dismantling,
demolition, or removal of improvements contract is contemplated and
the contract amount is expected to exceed the simplified acquisition threshold. The contracting officer may insert
the clause in solicitations and contracts when a fixed-price construction
or a fixed-price contract for dismantling, demolition, or removal of improvements is contemplated and the
contract amount is expected to be at or
below
the
simplified
acquisition
threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.503 Site investigation and conditions affecting the work.
The contracting officer shall insert
the clause at 52.236–3, Site Investigation and Conditions Affecting the
Work, in solicitations and contracts
when a fixed-price construction contract or a fixed-price dismantling, demolition, or removal of improvements
contract is contemplated and the contract amount is expected to exceed the
simplified acquisition threshold. The
contracting officer may insert the
clause in solicitations and contracts
when a fixed-price construction or a
fixed-price contract for dismantling,
demolition, or removal of improvements is contemplated and the contract amount is expected to be at or
below
the
simplified
acquisition
threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.504 Physical data.
The contracting officer shall insert
the clause at 52.236–4, Physical Data, in
solicitations and contracts when a
fixed-price construction contract is
contemplated and physical data (e.g.,
test borings, hydrographic data, weather conditions data) will be furnished or
made available to offerors.
36.505 Material and workmanship.
The contracting officer shall insert
the clause at 52.236–5, Material and
Workmanship, in solicitations and contracts for construction contracts.
[54 FR 48989, Nov. 28, 1989]
36.506 Superintendence by the contractor.
The contracting officer shall insert
the clause at 52.236–6, Superintendence
by the Contractor, in solicitations and
contracts when a fixed-price construction contract or a fixed-price dismantling, demolition, or removal of improvements contract is contemplated
and the contract amount is expected to
exceed
the
simplified
acquisition
threshold. The contracting officer may
insert the clause in solicitations and
contracts when a fixed-price construction or a fixed-price contract for dismantling, demolition, or removal of
improvements is contemplated and the
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Federal Acquisition Regulation
36.512
contract amount is expected to be at or
below
the
simplified
acquisition
threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.507 Permits and responsibilities.
The contracting officer shall insert
the clause at 52.236–7, Permits and Responsibilities, in solicitations and contracts when a fixed-price or cost-reimbursement construction contract or a
fixed-price dismantling, demolition, or
removal of improvements contract is
contemplated.
[54 FR 48989, Nov. 28, 1989]
36.508 Other contracts.
The contracting officer shall insert
the clause at 52.236–8, Other Contracts,
in solicitations and contracts when a
fixed-price construction contract or a
fixed-price dismantling, demolition, or
removal of improvements contract is
contemplated and the contract amount
is expected to exceed the simplified acquisition threshold. The contracting
officer may insert the clause in solicitations and contracts when a fixedprice construction or a fixed-price contract for dismantling, demolition, or
removal of improvements is contemplated and the contract amount is
expected to be at or below the simplified acquisition threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.509 Protection of existing vegetation, structures, equipment, utilities, and improvements.
The contracting officer shall insert
the clause at 52.236–9, Protection of Existing Vegetation, Structures, Equipment, Utilities, and Improvements, in
solicitations and contracts when a
fixed-price construction contract or a
fixed-price dismantling, demolition, or
removal of improvements contract is
contemplated and the contract amount
is expected to exceed the simplified acquisition threshold. The contracting
officer may insert the clause in solicitations and contracts when a fixedprice construction or a fixed-price contract for dismantling, demolition, or
removal of improvements is contemplated and the contract amount is
expected to be at or below the simplified acquisition threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.510 Operations and storage areas.
The contracting officer shall insert
the clause at 52.236–10, Operations ald
Storage Areas, in solicitations and contracts when a fixed-price construction
contract or a fixed-price dismantling,
demolition, or removal of improvements contract is contemplated and
the contract amount is expected to exceed the simplified acquisition threshold. The contracting officer may insert
the clause in solicitations and contracts when a fixed-price construction
or a fixed-price contract for dismantling, demolition, or removal of improvements is contemplated and the
contract amount is expected to be at or
below
the
simplified
acquisition
threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.511 Use and possession prior to
completion.
The contracting officer shall insert
the clause at 52.236–11, Use and Possession Prior to Completion, in solicitations and contracts when a fixed-price
construction contract is contemplated
and the contract award amount is expected to exceed the simplified acquisition threshold. This clause may be inserted in solicitations and contracts
when the contract amount is expected
to be at or below the simplified acquisition threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.512 Cleaning up.
The contracting officer shall insert
the clause at 52.236–12, Cleaning Up, in
solicitations and contracts when a
fixed-price construction contract or a
fixed-price dismantling, demolition, or
removal of improvements contract is
contemplated and the contract amount
is expected to exceed the simplified acquisition threshold. The contracting
officer may insert the clause in solicitations and contracts when a fixedprice construction or a fixed-price contract for dismantling, demolition, or
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36.513
48 CFR Ch. 1 (10–1–03 Edition)
removal of improvements is contemplated and the contract amount is
expected to be at or below the simplified acquisition threshold.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.513 Accident prevention.
(a) The contracting officer shall insert the clause at 52.236–13, Accident
Prevention, in solicitations and contracts when a fixed-price construction
contract or a fixed-price dismantling,
demolition, or removal of improvements contract is contemplated and
the contract amount is expected to exceed the simplified acquisition threshold. The contracting officer may insert
the clause in solicitations and contracts when a fixed-price construction
or a fixed-price contract for dismantling, demolition, or removal of improvements is contemplated and the
contract amount is expected to be at or
below
the
simplified
acquisition
threshold. If the contract will involve
work of a long duration or hazardous
nature, the contracting officer shall
use the clause with its Alternate I.
(b) The contracting officer shall insert the clause or the clause with its
Alternate I in solicitations and contracts when a contract for services to
be performed at Government facilities
(see FAR part 37) is contemplated, and
technical representatives advise that
special precautions are appropriate.
(c) The contracting officer should inform the Occupational Safety and
Health Administration (OSHA), or
other cognizant Federal, State, or local
officials, of instances where the contractor has been notified to take immediate action to correct serious or
imminent dangers.
[48 FR 42356, Sept. 19, 1983, as amended at 56
FR 55375, Oct. 25, 1991; 60 FR 34759, July 3,
1995]
36.514 Availability and use of utility
services.
The contracting officer shall insert
the clause at 52.236–14, Availability and
Use of Utility Services, in solicitations
and contracts when a fixed-price construction contract or a fixed-price dismantling, demolition, or removal of
improvements
contract
is
contemplated, the contract is to be per-
formed on Government sites, and the
contracting officer decides (a) that the
existing utility system(s) is adequate
for the needs of both the Government
and the contractor, and (b) furnishing
it is in the Government’s interest.
When this clause is used, the contracting officer shall list the available
utilities in the contract.
36.515 Schedules for construction contracts.
The contracting officer may insert
the clause at 52.236–15, Schedules for
Construction Contracts, in solicitations and contracts when a fixed-price
construction contract is contemplated,
the contract amount is expected to exceed the simplified acquisition threshold, and the period of actual work performance exceeds 60 days. This clause
may also be inserted in such solicitations and contracts when work performance is expected to last less than
60 days and an unusual situation exists
that warrants imposition of the requirements. This clause should not be
used in the same contract with clauses
covering
other
management
approaches for ensuring that a contractor
makes adequate progress.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
36.516 Quantity surveys.
The contracting officer may insert
the clause at 52.236–16, Quantity Surveys, in solicitations and contracts
when a fixed-price construction contract providing for unit pricing of
items and for payment based on quantity surveys is contemplated. If it is
determined at a level above that of the
contracting officer that it is impracticable for Government personnel to perform the original and final surveys,
and the Government wishes the contractor to perform these surveys, the
clause shall be used with its Alternate.
36.517 Layout of work.
The contracting officer shall insert
the clause at 52.236–17, Layout of Work,
in solicitations and contracts when a
fixed-price construction contract is
contemplated and use of this clause is
appropriate due to a need for accurate
work layout and for siting verification
during work performance.
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Federal Acquisition Regulation
36.601–2
36.518 Work oversight in cost-reimbursement construction contracts.
The contracting officer shall insert
the clause at 52.236–18, Work Oversight
in Cost-Reimbursement Construction
Contracts, in solicitations and contracts when a cost-reimbursement construction contract is contemplated.
36.519 Organization and direction of
the work.
The contracting officer shall insert
the clause at 52.236–19, Organization
and Direction of the Work, in solicitations and contracts when a cost-reimbursement construction contract is
contemplated.
36.520
Contracting by negotiation.
The contracting officer shall insert
in solicitations for construction the
provision at 52.236–28, Preparation of
Offers—Construction, when contracting
by negotiation.
[62 FR 51258, Sept. 30, 1997]
36.522
Preconstruction conference.
If the contracting officer determines
it may be desirable to hold a
preconstruction conference, the contracting officer shall insert a clause
substantially the same as the clause at
52.236–26, Preconstruction Conference,
in solicitations and fixed price contracts for construction or for dismantling, demolition or removal of improvements.
[59 FR 67050, Dec. 28, 1994]
36.523
Site visit.
The contracting officer shall insert a
provision substantially the same as the
provision at 52.236–27, Site Visit (Construction), in solicitations which include the clauses at 52.236–2, Differing
Site Conditions, and 52.236–3, Site Investigations and Conditions Affecting
the Work. Alternate I may be used
when an organized site visit will be
conducted.
[59 FR 67050, Dec. 28, 1994]
36.521 Specifications and drawings for
construction.
The contracting officer shall insert
the clause at 52.236–21, Specifications
and Drawings for Construction, in solicitations and contracts when a fixedprice construction contract or a fixedprice dismantling, demolition, or removal of improvements contract is
contemplated and the contract amount
is expected to exceed the simplified acquisition threshold. The contracting
officer may insert the clause in solicitations and contracts when a fixedprice construction or a fixed-price contract for dismantling, demolition, or
removal of improvements is contemplated and the contract amount is
expected to be at or below the simplified acquisition threshold. When the
Government needs record drawings, the
contracting officer shall (a) use the
clause with its Alternate I, if reproducible shop drawings are needed, or (b)
use the clause with its Alternate II, if
reproducible shop drawings are not
needed.
[48 FR 42356, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 60 FR 34759, July 3,
1995]
Subpart 36.6—Architect-Engineer
Services
36.600
Scope of subpart.
This subpart prescribes policies and
procedures applicable to the acquisition of architect-engineer services.
36.601
Policy.
36.601–1
Public announcement.
The Government shall publicly announce all requirements for architectengineer services and negotiate contracts for these services based on the
demonstrated competence and qualifications of prospective contractors to
perform the services at fair and reasonable prices. (See Pub. L. 92–582, as
amended; 40 U.S.C. 541–544.)
[56 FR 29128, June 25, 1991]
36.601–2
Competition.
Acquisition
of
architect-engineer
services in accordance with the procedures in this subpart will constitute a
competitive procedure. (See 6.102(d)(1).)
[56 FR 29128, June 25, 1991]
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36.601–3
48 CFR Ch. 1 (10–1–03 Edition)
36.601–3 Applicable contracting procedures.
(a) For facility design contracts, the
statement of work shall require that
the architect-engineer specify, in the
construction design specifications, use
of the maximum practicable amount of
recovered materials consistent with
the performance requirements, availability, price reasonableness, and costeffectiveness. Where appropriate, the
statement of work also shall require
the architect-engineer to consider energy conservation, pollution prevention, and waste reduction to the maximum extent practicable in developing
the construction design specifications.
(b) Sources for contracts for architect-engineer services shall be selected
in accordance with the procedures in
this subpart rather than the solicitation or source selection procedures prescribed in parts 13, 14, and 15 of this
regulation.
(c) When the contract statement of
work includes both architect-engineer
services and other services, the contracting officer shall follow the procedures in this subpart if the statement
of work, substantially or to a dominant
extent, specifies performance or approval by a registered or licensed architect or engineer. If the statement of
work does not specify such performance or approval, the contracting officer shall follow the procedures in parts
13, 14, or 15.
(d) Other than ‘‘incidental services’’
as specified in the definition of architect-engineer services in Section 2.101
and in Section 36.601–4(a)(3), services
that do not require performance by a
registered or licensed architect or engineer, notwithstanding the fact that architect-engineers also may perform
those services, should be acquired pursuant to parts 13, 14, and 15.
[56 FR 29128, June 25, 1991, as amended at 60
FR 28498, May 31, 1995; 62 FR 44812, Aug. 22,
1997; 66 FR 2132, Jan. 10, 2001]
36.601–4 Implementation.
(a) Contracting officers should consider the following services to be ‘‘architect-engineer services’’ subject to
the procedures of this subpart:
(1) Professional services of an architectural or engineering nature, as defined by applicable State law, which
the State law requires to be performed
or approved by a registered architect
or engineer.
(2) Professional services of an architectural or engineering nature associated with design or construction of real
property.
(3) Other professional services of an
architectural or engineering nature or
services incidental thereto (including
studies, investigations, surveying and
mapping, tests, evaluations, consultations, comprehensive planning, program management, conceptual designs,
plans and specifications, value engineering, construction phase services,
soils engineering, drawing reviews,
preparation of operating and maintenance manuals and other related services) that logically or justifiably require performance by registered architects or engineers or their employees.
(4) Professional surveying and mapping services on an architectural or engineering nature. Surveying is considered to be an architectural and engineering service and shall be procured
pursuant to 36.601 from registered surveyors or architects and engineers.
Mapping associated with the research,
planning, development, design, construction, or alteration of real property is considered to be an architectural and engineering service and is to
be procured pursuant to 36.601. However, mapping services that are not
connected to traditionally understood
or accepted architectural and engineering activities, are not incidental to
such architectural and engineering activities or have not in themselves traditionally been considered architectural and engineering services shall be
procured pursuant to provisions in
parts 13, 14, and 15.
(b) Contracting officers may award
contracts for architect-engineer services to any firm permitted by law to
practice the professions of architecture
or engineering.
[56 FR 29128, June 25, 1991, as amended at 64
FR 32747, June 17, 1999]
36.602 Selection of firms for architectengineer contracts.
36.602–1 Selection criteria.
(a) Agencies shall evaluate each potential contractor in terms of its—
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36.602–4
(1) Professional qualifications necessary for satisfactory performance of
required services;
(2) Specialized experience and technical competence in the type of work
required, including, where appropriate,
experience in energy conservation, pollution prevention, waste reduction, and
the use of recovered materials;
(3) Capacity to accomplish the work
in the required time;
(4) Past performance on contracts
with Government agencies and private
industry in terms of cost control, quality of work, and compliance with performance schedules;
(5) Location in the general geographical area of the project and
knowledge of the locality of the
project; provided, that application of
this criterion leaves an appropriate
number of qualified firms, given the
nature and size of the project; and
(6) Acceptability under other appropriate evaluation criteria.
(b) When the use of design competition is approved by the agency head or
a designee, agencies may evaluate
firms on the basis of their conceptual
design of the project. Design competition may be used when—
(1) Unique situations exist involving
prestige projects, such as the design of
memorials and structures of unusual
national significance;
(2) Sufficient time is available for the
production and evaluation of conceptual designs; and
(3) The design competition, with its
costs, will substantially benefit the
project.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 28498, May 31, 1995; 62 FR 44812, Aug. 22,
1997; 62 FR 51379, Oct. 1, 1997]
36.602–2 Evaluation boards.
(a) When acquiring architect-engineer services, an agency shall provide
for one or more permanent or ad hoc
architect-engineer evaluation boards
(which may include preselection boards
when authorized by agency regulations) to be composed of members who,
collectively, have experience in architecture, engineering, construction, and
Government and related acquisition
matters. Members shall be appointed
from among highly qualified professional employees of the agency or
other agencies, and if authorized by
agency procedure, private practitioners
of architecture, engineering, or related
professions. One Government member
of each board shall be designated as the
chairperson.
(b) No firm shall be eligible for award
of an architect-engineer contract during the period in which any of its principals or associates are participating as
members of the awarding agency’s
evaluation board.
36.602–3
Evaluation board functions.
Under the general direction of the
head of the contracting activity, an
evaluation board shall perform the following functions:
(a) Review the current data files on
eligible firms and responses to a public
notice
concerning
the
particular
project (see 36.604).
(b) Evaluate the firms in accordance
with the criteria in 36.602–1.
(c) Hold discussions with at least
three of the most highly qualified
firms regarding concepts and the relative utility of alternative methods of
furnishing the required services.
(d) Prepare a selection report for the
agency head or other designated selection authority recommending, in order
of preference, at least three firms that
are considered to be the most highly
qualified to perform the required services. The report shall include a description of the discussions and evaluation
conducted by the board to allow the selection authority to review the considerations upon which the recommendations are based.
[48 FR 42356, Sept. 19, 1983, as amended at 54
FR 48989, Nov. 28, 1989; 60 FR 28498, May 31,
1995; 62 FR 44812, Aug. 22, 1997]
36.602–4
Selection authority.
(a) The final selection decision shall
be made by the agency head or a designated selection authority.
(b) The selection authority shall review the recommendations of the evaluation board and shall, with the advice
of appropriate technical and staff representatives, make the final selection.
This final selection shall be a listing,
in order of preference, of the firms considered most highly qualified to perform the work. If the firm listed as the
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36.602–5
48 CFR Ch. 1 (10–1–03 Edition)
most preferred is not the firm recommended as the most highly qualified
by the evaluation board, the selection
authority shall provide for the contract file a written explanation of the
reason for the preference. All firms on
the final selection list are considered
selected firms with which the contracting officer may negotiate in accordance with 36.606.
(c) The selection authority shall not
add firms to the selection report. If the
firms recommended in the report are
not deemed to be qualified or the report is considered inadequate for any
reason, the selection authority shall
record the reasons and return the report through channels to the evaluation board for appropriate revision.
(d) The board shall be promptly informed of the final selection.
36.602–5 Short selection process for
contracts not to exceed the simplified acquisition threshold.
When authorized by the agency, either or both of the short processes described in this subsection may be used
to select firms for contracts not expected to exceed the simplified acquisition threshold. Otherwise, the procedures prescribed in 36.602–3 and 36.602–4
shall be followed.
(a) Selection by the board. The board
shall review and evaluate architect-engineer firms in accordance with 36.602–
3, except that the selection report shall
serve as the final selection list and
shall be provided directly to the contracting officer. The report shall serve
as an authorization for the contracting
officer to commence negotiations in
accordance with 36.606.
(b) Selection by the chairperson of the
board. When the board decides that formal action by the board is not necessary in connection with a particular
selection, the following procedures
shall be followed:
(1) The chairperson of the board shall
perform the functions required in
36.602–3.
(2) The agency head or designated selection authority shall review the report and approve it or return it to the
chairperson for appropriate revision.
(3) Upon receipt of an approved report, the chairperson of the board shall
furnish the contracting officer a copy
of the report which will serve as an authorization for the contracting officer
to commence negotiations in accordance with 36.606.
[48 FR 42356, Sept. 19, 1983, as amended at 54
FR 48989, Nov. 28, 1989; 60 FR 34759, July 3,
1995]
36.603 Collecting data on and appraising firms’ qualifications.
(a) Establishing offices. Agencies shall
maintain offices or permanent evaluation boards, or arrange to use the offices or boards of other agencies, to receive and maintain data on firms wishing to be considered for Government
contracts. Each office or board shall be
assigned a jurisdiction by its parent
agency, making it responsible for a
geographical region or area, or a specialized type of construction.
(b) Qualifications data. To be considered for architect-engineer contracts, a
firm must file with the appropriate office or board the Standard Form 254
(SF 254), Architect-Engineer and Related
Services Questionnaire, and when applicable, the Standard Form 255 (SF 255),
Architect-Engineer and Related Services
Questionnaire for Specific Project.
(c) Data files and the classification of
firms. Under the direction of the parent
agency, offices or permanent evaluation boards shall maintain an architect-engineer qualifications data file.
These offices or boards shall review the
SF’s 254 and 255 filed, and shall classify
each firm with respect to:
(1) Location;
(2) Specialized experience;
(3) Professional capabilities; and
(4) Capacity, with respect to the
scope of work that can be undertaken.
A firm’s ability and experience in computer-assisted design should be considered, when appropriate.
(d) Currency of files. Any office or
board maintaining qualifications data
files shall review and update each file
at least once a year. This process
should include:
(1) Encouraging firms to submit annually an updated statement of qualifications and performance data on a SF
254.
(2) Reviewing the SF’s 254 and 255
and, if necessary, updating the firm’s
classification (see 36.603(c)).
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(3) Recording any contract awards
made to the firm in the past year.
(4) Assuring that the file contains a
copy of each pertinent performance report (see 36.604).
(5) Discarding any material that has
not been updated within the past three
years, if it is no longer pertinent, see
36.604(c).
(6) Posting the date of the review in
the file.
(e) Use of data files. Evaluation boards
and other appropriate Government employees, including contracting officers,
shall use data files on firms.
The reviewing official should have
knowledge of the contractor’s performance and should normally be at an organizational level above that of the
evaluating official.
(c) Distribution and use of performance
reports. Each performance report shall
be distributed in accordance with agency procedures. The report shall be included in the contract file, and copies
shall be sent to offices or boards for filing with the firm’s qualifications data
(see 36.603(d)(4)). The contracting activity shall retain the report for at least
six years after the date of the report.
36.604 Performance evaluation.
(a) Preparation of performance reports.
For each contract of more than $25,000,
performance evaluation reports shall
be prepared by the cognizant contracting activity, using the SF 1421,
Performance Evaluation (ArchitectEngineer). Performance evaluation reports may also be prepared for contracts of $25,000 or less.
(1) A report shall be prepared after
final acceptance of the architect and
engineer contract work or after contract termination. Ordinarily, the evaluating official who prepares this report
should be the person responsible for
monitoring contract performance.
(2) A report may also be prepared
after completion of the actual construction of the project.
(3) In addition to the reports in subparagraphs (a)(1) and (2) of this section,
interim reports may be prepared at any
time.
(4) If the evaluating official concludes that a contractor’s overall performance was unsatisfactory, the contractor shall be advised in writing that
a report of unsatisfactory performance
is being prepared and the basis for the
report. If the contractor submits any
written comments, the evaluating official shall include them in the report,
resolve any alleged factual discrepancies, and make appropriate changes
in the report.
(5) The head of the contracting activity shall establish procedures which ensure that fully qualified personnel prepare and review performance reports.
(b) Review of performance reports. Each
performance report shall be reviewed
to ensure that it is accurate and fair.
[48 FR 42356, Sept. 19, 1983, as amended at 56
FR 15153, Apr. 15, 1991]
36.605 Government cost estimate for
architect-engineer work.
(a) An independent Government estimate of the cost of architect-engineer
services shall be prepared and furnished to the contracting officer before
commencing negotiations for each proposed contract or contract modification expected to exceed $100,000. The estimate shall be prepared on the basis of
a detailed analysis of the required
work as though the Government were
submitting a proposal.
(b) Access to information concerning
the Government estimate shall be limited to Government personnel whose
official duties require knowledge of the
estimate. An exception to this rule
may be made during contract negotiations to allow the contracting officer
to identify a specialized task and disclose the associated cost breakdown
figures in the Government estimate,
but only to the extent deemed necessary to arrive at a fair and reasonable price. The overall amount of the
Government’s estimate shall not be
disclosed except as permitted by agency regulations.
[48 FR 42356, Sept. 19, 1983, as amended at 62
FR 44829, Aug. 22, 1997]
36.606
Negotiations.
(a) Unless otherwise specified by the
selection authority, the final selection
authorizes the contracting officer to
begin negotiations. Negotiations shall
be conducted in accordance with part
15 of this chapter, beginning with the
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36.607
48 CFR Ch. 1 (10–1–03 Edition)
most preferred firm in the final selection (see 15.404–4(c)(4)(i) on fee limitation).
(b) The contracting officer should ordinarily request a proposal from the
firm, ensuring that the solicitation
does not inadvertently preclude the
firm from proposing the use of modern
design methods.
(c) The contracting officer shall inform the firm that no construction
contract may be awarded to the firm
that designed the project, except as
provided in 36.209.
(d) During negotiations, the contracting officer should seek advance
agreement (see 31.109) on any charges
for computer-assisted design. When the
firm’s proposal does not cover appropriate modern and cost-effective design
methods (e.g., computer-assisted design), the contracting officer should
discuss this topic with the firm.
(e) Because selection of firms is based
upon qualifications, the extent of any
subcontracting is an important negotiation topic. The clause prescribed at
44.204(b), Subcontractors and Outside
Associates and Consultants (ArchitectEngineer Services) (see 52.244–4), limits
a firm’s subcontracting to firms agreed
upon during negotiations.
(f) If a mutually satisfactory contract cannot be negotiated, the contracting officer shall obtain a written
final proposal revision from the firm,
and notify the firm that negotiations
have been terminated. The contracting
officer shall then initiate negotiations
with the next firm on the final selection list. This procedure shall be continued until a mutually satisfactory
contract has been negotiated. If negotiations fail with all selected firms, the
contracting officer shall refer the matter to the selection authority who,
after consulting with the contracting
officer as to why a contract cannot be
negotiated, may direct the evaluation
board to recommend additional firms
in accordance with 36.602.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 37777, July 21, 1995; 62 FR 51271, Sept. 30,
1997; 63 FR 34060, June 22, 1998; 67 FR 6120,
Feb. 8, 2002; 67 FR 56126, Aug. 30, 2002]
36.607 Release of information on firm
selection.
(a) After final selection has taken
place, the contracting officer may release information identifying only the
architect-engineer firm with which a
contract will be negotiated for certain
work. The work should be described in
any release only in general terms, unless information relating to the work is
classified. If negotiations are terminated without awarding a contract to
the highest rated firm, the contracting
officer may release that information
and state that negotiations will be undertaken with another (named) architect-engineer firm. When an award has
been made, the contracting officer may
release award information, (see 5.401).
(b) Debriefings of successful and unsuccessful firms will be held after final
selection has taken place and will be
conducted, to the extent practicable, in
accordance
with
15.503,
15.506(b)
through (f), 15.507(c). Note that
15.506(d)(2) through (d)(5) do not apply
to architect-engineer contracts.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 42657, Aug. 16, 1995; 61 FR 69291, Dec. 31,
1996; 62 FR 51271, Sept. 30, 1997]
36.608 Liability for Government costs
resulting from design errors or deficiencies.
Architect-engineer contractors shall
be responsible for the professional
quality, technical accuracy, and coordination of all services required
under their contracts. A firm may be
liable for Government costs resulting
from errors or deficiencies in designs
furnished under its contract. Therefore, when a modification to a construction contract is required because
of an error or deficiency in the services
provided under an architect-engineer
contract, the contracting officer (with
the advice of technical personnel and
legal counsel) shall consider the extent
to which the architect-engineer contractor may be reasonably liable. The
contracting officer shall enforce the liability and collect the amount due, if
the recoverable cost will exceed the administrative cost involved or is otherwise in the Government’s interest. The
contracting officer shall include in the
contract file a written statement of the
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36.609–4
reasons for the decision to recover or
not to recover the costs from the firm.
36.609
Contract clauses.
36.609–1 Design within funding limitations.
(a) The Government may require the
architect-engineer contractor to design
the project so that construction costs
will not exceed a contractually specified dollar limit (funding limitation). If
the price of construction proposed in
response to a Government solicitation
exceeds the construction funding limitation in the architect-engineer contract, the firm shall be solely responsible for redesigning the project within
the funding limitation. These additional services shall be performed at no
increase in the price of this contract.
However, if the cost of proposed construction is affected by events beyond
the firm’s reasonable control (e.g., if
there is an increase in material costs
which could not have been anticipated,
or an undue delay by the Government
in issuing a construction solicitation),
the firm shall not be obligated to redesign at no cost to the Government. If a
firm’s design fails to meet the contractual limitation on construction cost
and the Government determines that
the firm should not redesign the
project, a written statement of the reasons for that determination shall be
placed in the contract file.
(b) The amount of the construction
funding limitation (to be inserted in
paragraph (c) of the clause at 52.236–22)
is to be established during negotiations
between the contractor and the Government. This estimated construction
contract price shall take into account
any statutory or other limitations and
exclude any allowances for Government supervision and overhead and any
amounts set aside by the Government
for contingencies. In negotiating the
amount, the contracting officer should
make available to the contractor the
information upon which the Government has based its initial construction
estimate and any subsequently acquired information that may affect the
construction costs.
(c) The contracting officer shall insert the clause at 52.236–22, Design
Within Funding Limitations, in fixed-
price architect-engineer contracts except when (1) the head of the contracting activity or a designee determines in writing that cost limitations
are secondary to performance considerations and additional project funding
can be expected, if necessary, (2) the
design is for a standard structure and
is not intended for a specific location,
or (3) there is little or no design effort
involved.
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 26903, June 28, 1985]
36.609–2 Redesign responsibility
design errors or deficiencies.
(a) Under architect-engineer contracts, contractors shall be required to
make necessary corrections at no cost
to the Government when the designs,
drawings, specifications, or other items
or services furnished contain any errors, deficiencies, or inadequacies. If,
in a given situation, the Government
does not require a firm to correct such
errors, the contracting officer shall include a written statement of the reasons for that decision in the contract
file.
(b) The contracting officer shall insert the clause at 52.236–23, Responsibility of the Architect-Engineer Contractor, in fixed-price architect-engineer contracts.
[48 FR 42356, Sept. 19, 1983, as amended at 50
FR 26903, June 28, 1985]
36.609–3 Work oversight in architectengineer contracts.
The contracting officer shall insert
the clause at 52.236–24, Work Oversight
in Architect-Engineer Contracts, in all
architect-engineer contracts.
[50 FR 26903, June 28, 1985, as amended at 64
FR 51845, Sept. 24, 1999]
The contracting officer shall insert
the clause at 52.236–25,
36.609–4 Requirements for registration
of designers.
Insert the clause at 52.236–25, Requirements for Registration of Designers, in architect-engineer contracts, except that it may be omitted when the
design will be performed—
(a) Outside the United States and its
outlying areas; or
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36.700
48 CFR Ch. 1 (10–1–03 Edition)
(b) In a State or outlying area of the
United States that does not have registration requirements for the particular field involved.
[54 FR 29282, July 11, 1989]
(c) Optional Form 347, Order for Supplies or Services, may be used for construction or dismantling, demolition,
or removal of improvements contracts
that are at or below the simplified acquisition threshold provided, that the
contracting officer includes the clauses
required (see subpart 36.5) in the simplified acquisitions (see part 13).
(d) Contracting officers may use Optional Form 1419, Abstract of Offers—
Construction, and Optional Form
1419A, Abstract of Offers—Construction, Continuation Sheet, or the automated equivalents to record offers submitted in response to a sealed bid solicitation (see 14.403) and may also use
them to record offers submitted in response to negotiated solicitations.
(e) Contracting activities shall use
Standard Form 1420, Performance Evaluation (Construction), in evaluating
and reporting on the performance of
construction contractors as required in
36.201.
36.701 Standard and optional forms
for use in contracting for construction or dismantling, demolition, or
removal of improvements.
[48 FR 42356, Sept. 19, 1983, as amended at 52
FR 19805, May 27, 1987; 54 FR 29282, July 11,
1989; 60 FR 34759, July 3, 1995; 61 FR 39198,
July 26, 1996]
[68 FR 28083, May 22, 2003]
Subpart 36.7—Standard and Optional Forms for Contracting
for Construction, Architect-Engineer Services, and Dismantling, Demolition, or Removal
of Improvements
36.700
Scope of subpart.
This subpart sets forth requirements
for the use of standard and optional
forms, prescribed in part 53, for contracting for construction, architect-engineer services, or dismantling, demolition, or removal of improvements.
These standard and optional forms are
illustrated in part 53.
(a) Contracting officers shall use
Standard Form 1417, Presolicitation
Notice (Construction Contract), to inform prospective offerors that a solicitation will be released for a proposed
construction or dismantling, demolition, or removal of improvements contract estimated to be $100,000 or more.
This form may also be used if the proposed contract is estimated to be less
than $100,000.
(b) Standard Form 1442, Solicitation,
Offer, and Award (Construction, Alteration, or Repair), shall be used to solicit and submit offers, and award construction or dismantling, demolition,
or removal of improvements contracts
expected to exceed the simplified acquisition threshold, and may be used
for contracts at or below the simplified
acquisition threshold. In all sealed bid
solicitations, or when the Government
otherwise requires a noncancellable
offer acceptance period, the contracting officer shall insert in the
blank provided in Block 13D the number of calendar days that the offer
must be available for acceptance after
the date offers are due.
36.702 Forms for use in contracting
for architect-engineer services.
(a) Contracting officers must use
Standard Form 252, Architect-Engineer
Contract, to award fixed-price contracts for architect-engineer services
when the services will be performed in
the United States or its outlying areas.
(b) The following standard forms
shall be used preliminary to award of a
contract for architect-engineer services relating to the construction, alteration, or repair of real property:
(1) Standard Form 254, Architect-Engineer and Related Services Questionnaire, shall be used to obtain information from architect-engineer firms regarding their professional qualifications.
(2) Standard Form 255, Architect-Engineer and Related Services Questionnaire for Specific Project, shall be used
to supplement the SF 254 with additional, specific information on the
firms’ qualifications for a particular
project when the contract amount is
expected to exceed the simplified acquisition threshold. This form may be
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37.000
used when the contract amount is expected to be at or below the simplified
acquisition threshold, if the contracting officer determines that its use
is appropriate.
(c) Standard Form 1421, Performance
Evaluation (Architect-Engineer), shall
be used in evaluating and reporting on
the performance of architect-engineer
contractors as required in 36.604.
[48 FR 42356, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995; 68 FR 28084, May 22,
2003]
PART 37—SERVICE CONTRACTING
Sec.
37.000
37.301
37.302
37.303
37.304
Subpart 37.4—Nonpersonal Health Care
Services
37.400
37.401
37.402
37.403
Subpart 37.1—Service Contracts—General
37.101 Definitions.
37.102 Policy.
37.103 Contracting officer responsibility.
37.104 Personal services contracts.
37.105 Competition in service contracting.
37.106 Funding and term of service contracts.
37.107 Service Contract Act of 1965.
37.108 Small business Certificate of Competency.
37.109 Services of quasi-military armed
forces.
37.110 Solicitation provisions and contract
clauses.
37.111 Extension of services.
37.112 Government use of private sector
temporaries.
37.113 Severance payments to foreign nationals.
37.113–1 Waiver of cost allowability limitations.
37.113–2 Solicitation provision and contract
clause.
37.114 Special acquisition requirements.
37.115 Uncompensated overtime.
37.115–1 Scope.
37.115–2 General policy.
37.115–3 Solicitation provision.
Subpart 37.2—Advisory and Assistance
Services
37.200 Scope of subpart.
37.201 Definition.
37.202 Exclusions.
37.203 Policy.
37.204 Guidelines for determining availability of personnel.
37.205 Contracting officer responsibilities.
Subpart 37.3—Dismantling, Demolition, or
Removal of Improvements
37.300
Scope of subpart.
Scope of subpart.
Policy.
Contracting officer responsibilities.
Contract clause.
Subpart 37.5—Management Oversight of
Service Contracts
37.500
37.501
37.502
37.503
37.504
Scope of part.
Labor standards.
Bonds or other security.
Payments.
Contract clauses.
Scope of subpart.
Definition.
Exclusions.
Agency-head responsibilities.
Contracting officials’ responsibilities.
Subpart 37.6—Performance-Based
Contracting
37.600 Scope of subpart.
37.601 General.
37.602 Elements of performance-based contracting.
37.602–1 Statements of work.
37.602–2 Quality assurance.
37.602–3 Selection procedures.
37.602–4 Contract type.
37.602–5 Follow-on and repetitive requirements.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42365, Sept. 19, 1983, unless
otherwise noted.
37.000
Scope of part.
This part prescribes policy and procedures that are specific to the acquisition and management of services by
contract. This part applies to all contracts for services regardless of the
type of contract or kind of service
being acquired. This part requires the
use of performance-based contracting
to the maximum extent practicable
and prescribes policies and procedures
for use of performance-based contracting methods (see subpart 37.6). Additional guidance for research and development services is in part 35; architect-engineering services is in part 36;
information technology is in part 39;
and transportation services is in part
47. Parts 35, 36, 39, and 47 take precedence over this part in the event of inconsistencies. This part includes, but is
not limited to, contracts for services to
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37.101
48 CFR Ch. 1 (10–1–03 Edition)
which the Service Contract Act of 1965,
as amended, applies (see subpart 22.10).
[62 FR 12694, Mar. 17, 1997, as amended at 62
FR 44815, Aug. 22, 1997]
Subpart 37.1—Service Contracts—
General
37.101 Definitions.
As used in this part—
Child care services means child protective services (including the investigation of child abuse and neglect reports), social services, health and mental health care, child (day) care, education (whether or not directly involved in teaching), foster care, residential care, recreational or rehabilitative programs, and detention, correctional, or treatment services.
Nonpersonal services contract means a
contract under which the personnel
rendering the services are not subject,
either by the contract’s terms or by
the manner of its administration, to
the supervision and control usually
prevailing in relationships between the
Government and its employees.
Performance-based contracting means
structuring all aspects of an acquisition around the purpose of the work to
be performed as opposed to either the
manner by which the work is to be performed or broad and imprecise statements of work.
Service contract means a contract that
directly engages the time and effort of
a contractor whose primary purpose is
to perform an identifiable task rather
than to furnish an end item of supply.
A service contract may be either a nonpersonal or personal contract. It can
also cover services performed by either
professional or nonprofessional personnel whether on an individual or organizational basis. Some of the areas
in which service contracts are found include the following:
(1) Maintenance, overhaul, repair,
servicing, rehabilitation, salvage, modernization, or modification of supplies,
systems, or equipment.
(2) Routine recurring maintenance of
real property.
(3) Housekeeping and base services.
(4) Advisory and assistance services.
(5) Operation of Government-owned
equipment, facilities, and systems.
(6) Communications services.
(7) Architect-Engineering (see subpart 36.6).
(8) Transportation and related services (see part 47).
(9) Research and development (see
part 35).
[48 FR 42365, Sept. 19, 1983, as amended at 53
FR 43392, Oct. 26, 1988; 59 FR 67051, Dec. 28,
1994; 62 FR 44815, Aug. 22, 1997; 66 FR 2133,
Jan. 10, 2001]
37.102 Policy.
(a) Performance-based contracting
(see Subpart 37.6) is the preferred
method for acquiring services (Public
Law 106–398, section 821). When acquiring services, including those acquired
under
supply
contracts,
agencies
must—
(1)
Use
performance-based
contracting methods to the maximum extent practicable, except for—
(i) Architect-engineer services acquired in accordance with 40 U.S.C. 541–
544 (see part 36);
(ii) Construction (see part 36);
(iii) Utility services (see part 41); or
(iv) Services that are incidental to
supply purchases; and
(2) Use the following order of precedence (Public Law 106–398, section
821(a));
(i) A firm-fixed price performancebased contract or task order.
(ii) A performance-based contract or
task order that is not firm-fixed price.
(iii) A contract or task order that is
not performance-based.
(b) Agencies shall generally rely on
the private sector for commercial services (see OMB Circular No. A–76, Performance of Commercial Activities and
subpart 7.3).
(c) Agencies shall not award a contract for the performance of an inherently governmental function (see subpart 7.5).
(d) Non-personal service contracts
are proper under general contracting
authority.
(e) Agency program officials are responsible for accurately describing the
need to be filled, or problem to be resolved, through service contracting in
a manner that ensures full understanding and responsive performance
by contractors and, in so doing, should
obtain assistance from contracting officials, as needed.
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Federal Acquisition Regulation
37.104
(f) Agencies shall establish effective
management practices in accordance
with Office of Federal Procurement
Policy (OFPP) Policy Letter 93–1, Management Oversight of Service Contracting, to prevent fraud, waste, and
abuse in service contracting.
(g) Services are to be obtained in the
most cost-effective manner, without
barriers to full and open competition,
and free of any potential conflicts of
interest.
(h) Agencies shall ensure that sufficiently trained and experienced officials are available within the agency to
manage and oversee the contract administration function.
[61 FR 2630, Jan. 26, 1996, as amended at 62
FR 12694, Mar. 17, 1997; 62 FR 44815, Aug. 22,
1997; 66 FR 22083, May 2, 2001]
37.103 Contracting
bility.
officer
responsi-
(a) The contracting officer is responsible for ensuring that a proposed contract for services is proper. For this
purpose the contracting officer shall—
(1) Determine whether the proposed
service is for a personal or nonpersonal
services contract using the definitions
at 2.101 and 37.101 and the guidelines in
37.104;
(2) In doubtful cases, obtain the review of legal counsel; and
(3) Document the file (except as provided in paragraph (b) below) with (i)
the opinion of legal counsel, if any, (ii)
a memorandum of the facts and rationale supporting the conclusion that the
contract does not violate the provisions in 37.104(b), and (iii) any further
documentation that the contracting
agency may require.
(b) Nonpersonal services contracts
are exempt from the requirements of
subparagraph (a)(3) above.
(c) Ensure that performance-based
contracting methods are used to the
maximum extent practicable when acquiring services.
(d) Ensure that contracts for child
care services include requirements for
criminal history background checks on
employees who will perform child care
services under the contract in accord-
ance with 42 U.S.C. 13041, as amended,
and agency procedures.
[48 FR 42365, Sept. 19, 1983, as amended at 55
FR 36796, Sept. 6, 1990; 59 FR 67051, Dec. 28,
1994; 62 FR 233, Jan. 2, 1997; 62 FR 44815, Aug.
22, 1997; 62 FR 51379, Oct. 1, 1997; 66 FR 2133,
Jan. 10, 2001]
37.104 Personal services contracts.
(a) A personal services contract is
characterized by the employer-employee relationship it creates between
the Government and the contractor’s
personnel. The Government is normally required to obtain its employees
by direct hire under competitive appointment or other procedures required
by the civil service laws. Obtaining
personal services by contract, rather
than by direct hire, circumvents those
laws unless Congress has specifically
authorized acquisition of the services
by contract.
(b) Agencies shall not award personal
services contracts unless specifically
authorized by statute (e.g., 5 U.S.C.
3109) to do so.
(c)(1) An employer-employee relationship under a service contract occurs when, as a result of (i) the contract’s terms or (ii) the manner of its
administration during performance,
contractor personnel are subject to the
relatively continuous supervision and
control of a Government officer or employee. However, giving an order for a
specific article or service, with the
right to reject the finished product or
result, is not the type of supervision or
control that converts an individual
who is an independent contractor (such
as a contractor employee) into a Government employee.
(2) Each contract arrangement must
be judged in the light of its own facts
and circumstances, the key question
always being: Will the Government exercise relatively continuous supervision and control over the contractor
personnel performing the contract?
The sporadic, unauthorized supervision
of only one of a large number of contractor employees might reasonably be
considered not relevant, while relatively continuous Government supervision of a substantial number of contractor employees would have to be
taken strongly into account (see (d)
below).
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37.105
48 CFR Ch. 1 (10–1–03 Edition)
(d) The following descriptive elements should be used as a guide in assessing whether or not a proposed contract is personal in nature:
(1) Performance on site.
(2) Principal tools and equipment furnished by the Government.
(3) Services are applied directly to
the integral effort of agencies or an organizational subpart in furtherance of
assigned function or mission.
(4) Comparable services, meeting
comparable needs, are performed in the
same or similar agencies using civil
service personnel.
(5) The need for the type of service
provided can reasonably be expected to
last beyond one year.
(6) The inherent nature of the service, or the manner in which it is provided reasonably requires directly or
indirectly, Government direction or supervision of contractor employees in
order to—
(i) Adequately protect the Government’s interest;
(ii) Retain control of the function involved; or
(iii) Retain full personal responsibility for the function supported in a
duly authorized Federal officer or employee.
(e) When specific statutory authority
for a personal service contract is cited,
obtain the review and opinion of legal
counsel.
(f) Personal services contracts for the
services of individual experts or consultants are limited by the Classification Act. In addition, the Office of Personnel Management has established requirements which apply in acquiring
the personal services of experts or consultants in this manner (e.g., benefits,
taxes, conflicts of interest). Therefore,
the contracting officer shall effect necessary coordination with the cognizant
civilian personnel office.
(b) The provisions of statute and part
6 of this regulation requiring competition apply fully to service contracts.
The method of contracting used to provide for competition may vary with the
type of service being acquired and may
not necessarily be limited to price
competition.
[48 FR 42365, Sept. 19, 2001, as amended at 66
FR 2133, Jan. 10, 2001]
The Service Contract Act of 1965 (41
U.S.C. 351–357) (the Act) provides for
minimum wages and fringe benefits as
well as other conditions of work under
certain types of service contracts (see
subpart 22.10). Whether or not the Act
applies to a specific service contract
will be determined by the definitions
and exceptions given in the Act, or implementing regulations.
37.105 Competition
tracting.
in
service
con-
(a) Unless otherwise provided by statute, contracts for services shall be
awarded through sealed bidding whenever the conditions in 6.401(a) are met
(except see 6.401(b)).
[50 FR 1744, Jan. 11, 1985, and 50 FR 52429,
Dec. 23, 1985]
37.106 Funding and term of service
contracts.
(a) When contracts for services are
funded by annual appropriations, the
term of contracts so funded shall not
extend beyond the end of the fiscal
year of the appropriation except when
authorized by law (see paragraph (b) of
this section for certain service contracts, 32.703–2 for contracts conditioned upon availability of funds, and
32.703–3 for contracts crossing fiscal
years).
(b) The head of an executive agency,
except NASA, may enter into a contract, exercise an option, or place an
order under a contract for severable
services for a period that begins in one
fiscal year and ends in the next fiscal
year if the period of the contract
awarded, option exercised, or order
placed does not exceed one year (10
U.S.C. 2410a and 41 U.S.C. 253l). Funds
made available for a fiscal year may be
obligated for the total amount of an
action entered into under this authority.
(c)
Agencies
with
statutory
multiyear authority shall consider the
use of this authority to encourage and
promote economical business operations when acquiring services.
[60 FR 37778, July 21, 1995, as amended at 62
FR 44815, Aug. 22, 1997; 63 FR 58601, Oct. 30,
1998]
37.107
Service Contract Act of 1965.
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Federal Acquisition Regulation
37.112
37.108 Small business Certificate of
Competency.
In those service contracts for which
the Government requires the highest
competence obtainable, as evidenced in
a solicitation by a request for a technical/management proposal and a resultant
technical
evaluation
and
source selection, the small business
Certificate of Competency procedures
may not apply (see subpart 19.6).
37.109 Services
of
quasi-military
armed forces.
Contracts with Pinkerton Detective
Agencies or similar organizations are prohibited by 5 U.S.C. 3108. This prohibition applies only to contracts with organizations that offer quasi-military
armed forces for hire, or with their employees, regardless of the contract’s
character. An organization providing
guard or protective services does not
thereby become a quasi-military armed
force, even though the guards are
armed or the organization provides
general investigative or detective services. (See 57 Comp. Gen. 524).
37.110 Solicitation provisions and contract clauses.
(a) The contracting officer shall insert the provision at 52.237–1, Site
Visit, in solicitations for services to be
performed on Government installations, unless the solicitation is for construction.
(b) The contracting officer shall insert the clause at 52.237–2, Protection
of Government Buildings, Equipment,
and Vegetation, in solicitations and
contracts for services to be performed
on Government installations, unless a
construction contract is contemplated.
(c) The contracting officer may insert the clause at 52.237–3, Continuity
of Services, in solicitations and contracts for services, when—
(1) The services under the contract
are considered vital to the Government
and must be continued without interruption and when, upon contract expiration, a successor, either the Government or another contractor, may continue them; and
(2) The Government anticipates difficulties during the transition from one
contractor to another or to the Government. Examples of instances where
use of the clause may be appropriate
are services in remote locations or
services requiring personnel with special security clearances.
(d) See 9.508 regarding the use of an
appropriate provision and clause concerning the subject of conflict-of-interest, which may at times be significant
in solicitations and contracts for services.
(e) The contracting officer shall also
insert in solicitations and contracts for
services the provisions and clauses prescribed elsewhere in the FAR, as appropriate for each acquisition, depending
on the conditions that are applicable.
[48 FR 42365, Sept. 19, 1983, as amended at 55
FR 52795, Dec. 21, 1990; 57 FR 60584, Dec. 21,
1992]
37.111
Extension of services.
Award of contracts for recurring and
continuing service requirements are
often delayed due to circumstances beyond the control of contracting offices.
Examples of circumstances causing
such delays are bid protests and alleged
mistakes in bid. In order to avoid negotiation of short extensions to existing
contracts, the contracting officer may
include an option clause (see 17.208(f))
in solicitations and contracts which
will enable the Government to require
continued performance of any services
within the limits and at the rates specified in the contract. However, these
rates may be adjusted only as a result
of revisions to prevailing labor rates
provided by the Secretary of Labor.
The option provision may be exercised
more than once, but the total extension of performance thereunder shall
not exceed 6 months.
[54 FR 29282, July 11, 1989]
37.112 Government use of private sector temporaries.
Contracting officers may enter into
contracts with temporary help service
firms for the brief or intermittent use
of the skills of private sector temporaries. Services furnished by temporary help firms shall not be regarded
or treated as personal services. These
services shall not be used in lieu of regular recruitment under civil service
laws or to displace a Federal employee.
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37.113
48 CFR Ch. 1 (10–1–03 Edition)
Acquisition of these services shall comply with the authority, criteria, and
conditions of 5 CFR part 300, subpart E,
Use of Private Sector Temporaries, and
agency procedures.
[56 FR 55380, Oct. 25, 1991]
37.113 Severance payments to foreign
nationals.
37.113–1 Waiver of cost allowability
limitations.
(a) The head of the agency may waive
the 31.205–6(g)(6) cost allowability limitations on severance payments to foreign nationals for contracts that—
(1) Provide significant support services for (i) members of the armed forces
stationed or deployed outside the
United States, or (ii) employees of an
executive agency posted outside the
United States; and
(2) Will be performed in whole or in
part outside the United States.
(b) Waivers can be granted only before contract award.
(c) Waivers cannot be granted for—
(1) Military banking contracts, which
are covered by 10 U.S.C. 2324(e)(2); or
(2) Severance payments made by a
contractor to a foreign national employed by the contractor under a DOD
service contract in the Republic of the
Philippines, if the discontinuation of
the foreign national is the result of the
termination of basing rights of the
United States military in the Republic
of the Philippines (section 1351(b) of
Public Law 102–484, 10 U.S.C. 1592,
note).
[60 FR 42661, Aug. 16, 1995, as amended at 68
FR 43867, July 24, 2003]
37.113–2 Solicitation
contract clause.
provision
and
(a) Use the provision at 52.237–8, Restriction on Severance Payments to
Foreign Nationals, in all solicitations
that meet the criteria in 37.113–1(a), except for those excluded by 37.113–1(c).
(b) When the head of an agency has
granted a waiver pursuant to 37.113–1,
use the clause at 52.237–9, Waiver of
Limitation on Severance Payments to
Foreign Nationals.
[60 FR 42261, Aug. 16, 1995, as amended at 68
FR 43867, July 24, 2003]
37.114 Special
acquisition
requirements.
Contracts for services which require
the contractor to provide advice, opinions, recommendations, ideas, reports,
analyses, or other work products have
the potential for influencing the authority, accountability, and responsibilities of Government officials.
These contracts require special management attention to ensure that they
do not result in performance of inherently governmental functions by the
contractor and that Government officials properly exercise their authority.
Agencies must ensure that—
(a) A sufficient number of qualified
Government employees are assigned to
oversee contractor activities, especially those that involve support of
government policy or decision making.
During performance of service contracts, the functions being performed
shall not be changed or expanded to become inherently governmental.
(b) A greater scrutiny and an appropriate enhanced degree of management
oversight is exercised when contracting
for functions that are not inherently
governmental but closely support the
performance of inherently governmental functions (see 7.503(c)).
(c) All contractor personnel attending meetings, answering Government
telephones, and working in other situations where their contractor status is
not obvious to third parties are required to identify themselves as such
to avoid creating an impression in the
minds of members of the public or Congress that they are Government officials, unless, in the judgment of the
agency, no harm can come from failing
to identify themselves. They must also
ensure that all documents or reports
produced by contractors are suitably
marked as contractor products or that
contractor participation is appropriately disclosed.
[61 FR 2630, Jan. 26, 1996]
37.115
Uncompensated overtime.
37.115–1 Scope.
The policies in this section are based
on Section 834 of Public Law 101–510 (10
U.S.C. 2331).
[62 FR 44815, Aug. 22, 1997]
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Federal Acquisition Regulation
37.115–2
37.202
[62 FR 44815, Aug. 22, 1997, as amended at 64
FR 51842, Sept. 24, 1999]
37.115–3
Subpart 37.2—Advisory and
Assistance Services
General policy.
(a) Use of uncompensated overtime is
not encouraged.
(b) When professional or technical
services are acquired on the basis of
the number of hours to be provided,
rather than on the task to be performed, the solicitation shall require
offerors to identify uncompensated
overtime hours and the uncompensated
overtime rate for direct charge Fair
Labor Standards Act—exempt personnel included in their proposals and
subcontractor proposals. This includes
uncompensated overtime hours that
are in indirect cost pools for personnel
whose regular hours are normally
charged direct.
(c) Contracting officers must ensure
that the use of uncompensated overtime in contracts to acquire services
on the basis of the number of hours
provided will not degrade the level of
technical expertise required to fulfill
the Government’s requirements (see
15.305 for competitive negotiations and
15.404–1(d) for cost realism analysis).
When acquiring these services, contracting officers must conduct a risk
assessment and evaluate, for award on
that basis, any proposals received that
reflect factors such as:
(1) Unrealistically low labor rates or
other costs that may result in quality
or service shortfalls; and
(2) Unbalanced distribution of uncompensated overtime among skill levels and its use in key technical positions.
Solicitation provision.
The contracting officer shall insert
the provision at 52.237–10, Identification of Uncompensated Overtime, in all
solicitations valued above the simplified acquisition threshold, for professional or technical services to be acquired on the basis of the number of
hours to be provided.
[62 FR 44815, Aug. 22, 1997]
SOURCE: 60 FR 49722, Sept. 26, 1995, unless
otherwise noted.
37.200
Scope of subpart.
This subpart prescribes policies and
procedures for acquiring advisory and
assistance services by contract. The
subpart applies to contracts, whether
made with individuals or organizations, that involve either personal or
nonpersonal services.
37.201
Definition.
Covered personnel means—
(1) An officer or an individual who is
appointed in the civil service by one of
the following acting in an official capacity:
(i) The President;
(ii) A Member of Congress;
(iii) A member of the uniformed services;
(iv) An individual who is an employee
under 5 U.S.C. 2105;
(v) The head of a Government-controlled corporation; or
(vi) An adjutant general appointed by
the Secretary concerned under 32
U.S.C. 709(c).
(2) A member of the Armed Services
of the United States.
(3) A person assigned to a Federal
agency who has been transferred to another position in the competitive service in another agency.
[60 FR 49722, Sept. 26, 1995, as amended at 65
FR 24320, Apr. 25, 2000; 66 FR 2133, Jan. 10,
2001]
37.202
Exclusions.
The following activities and programs are excluded or exempted from
the definition of advisory or assistance
services:
(a) Routine information technology
services unless they are an integral
part of a contract for the acquisition of
advisory and assistance services.
(b) Architectural and engineering
services as defined in the Brooks Architect-Engineers Act (Section 901 of the
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37.203
48 CFR Ch. 1 (10–1–03 Edition)
Federal Property and Administrative
Services Act of 1949, 40 U.S.C. 541).
(c) Research on theoretical mathematics and basic research involving
medical, biological, physical, social,
psychological, or other phenomena.
[60 FR 49722, Sept. 26, 1995, as amended at 61
FR 41470, Aug. 8, 1996]
37.203 Policy.
(a) The acquisition of advisory and
assistance services is a legitimate way
to improve Government services and
operations. Accordingly, advisory and
assistance services may be used at all
organizational levels to help managers
achieve maximum effectiveness or
economy in their operations.
(b) Subject to 37.205, agencies may
contract for advisory and assistance
services, when essential to the agency’s
mission, to—
(1) Obtain outside points of view to
avoid too limited judgment on critical
issues;
(2) Obtain advice regarding developments in industry, university, or foundation research;
(3) Obtain the opinions, special
knowledge, or skills of noted experts;
(4) Enhance the understanding of,
and develop alternative solutions to,
complex issues;
(5) Support and improve the operation of organizations; or
(6) Ensure the more efficient or effective operation of managerial or hardware systems.
(c) Advisory and assistance services
shall not be—
(1) Used in performing work of a policy, decision-making, or managerial
nature which is the direct responsibility of agency officials;
(2) Used to bypass or undermine personnel ceilings, pay limitations, or
competitive employment procedures;
(3) Contracted for on a preferential
basis to former Government employees;
(4) Used under any circumstances
specifically to aid in influencing or enacting legislation; or
(5) Used to obtain professional or
technical advice which is readily available within the agency or another Federal agency.
(d) Limitation on payment for advisory
and assistance services. Contractors may
not be paid for services to conduct
evaluations or analyses of any aspect
of a proposal submitted for an initial
contract award unless—
(1) Neither covered personnel from
the requesting agency, nor from another agency, with adequate training
and capabilities to perform the required proposal evaluation, are readily
available and a written determination
is made in accordance with 37.204;
(2) The contractor is a FederallyFunded Research and Development
Center (FFRDC) as authorized in Section 23 of the Office of Federal Procurement Policy (OFPP) Act as amended
(41 U.S.C. 419) and the work placed
under the FFRDCOs contract meets
the criteria of 35.017–3; or
(3) Such functions are otherwise authorized by law.
37.204 Guidelines
for
determining
availability of personnel.
(a) The head of an agency shall determine, for each evaluation or analysis of
proposals, if sufficient personnel with
the requisite training and capabilities
are available within the agency to perform the evaluation or analysis of proposals submitted for the acquisition.
(b) If, for a specific evaluation or
analysis, such personnel are not available within the agency, the head of the
agency shall—
(1) Determine which Federal agencies
may have personnel with the required
training and capabilities; and
(2) Consider the administrative cost
and time associated with conducting
the search, the dollar value of the procurement, other costs, such as travel
costs involved in the use of such personnel, and the needs of the Federal
agencies to make management decisions on the best use of available personnel in performing the agency’s mission.
(c) If the supporting agency agrees to
make the required personnel available,
the agencies shall execute an agreement for the detail of the supporting
agency’s personnel to the requesting
agency.
(d) If the requesting agency, after
reasonable attempts to obtain personnel with the required training and
capabilities, is unable to identify such
personnel, the head of the agency may
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Federal Acquisition Regulation
37.304
make the determination required by
37.203.
(e) An agency may make a determination regarding the availability of
covered personnel for a class of proposals for which evaluation and analysis would require expertise so unique
or specialized that it is not reasonable
to expect such personnel to be available.
37.205 Contracting officer responsibilities.
The contracting officer shall ensure
that the determination required in accordance with the guidelines at 37.204
has been made prior to issuing a solicitation.
Subpart 37.3—Dismantling, Demolition, or Removal of Improvements
37.300
Scope of subpart.
This subpart prescribes procedures
for contracting for dismantling or demolition of buildings, ground improvements, and other real property structures and for the removal of such
structures or portions of them (hereafter referred to as dismantling, demolition, or removal of improvements).
37.301
Labor standards.
Contracts for dismantling, demolition, or removal of improvements are
subject to either the Service Contract
Act (41 U.S.C. 351–358) or the DavisBacon Act (40 U.S.C. 276a—276a–7). If
the contract is solely for dismantling,
demolition, or removal of improvements, the Service Contract Act applies unless further work which will result in the construction, alteration, or
repair of a public building or public
work at that location is contemplated.
If such further construction work is intended, even though by separate contract, then the Davis-Bacon Act applies
to the contract for dismantling, demolition, or removal.
37.302
Bonds or other security.
When a contract is solely for dismantling, demolition, or removal of improvements, the Miller Act (40 U.S.C.
270a–270f) (see 28.102) does not apply.
However, the contracting officer may
require the contractor to furnish a performance bond or other security (see
28.103) in an amount that the contracting officer considers adequate to
(a) ensure completion of the work, (b)
protect property to be retained by the
Government, (c) protect property to be
provided as compensation to the contractor, and (d) protect the Government against damage to adjoining
property.
37.303
Payments.
(a) The contract may provide that
the (1) Government pay the contractor
for the dismantling or demolition of
structures or (2) contractor pay the
Government for the right to salvage
and remove the materials resulting
from the dismantling or demolition operation.
(b) The contracting officer shall consider the usefulness to the Government
of all salvageable property. Any of the
property that is more useful to the
Government than its value as salvage
to the contractor should be expressly
designated in the contract for retention by the Government. The contracting officer shall determine the
fair market value of any property not
so designated, since the contractor will
get title to this property, and its value
will therefore be important in determining what payment, if any, shall be
made to the contractor and whether
additional compensation will be made
if the contract is terminated.
37.304
Contract clauses.
(a) The contracting officer shall insert the clause at 52.237–4, Payment by
Government to Contractor, in solicitations and contracts solely for dismantling, demolition, or removal of improvements whenever the contracting
officer determines that the Government shall make payment to the contractor in addition to any title to property that the contractor may receive
under the contract. If the contracting
officer determines that all material resulting from the dismantling or demolition work is to be retained by the
Government, use the basic clause with
its Alternate I.
(b) The contracting officer shall insert the clause at 52.237–5, Payment by
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37.400
48 CFR Ch. 1 (10–1–03 Edition)
Contractor to Government in solicitations and contracts for dismantling,
demolition, or removal of improvements whenever the contractor is to
receive title to dismantled or demolished property and a net amount of
compensation is due to the Government, except if the contracting officer
determines that it would be advantageous to the Government for the contractor to pay in increments and the
government to transfer title to the
contractor for increments of property
only upon receipt of those payments.
(c) The contracting officer shall insert the clause at 52.237–6, Incremental
Payment by Contractor to Government, in solicitations and contracts for
dismantling, demolition, or removal of
improvements if (1) the contractor is to
receive title to dismantled or demolished property and a net amount of
compensation is due the Government,
and (2) the contracting officer determines that it would be advantageous to
the Government for the contractor to
pay in increments, and for the Government to transfer title to the contractor
for increments of property only upon
receipt of those payments. This determination may be appropriate, for example, if it encourages greater competition or participation of small business concerns.
Subpart 37.4—Nonpersonal Health
Care Services
SOURCE: 54 FR 5056, Jan. 31, 1989, unless
otherwise noted.
37.400 Scope of subpart.
This subpart prescribes policies and
procedures for obtaining health care
services of physicians, dentists and
other health care providers by nonpersonal services contracts, as defined in
37.101.
37.401 Policy.
Agencies may enter into nonpersonal
health care services contracts with
physicians, dentists and other health
care providers under authority of 10
U.S.C. 2304 and 41 U.S.C. 253. Each contract shall—
(a) State that the contract is a nonpersonal health care services contract,
as defined in 37.101, under which the
contractor is an independent contractor;
(b) State that the Government may
evaluate the quality of professional
and administrative services provided,
but retains no control over the medical, professional aspects of services
rendered (e.g., professional judgments,
diagnosis for specific medical treatment);
(c) Require that the contractor indemnify the Government for any liability producing act or omission by the
contractor, its employees and agents
occurring during contract performance;
(d) Require that the contractor maintain medical liability insurance, in a
coverage amount acceptable to the
contracting officer, which is not less
than the amount normally prevailing
within the local community for the
medical specialty concerned; and
(e) State that the contractor is required to ensure that its subcontracts
for provisions of health care services,
contain the requirements of the clause
at 52.237–7, including the maintenance
of medical liability insurance.
37.402 Contracting officer responsibilities.
Contracting officers shall obtain evidence of insurability concerning medical liability insurance from the apparent successful offeror prior to contract
award and shall obtain evidence of insurance demonstrating the required
coverage prior to commencement of
performance.
[62 FR 237, Jan. 2, 1997]
37.403
Contract clause.
The contracting officer shall insert
the clause at 52.237–7, Indemnification
and Medical Liability Insurance, in solicitations and contracts for nonpersonal health care services. The contracting officer may include the clause
in bilateral purchase orders for nonpersonal health care services awarded
under the procedures in part 13.
Subpart 37.5—Management
Oversignt of Service Contracts
SOURCE: 62 FR 12694, Mar. 17, 1997, unless
otherwise noted.
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Federal Acquisition Regulation
37.601
37.500 Scope of subpart.
This subpart establishes responsibilities for implementing Office of Federal Procurement Policy (OFPP) Policy Letter 93–1, Management Oversight
of Service Contracting.
37.501 Definition.
Best practices, as used in this subpart,
means techniques that agencies may
use to help detect problems in the acquisition, management, and administration of service contracts. Best practices are practical techniques gained
from experience that agencies may use
to improve the procurement process.
37.502 Exclusions.
(a) This subpart does not apply to
services that are
(1) Obtained through personnel appointments and advisory committees;
(2) Obtained through personal service
contracts authorized by statute;
(3) For construction as defined in
2.101; or
(4) Obtained through interagency
agreements where the work is being
performed by in-house Federal employees.
(b) Services obtained under contracts
below
the
simplified
acquisition
threshold and services incidental to
supply contracts also are excluded
from the requirements of this subpart.
However, good management practices
and contract administration techniques should be used regardless of the
contracting method.
[62 FR 12694, Mar. 17, 1997, as amended at 66
FR 2133, Jan. 10, 2001]
37.503 Agency-head responsibilities.
The agency head or designee should
ensure that—
(a) Requirements for services are
clearly defined and appropriate performance standards are developed so
that the agency’s requirements can be
understood by potential offerors and
that performance in accordance with
contract terms and conditions will
meet the agency’s requirements;
(b) Service contracts are awarded and
administered in a manner that will
provide the customer its supplies and
services within budget and in a timely
manner;
(c) Specific procedures are in place
before contracting for services to ensure compliance with OFPP Policy
Letter 92–1, Inherently Governmental
Functions; and
(d) Strategies are developed and necessary staff training is initiated to ensure effective implementation of the
policies in 37.102.
[62 FR 12694, Mar. 17, 1997, as amended at 65
FR 36014, June 6, 2000]
37.504 Contracting
sibilities.
officials’
Contracting officials should ensure
that ‘‘best practices’’ techniques are
used when contracting for services and
in contract management and administration (see OFPP Policy Letter 93–1).
Subpart 37.6—Performance-Based
Contracting
SOURCE: 62 FR 44815, Aug. 22, 1997, unless
otherwise noted.
37.600
Scope of subpart.
This subpart prescribes policies and
procedures for use of performancebased contracting methods.
[62 FR 44815, Aug. 22, 1997, as amended at 65
FR 36014, June 6, 2000]
37.601
General.
Performance-based
contracting
methods are intended to ensure that
required performance quality levels are
achieved and that total payment is related to the degree that services performed meet contract standards. Performance-based contracts—
(a) Describe the requirements in
terms of results required rather than
the methods of performance of the
work;
(b) Use measurable performance
standards (i.e., terms of quality, timeliness, quantity, etc.) and quality assurance surveillance plans (see 46.103(a)
and 46.401(a));
(c) Specify procedures for reductions
of fee or for reductions to the price of
a fixed-price contract when services
are not performed or do not meet contract requirements (see 46.407); and
(d) Include performance incentives
where appropriate.
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37.602
48 CFR Ch. 1 (10–1–03 Edition)
37.602 Elements of performance-based
contracting.
37.602–1 Statements of work.
(a) Generally, statements of work
shall define requirements in clear, concise language identifying specific work
to be accomplished. Statements of
work must be individually tailored to
consider the period of performance, deliverable items, if any, and the desired
degree of performance flexibility (see
11.106). In the case of task order contracts, the statement of work for the
basic contract need only define the
scope of the overall contract (see
16.504(a)(4)(iii)). The statement of work
for each task issued under a task order
contract shall comply with paragraph
(b) of this subsection. To achieve the
maximum benefits of performancebased contracting, task order contracts
should be awarded on a multiple award
basis (see 16.504(c) and 16.505(b)).
(b) When preparing statements of
work, agencies shall, to the maximum
extent practicable—
(1) Describe the work in terms of
‘‘what’’ is to be the required output
rather than either ‘‘how’’ the work is
to be accomplished or the number of
hours to be provided (see 11.002(a)(2)
and 11.101);
(2) Enable assessment of work performance against measurable performance standards;
(3) Rely on the use of measurable performance standards and financial incentives in a competitive environment
to encourage competitors to develop
and institute innovative and cost-effective methods of performing the work;
and
(4) Avoid combining requirements
into a single acquisition that is too
broad for the agency or a prospective
contractor to manage effectively.
[48 FR 42365, Sept. 19, 1983, as amended at 64
FR 32742, June 17, 1999]
37.602–2 Quality assurance.
Agencies shall develop quality assurance surveillance plans when acquiring
services (see 46.103 and 46.401(a)). These
plans shall recognize the responsibility
of the contractor (see 46.105) to carry
out its quality control obligations and
shall contain measurable inspection
and acceptance criteria corresponding
to the performance standards contained in the statement of work. The
quality assurance surveillance plans
shall focus on the level of performance
required by the statement of work,
rather than the methodology used by
the contractor to achieve that level of
performance.
37.602–3
Selection procedures.
Agencies shall use competitive negotiations when appropriate to ensure selection of services that offer the best
value to the Government, cost and
other factors considered (see 15.304).
[62 FR 44815, Aug. 22, 1997, as amended at 63
FR 70292, Dec. 18, 1998]
37.602–4
Contract type.
Contract types most likely to motivate contractors to perform at optimal
levels shall be chosen (see subpart 16.1
and, for research and development contracts, see 35.006). To the maximum extent practicable, performance incentives, either positive or negative or
both, shall be incorporated into the
contract to encourage contractors to
increase efficiency and maximize performance (see subpart 16.4). These incentives shall correspond to the specific performance standards in the
quality assurance surveillance plan and
shall be capable of being measured objectively. Fixed-price contracts are
generally appropriate for services that
can be defined objectively and for
which the risk of performance is manageable (see subpart 16.1).
37.602–5 Follow-on and repetitive requirements.
When acquiring services that previously have been provided by contract, agencies shall rely on the experience gained from the prior contract to
incorporate performance-based contracting methods to the maximum extent practicable. This will facilitate
the use of fixed-price contracts for such
requirements for services. (See 7.105 for
requirement to address performancebased contracting strategies in acquisition plans. See also 16.104(k).)
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Federal Acquisition Regulation
38.201
PART 38—FEDERAL SUPPLY
SCHEDULE CONTRACTING
Sec.
38.000
Scope of part.
Subpart 38.1—Federal Supply Schedule
Program
38.101
General.
Subpart 38.2—Establishing and
Administering Federal Supply Schedules
38.201
Coordination requirements.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42368, Sept. 19, 1983, unless
otherwise noted.
38.000 Scope of part.
This part prescribes policies and procedures for contracting for supplies and
services under the Federal Supply
Schedule program, which is directed
and managed by the General Services
Administration (see subpart 8.4, Federal Supply Schedules, for additional
information). The Department of Defense uses a similar system of schedule
contracting for military items that are
also not a part of the Federal Supply
Schedule program.
[59 FR 53717, Oct. 25, 1994, as amended at 61
FR 41470, Aug. 8, 1996]
Subpart 38.1—Federal Supply
Schedule Program
38.101 General.
(a) The Federal Supply Schedule program,
pursuant
to
41
U.S.C.
259(b)(3)(A), provides Federal agencies
with a simplified process of acquiring
commonly used supplies and services in
varying quantities while obtaining volume discounts. Indefinite-delivery contracts (including requirements contracts) are awarded using competitive
procedures to commercial firms. The
firms provide supplies and services at
stated prices for given periods of time,
for delivery within a stated geographic
area such as the 48 contiguous states,
the District of Columbia, Alaska, Hawaii, and overseas. The schedule contracting office issues Federal Supply
Schedules that contain information
needed for placing orders.
(b) Each schedule identifies agencies
that are required to use the contracts
as primary sources of supply.
(c) Federal agencies not identified in
the schedules as mandatory users may
issue orders under the schedules. Contractors are encouraged to accept the
orders.
(d) Although GSA awards most Federal Supply Schedule contracts, it may
authorize other agencies to award
schedule contracts and publish schedules. For example, the Department of
Veterans Affairs awards schedule contracts for certain medical and nonperishable subsistence items.
(e) When establishing Federal Supply
Schedules, GSA, or an agency delegated that authority, is responsible for
complying with all applicable statutory and regulatory requirements (e.g.,
Parts 5, 6, and 19). The requirements of
Parts 5, 6, and 19 apply at the acquisition planning stage prior to issuing the
schedule solicitation and do not apply
to orders and BPAs placed under resulting schedule contracts (see 8.404).
[65 FR 36025, June 6, 2000]
Subpart 38.2—Establishing and
Administering Federal Supply
Schedules
38.201
Coordination requirements.
(a) Subject to interagency agreements, contracting officers having responsibility for awarding Federal Supply Schedule contracts shall coordinate and obtain approval of the General Services Administration’s Federal
Supply Service (FSS) before—
(1) Establishing new schedules;
(2) Discontinuing existing schedules;
(3) Changing the scope of agency or
geographical coverage of existing
schedules; or
(4) Adding or deleting special item
numbers, national stock numbers, or
revising their description.
(b) Requests should be forwarded to
the General Services Administration,
Federal Supply Service, Office of Acquisition (FC), Washington, DC 20406.
[48 FR 42368, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989; 56 FR 55372, Oct. 25,
1991; 59 FR 53718, Oct. 25, 1994; 62 FR 40237,
July 25, 1997]
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Pt. 39
48 CFR Ch. 1 (10–1–03 Edition)
PART 39—ACQUISITION OF
INFORMATION TECHNOLOGY
Sec.
39.000
39.001
39.002
39.002
Scope of part.
Applicability.
Definitions.
Subpart 39.1—General
39.101 Policy.
39.102 Management of risk.
39.103 Modular contracting.
39.104 Information technology services.
39.105 Privacy.
39.106 Year 2000 complaints.
39.107 Contract clause.
Subpart 39.2—Electronic and Information
Technology
39.201
39.202
39.203
39.204
Scope of subpart.
Definition.
Applicability.
Exceptions.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 61 FR 41470, Aug. 8, 1996, unless
otherwise noted.
39.000 Scope of part.
This part prescribes acquisition policies and procedures for use in acquiring—
(a) Information technology, including financial management systems,
consistent with other parts of this regulation, OMB Circular No. A–127, Financial Management Systems, and
OMB Circular No. A–130, Management
of Federal Information Resources; and
(b) Electronic and information technology.
[66 FR 20897, Apr. 25, 2001]
39.001 Applicability.
This part applies to the acquisition
of information technology by or for the
use of agencies except for acquisitions
of information technology for national
security systems. However, acquisitions of information technology for national security systems shall be conducted in accordance with 40 U.S.C.
1412 with regard to requirements for
performance and results-based management; the role of the agency Chief Information Officer in acquisitions; and
accountability. These requirements are
addressed in OMB Circular No. A–130.
Definitions.
As used in this part—
Modular contracting means use of one
or more contracts to acquire information technology systems in successive,
interoperable increments.
National security system means any
telecommunications or information
system operated by the United States
Government, the function, operation,
or use of which—
(1) Involves intelligence activities;
(2) Involves cryptologic activities related to national security;
(3) Involves command and control of
military forces;
(4) Involves equipment that is an integral part of a weapon or weapons system; or
(5) Is critical to the direct fulfillment
of military or intelligence missions.
This does not include a system that is
to be used for routine administrative
and business applications, such as payroll, finance, logistics, and personnel
management applications.
Year 2000 compliant with respect to information technology, means that the
information
technology
accurately
processes date/time data (including,
but not limited to, calculating, comparing, and sequencing) from, into, and
between the twentieth and twenty-first
centuries, and the years 1999 and 2000
and leap year calculations, to the extent that other information technology, used in combination with the
information technology being acquired,
properly exchanges date/time data with
it.
[61 FR 41470, Aug. 8, 1996, as amended at 62
FR 274, Jan. 2, 1997; 62 FR 44830, Aug. 22, 1997;
63 FR 9068, Feb. 23, 1998; 66 FR 2133, Jan. 10,
2001]
Subpart 39.1—General
39.101 Policy.
(a) Division A, Section 101(h), Title
VI, Section 622 of the Omnibus Appropriations and Authorization Act for
Fiscal Year 1999 (Pub. L. 105–277) requires that agencies may not use appropriated funds to acquire information technology that does not comply
with 39.106, unless the agency’s Chief
Information Officer determines that
noncompliance with 39.106 is necessary
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Federal Acquisition Regulation
39.103
to the function and operation of the
agency or the acquisition is required
by a contract in effect before October
21, 1998. The Chief Information Officer
must send to the Office of Management
and Budget a copy of all waivers for
forwarding to Congress.
(b) In acquiring information technology, agencies shall identify their requirements pursuant to OMB Circular
A–130, including consideration of security of resources, protection of privacy,
national security and emergency preparedness, accommodations for individuals with disabilities, and energy efficiency. When developing an acquisition
strategy, contracting officers should
consider the rapidly changing nature of
information technology through market research (see part 10) and the application of technology refreshment techniques.
(c) Agencies must follow OMB Circular A–127, Financial Management
Systems, when acquiring financial
management systems. Agencies may
acquire only core financial management software certified by the Joint
Financial Management Improvement
Program.
[61 FR 41470, Aug. 8, 1996, as amended at 64
FR 32748, June 17, 1999; 64 FR 72446, Dec. 27,
1999]
39.102 Management of risk.
(a) Prior to entering into a contract
for information technology, an agency
should analyze risks, benefits, and
costs. (See part 7 for additional information regarding requirements definition.) Reasonable risk taking is appropriate as long as risks are controlled
and mitigated. Contracting and program office officials are jointly responsible for assessing, monitoring and controlling risk when selecting projects
for investment and during program implementation.
(b) Types of risk may include schedule risk, risk of technical obsolescence,
cost risk, risk implicit in a particular
contract type, technical feasibility, dependencies between a new project and
other projects or systems, the number
of simultaneous high risk projects to
be monitored, funding availability, and
program management risk.
(c) Appropriate techniques should be
applied to manage and mitigate risk
during the acquisition of information
technology. Techniques include, but
are not limited to: prudent project
management; use of modular contracting; thorough acquisition planning tied to budget planning by the
program, finance and contracting offices; continuous collection and evaluation of risk-based assessment data;
prototyping prior to implementation;
post implementation reviews to determine actual project cost, benefits and
returns; and focusing on risks and returns using quantifiable measures.
39.103
Modular contracting.
(a) This section implements Section
5202, Incremental Acquisition of Information Technology, of the ClingerCohen Act of 1996 (Public Law 104–106).
Modular contracting is intended to reduce program risk and to incentivize
contractor performance while meeting
the Governments need for timely access to rapidly changing technology.
Consistent with the agency’s information technology architecture, agencies
should, to the maximum extent practicable, use modular contracting to acquire major systems (see 2.101) of information technology. Agencies may also
use modular contracting to acquire
non-major systems of information
technology.
(b) When using modular contracting,
an acquisition of a system of information technology may be divided into
several smaller acquisition increments
that—
(1) Are easier to manage individually
than would be possible in one comprehensive acquisition;
(2) Address complex information
technology objectives incrementally in
order to enhance the likelihood of
achieving workable systems or solutions for attainment of those objectives;
(3) Provide for delivery, implementation, and testing of workable systems
or solutions in discrete increments,
each of which comprises a system or
solution that is not dependent on any
subsequent increment in order to perform its principal functions;
(4) Provide an opportunity for subsequent increments to take advantage of
any evolution in technology or needs
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39.104
48 CFR Ch. 1 (10–1–03 Edition)
that occur during implementation and
use of the earlier increments; and
(5) Reduce risk of potential adverse
consequences on the overall project by
isolating and avoiding custom-designed
components of the system.
(c) The characteristics of an increment may vary depending upon the
type of information technology being
acquired and the nature of the system
being developed. The following factors
may be considered:
(1) To promote compatibility, the information technology acquired through
modular contracting for each increment should comply with common or
commercially acceptable information
technology standards when available
and appropriate, and shall conform to
the agency’s master information technology architecture.
(2) The performance requirements of
each increment should be consistent
with the performance requirements of
the completed, overall system within
which the information technology will
function and should address interface
requirements with succeeding increments.
(d) For each increment, contracting
officers shall choose an appropriate
contracting technique that facilitates
the acquisition of subsequent increments. Pursuant to Parts 16 and 17 of
the Federal Acquisition Regulations,
contracting officers shall select the
contract type and method appropriate
to the circumstances (e.g., indefinite
delivery, indefinite quantity contracts,
single contract with options, successive contracts, multiple awards, task
order contracts). Contract(s) shall be
structured to ensure that the Government is not required to procure additional increments.
(e) To avoid obsolescence, a modular
contract for information technology
should, to the maximum extent practicable, be awarded within 180 days
after the date on which the solicitation
is issued. If award cannot be made
within 180 days, agencies should consider cancellation of the solicitation in
accordance with 48 CFR 14.209 or
15.206(e). To the maximum extent practicable, deliveries under the contract
should be scheduled to occur within 18
months after issuance of the solicitation.
[63 FR 9068, Feb. 23, 1998]
39.104 Information technology services.
When acquiring information technology services, solicitations must not
describe any minimum experience or
educational requirement for proposed
contractor personnel unless the contracting officer determines that the
needs of the agency—
(a) Cannot be met without that requirement; or
(b) Require the use of other than a
performance-based contract (see subpart 37.6).
[66 FR 22085, May 2, 2001]
39.105 Privacy.
Agencies shall ensure that contracts
for information technology address
protection of privacy in accordance
with the Privacy Act (5 U.S.C. 552a)
and part 24. In addition, each agency
shall ensure that contracts for the design, development, or operation of a
system of records using commercial information technology services or information technology support services include the following:
(a) Agency rules of conduct that the
contractor and the contractor’s employees shall be required to follow.
(b) A list of the anticipated threats
and hazards that the contractor must
guard against.
(c) A description of the safeguards
that the contractor must specifically
provide.
(d) Requirements for a program of
Government inspection during performance of the contract that will ensure the continued efficacy and efficiency of safeguards and the discovery
and countering of new threats and hazards.
39.106 Year 2000 compliance.
When acquiring information technology that will be required to perform
date/time processing involving dates
subsequent to December 31, 1999, agencies shall ensure that solicitations and
contracts—
(a)(1) Require the information technology to be Year 2000 compliant; or
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Federal Acquisition Regulation
39.203
(2) Require that non-compliant information technology be upgraded to be
Year 2000 compliant prior to the earlier
of
(i) The earliest date on which the information technology may be required
to perform date/time processing involving dates later than December 31, 1999,
or
(ii) December 31, 1999; and
(b) As appropriate, describe existing
information technology that will be
used with the information technology
to be acquired and identify whether the
existing information technology is
Year 2000 compliant.
[62 FR 274, Jan. 2, 1997]
39.107 Contract clause.
The contracting officer shall insert a
clause substantially the same as the
clause at 52.239–1, Privacy or Security
Safeguards, in solicitations and contracts for information technology
which require security of information
technology, and/or are for the design,
development, or operation of a system
of records using commercial information technology services or support
services.
[61 FR 41470, Aug. 8, 1996. Redesignated at 62
FR 274, Jan. 2, 1997]
Subpart 39.2—Electronic and
Information Technology
SOURCE: 66 FR 20897, Apr. 25, 2001, unless
otherwise noted.
39.201 Scope of subpart.
(a) This subpart implements section
508 of the Rehabilitation Act of 1973 (29
U.S.C. 794d), and the Architectural and
Transportation Barriers Compliance
Board Electronic and Information
Technology (EIT) Accessibility Standards (36 CFR part 1194).
(b) Further information on section
508 is available via the Internet at
http://www.section508.gov.
(c) When acquiring EIT, agencies
must ensure that—
(1) Federal employees with disabilities have access to and use of information and data that is comparable to the
access and use by Federal employees
who are not individuals with disabilities; and
(2) Members of the public with disabilities seeking information or services from an agency have access to and
use of information and data that is
comparable to the access to and use of
information and data by members of
the public who are not individuals with
disabilities.
39.202
Definition.
Undue burden, as used in this subpart,
means a significant difficulty or expense.
39.203
Applicability.
(a) Unless an exception at 39.204 applies, acquisitions of EIT supplies and
services must meet the applicable accessibility standards at 36 CFR part
1194.
(b)(1) Exception determinations are
required prior to contract award, except for indefinite-quantity contracts
(see paragraph (b)(2) of this section).
(2) Exception determinations are not
required prior to award of indefinitequantity contracts, except for requirements that are to be satisfied by initial
award. Contracting offices that award
indefinite-quantity contracts must indicate to requiring and ordering activities which supplies and services the
contractor indicates as compliant, and
show where full details of compliance
can be found (e.g., vendor’s or other
exact website location).
(3) Requiring and ordering activities
must ensure supplies or services meet
the applicable accessibility standards
at 36 CFR part 1194, unless an exception
applies, at the time of issuance of task
or delivery orders. Accordingly, indefinite-quantity contracts may include
noncompliant items; however, any task
or delivery order issued for noncompliant items must meet an applicable exception.
(c)(1) When acquiring commercial
items, an agency must comply with
those accessibility standards that can
be met with supplies or services that
are available in the commercial marketplace in time to meet the agency’s
delivery requirements.
(2) The requiring official must document in writing the nonavailability,
including a description of market research performed and which standards
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39.204
48 CFR Ch. 1 (10–1–03 Edition)
cannot be met, and provide documentation to the contracting officer for inclusion in the contract file.
39.204
PART 41—ACQUISITION OF UTILITY
SERVICES
Subpart 41.1—General
Exceptions.
The requirements in 39.203 do not
apply to EIT that—
(a) Is purchased in accordance with
Subpart 13.2 (micro-purchases) prior to
October 1, 2004. However, for micro-purchases, contracting officers and other
individuals designated in accordance
with 1.603–3 are strongly encouraged to
comply with the applicable accessibility standards to the maximum extent practicable;
(b) Is for a national security system;
(c) Is acquired by a contractor incidental to a contract;
(d) Is located in spaces frequented
only by service personnel for maintenance, repair or occasional monitoring
of equipment; or
(e) Would impose an undue burden on
the agency.
(1) Basis. In determining whether
compliance with all or part of the applicable accessibility standards in 36
CFR part 1194 would be an undue burden, an agency must consider—
(i) The difficulty or expense of compliance; and
(ii) Agency resources available to its
program or component for which the
supply or service is being acquired.
(2) Documentation. (i) The requiring
official must document in writing the
basis for an undue burden decision and
provide the documentation to the contracting officer for inclusion in the
contract file.
(ii) When acquiring commercial
items, an undue burden determination
is not required to address individual
standards that cannot be met with supplies or service available in the commercial marketplace in time to meet
the agency delivery requirements (see
39.203(c)(2) regarding documentation of
nonavailability).
[66 FR 20897, Apr. 25, 2001, as amended at 67
FR 80322, Dec. 31, 2002]
Sec.
41.100
41.101
41.102
41.103
Scope of part.
Definitions.
Applicability.
Statutory and delegated authority.
Subpart 41.2—Acquiring Utility Services
41.201 Policy.
41.202 Procedures.
41.203 GSA assistance.
41.204 GSA areawide contracts.
41.205 Separate contracts.
41.206 Interagency agreements.
Subpart 41.3—Requests for Assistance
41.301
Requirements.
Subpart 41.4—Administration
41.401 Monthly and annual review.
41.402 Rate changes and regulatory intervention.
Subpart 41.5—Solicitation Provision and
Contract Clauses
41.501 Solicitation provision and contract
clauses.
Subpart 41.6—Forms
41.601
Utility services forms.
Subpart 41.7—Formats
41.701 Formats for utility service specifications.
41.702 Formats for annual utility service review.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 59 FR 67018, Dec. 28, 1994, unless
otherwise noted.
Subpart 41.1—General
41.100
Scope of part.
This part prescribes policies, procedures, and contract format for the acquisition of utility services. (See
41.102(b) for services that are excluded
from this part.)
41.101
PART 40 [RESERVED]
Definitions.
As used in this part,
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Federal Acquisition Regulation
41.102
Areawide contract means a contract
entered into between the General Services Administration (GSA) and a utility service supplier to cover utility
service needs of Federal agencies within the franchise territory of the supplier. Each areawide contract includes
an ‘‘Authorization’’ form for requesting service, connection, disconnection,
or change in service.
Authorization means the document
executed by the ordering agency and
the utility supplier to order service
under an areawide contract.
Connection charge means all nonrecurring costs, whether refundable or
nonrefundable, to be paid by the Government to the utility supplier for the
required connecting facilities, which
are installed, owned, operated, and
maintained by the utility supplier (see
Termination liability).
Delegated agency means an agency
that has received a written delegation
of authority from GSA to contract for
utility services for periods not exceeding ten years (see 41.103(b)).
Federal Power and Water Marketing
Agency means a Government entity
that produces, manages, transports,
controls, and sells electrical and water
supply service to customers.
Franchise territory means a geographical area that a utility supplier
has a right to serve based upon a franchise, a certificate of public convenience and necessity, or other legal
means.
Intervention means action by GSA or
a delegated agency to formally participate in a utility regulatory proceeding
on behalf of all Federal executive agencies.
Multiple service locations means the
various locations or delivery points in
the utility supplier’s service area to
which it provides service under a single
contract.
Rates may include rate schedules, riders, rules, terms and conditions of service, and other tariff and service
charges, e.g., facilities use charges.
Separate contract means a utility
services contract (other than a GSA
areawide contract, an Authorization
under an areawide contract, or an
interagency agreement) to cover the
acquisition of utility services.
Termination liability means a contingent Government obligation to pay a
utility supplier the unamortized portion of a connection charge and any
other applicable nonrefundable service
charge as defined in the contract in the
event the Government terminates the
contract before the cost of connection
facilities has been recovered by the
utility
supplier
(see
‘‘Connection
charge’’).
Utility service means a service such as
furnishing electricity, natural or manufactured gas, water, sewerage, thermal energy, chilled water, steam, hot
water, or high temperature hot water.
The application of part 41 to other
services (e.g., rubbish removal, snow
removal) may be appropriate when the
acquisition is not subject to the Service Contract Act of 1965 (see 37.107).
41.102
Applicability.
(a) Except as provided in paragraph
(b) of this section, this part applies to
the acquisition of utility services for
the Government, including connection
charges and termination liabilities.
(b) This part does not apply to—
(1) Utility services produced, distributed, or sold by another Federal agency. In those cases, agencies shall use
interagency agreements (see 41.206);
(2) Utility services obtained by purchase, exchange, or otherwise by a Federal power or water marketing agency
incident to that agency’s marketing or
distribution program;
(3) Cable television (CATV) and telecommunications services;
(4) Acquisition of natural or manufactured gas when purchased as a commodity;
(5) Acquisition of utilities services in
foreign countries;
(6) Acquisition of rights in real property, acquisition of public utility facilities, and on-site equipment needed
for the facility’s own distribution system, or construction/maintenance of
Government-owned facilities; or
(7) Third party financed shared-savings projects authorized by 42 U.S.C.
8287. However, agencies may utilize
part 41 for any energy savings or purchased utility service directly resulting from implementation of a third
party financed shared-savings project
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41.103
48 CFR Ch. 1 (10–1–03 Edition)
under 42 U.S.C. 8287 for periods not to
exceed 25 years.
41.103 Statutory
thority.
and
delegated
au-
(a) Statutory authority. (1) The General Services Administration (GSA) is
authorized by section 201 of the Federal
Property and Administrative Services
Act of 1949, as amended (40 U.S.C. 481),
to prescribe policies and methods governing the acquisition and supply of
utility services for Federal agencies.
This authority includes related functions such as managing public utility
services and representing Federal agencies in proceedings before Federal and
state regulatory bodies. GSA is authorized by section 201 of the Act to contract for utility services for periods not
exceeding ten years.
(2) The Department of Defense (DOD)
is authorized by 10 U.S.C. 2304, and 40
U.S.C. 474(d)(3) to acquire utility services for military facilities.
(3) The Department of Energy (DOE)
is authorized by the Department of Energy Organization Act (42 U.S.C. 7251, et
seq.) to acquire utility services. DOE is
authorized by the Atomic Energy Act
of 1954, as amended (42 U.S.C. 2204), to
enter into new contracts or modify existing contracts for electric services
for periods not exceeding 25 years for
uranium enrichment installations.
(b) Delegated authority. GSA has delegated its authority to enter into utility service contracts for periods not exceeding ten years to DOD and DOE, and
for connection charges only to the Department of Veteran Affairs. Contracting pursuant to this delegated authority shall be consistent with the requirements of this part. Other agencies
requiring utility service contracts for
periods over one year, but not exceeding ten years, may request a delegation
of authority from GSA at the address
specified in 41.301(a). In keeping with
its statutory authority, GSA will, as
necessary, conduct reviews of delegated agencies’ acquisitions of utility
services to ensure compliance with the
terms of the delegation and applicable
laws and regulations.
(c) Requests for delegations of contracting authority from GSA shall include a certification from the acquir-
ing agency’s Senior Procurement Executive that the agency has—
(1) An established acquisition program;
(2) Personnel technically qualified to
deal with specialized utilities problems; and
(3) The ability to accomplish its own
pre-award contract review.
[59 FR 67018, Dec. 28, 1994, as amended at 60
FR 37777, July 21, 1995; 63 FR 58603, Oct. 30,
1998]
Subpart 41.2—Acquiring Utility
Services
41.201 Policy.
(a) Subject to paragraph (d) of this
section, it is the policy of the Federal
Government that agencies obtain required utility services from sources of
supply which are most advantageous to
the Government in terms of economy,
efficiency, reliability, or service.
(b) Except for acquisitions at or
below
the
simplified
acquisition
threshold, agencies shall acquire utility services by a bilateral written contract, which must include the clauses
required by 41.501, regardless of whether rates or terms and conditions of
service are fixed or adjusted by a regulatory body. Agencies may not use the
utility supplier’s forms and clauses to
avoid the inclusion of provisions and
clauses required by 41.501 or by statute.
(See 41.202(c) for procedures to be used
when the supplier refuses to execute a
written contract.)
(c) Specific operating and management details, such as procedures for internal agency contract assistance and
review, delegations of authority, and
approval thresholds, may be prescribed
by an individual agency subject to
compliance with applicable statutes
and regulations.
(d)(1) Section 8093 of the Department
of Defense Appropriations Act of 1988,
Pub. L. 100–202, provides that none of
the funds appropriated by that Act or
any other Act with respect to any fiscal year by any department, agency, or
instrumentality of the United States,
may be used for the purchase of electricity by the Government in any manner that is inconsistent with state law
governing the providing of electric
utility service, including state utility
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Federal Acquisition Regulation
41.202
commission rulings and electric utility
franchises or service territories established pursuant to state statute, state
regulation, or state-approved territorial agreements.
(2) The Act does not preclude—
(i) The head of a Federal agency from
entering into a contract pursuant to 42
U.S.C. 8287 (which pertains to the subject of shared energy savings including
cogeneration);
(ii) The Secretary of a military department from entering into a contract
pursuant to 10 U.S.C. 2394 (which pertains to contracts for energy or fuel for
military installations including the
provision and operation of energy production facilities); or
(iii) The Secretary of a military department from purchasing electricity
from any provider when the utility or
utilities having applicable state-approved franchise or other service authorizations are found by the Secretary
to be unwilling or unable to meet unusual standards for service reliability
that are necessary for purposes of national defense.
(3) Additionally, the head of a Federal agency may—
(i) Consistent with applicable state
law, enter into contracts for the purchase or transfer of electricity to the
agency by a non-utility, including a
qualifying facility under the Public
Utility Regulatory Policies Act of 1978;
(ii) Enter into an interagency agreement, pursuant to 41.206 and 17.5, with
a Federal power marketing agency or
the Tennessee Valley Authority for the
transfer of electric power to the agency; and
(iii) Enter into a contract with an
electric utility under the authority or
tariffs of the Federal Energy Regulatory Commission.
(e) Prior to acquiring electric utility
services on a competitive basis, the
contracting officer shall determine,
with the advice of legal counsel, by a
market survey or any other appropriate means, e.g. consultation with
the state agency responsible for regulating public utilities, that such competition would not be inconsistent with
state law governing the provision of
electric utility service, including state
utility commission rulings and electric
utility franchises or service territories
established pursuant to state statute,
state regulation, or state-approved territorial agreements. Proposals from alternative electric suppliers shall provide a representation that service can
be provided in a manner consistent
with section 8093 of Public Law 100–202
(see 41.201(d)).
[59 FR 67018, Dec. 28, 1994, as amended at 60
FR 34759, July 3, 1995; 61 FR 39190, July 26,
1996; 64 FR 10533, Mar. 4, 1999]
41.202 Procedures.
(a) Prior to executing a utility service contract, the contracting officer
shall comply with parts 6 and 7 and
41.201 (d) and (e). In accordance with
parts 6 and 7, agencies shall conduct
market surveys and perform acquisition planning in order to promote and
provide for full and open competition
provided that the contracting officer
determines that any resultant contract
would not be inconsistent with applicable state law governing the provision of
electric utility services. If competition
for an entire utility service is not
available, the market survey may be
used to determine the availability of
competitive sources for certain portions of the requirement. The scope of
the term ‘‘entire utility service’’ includes the provision of the utility service capacity, energy, water, sewage,
transportation, standby or back-up
service, transmission and/or distribution service, quality assurance, system
reliability, system operation and maintenance, metering, and billing.
(b) In performing a market survey
(see 7.101), the contracting officer shall
consider, in addition to alternative
competitive sources, use of the following:
(1) GSA areawide contracts (see
41.204);
(2) Separate contracts (see 41.205);
and
(3) Interagency agreements (see
41.206).
(c) When a utility supplier refuses to
execute a tendered contract as outlined
in 41.201(b), the agency shall obtain a
written definite and final refusal
signed by a corporate officer or other
responsible official of the supplier (or if
unobtainable, document any unwritten
refusal), and transmit this document,
along with statements of the reasons
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41.203
48 CFR Ch. 1 (10–1–03 Edition)
for the refusal and the record of negotiations, to GSA at the address specified at 41.301(a). Unless urgent and
compelling circumstances exist, the
contracting officer shall notify GSA
prior to acquiring utility services without executing a tendered contract.
After such notification, the agency
may proceed with the acquisition and
pay for the utility service under the
provisions of 31 U.S.C. 1501(a)(8)—
(1) By issuing a purchase order in accordance with 13.302; or
(2) By ordering the necessary utility
service and paying for it upon the presentation of an invoice, provided that a
determination is approved by the head
of the contracting activity that a written contract cannot be obtained and
that the issuance of a purchase order is
not feasible.
(d) When obtaining service without a
bilateral written contract, the contracting officer shall establish a utility
history file on each acquisition of utility service provided by a contractor.
This utility history file shall contain,
in addition to applicable documents in
4.803, the following information:
(1) The unsigned, tendered contract
and any related letter of transmittal.
(2) The reasons stated by the utility
supplier for not executing the tendered
contract, the record of negotiations,
and a written definite and final refusal
by a corporate officer or other responsible official of the supplier (or if
unobtainable, documentation of unwritten refusal).
(3) Services to be furnished and the
estimated annual cost.
(4) Historical record of any applicable
connection charges.
(5) Historical record of any applicable
ongoing capital credits.
(6) A copy of the applicable rate
schedule.
(e) If the Government obtains utility
service pursuant to paragraph (c) of
this section, the contracting officer
shall, on an annual basis beginning
from the date of final refusal, take action to execute a bilateral written contract. The contracting officer shall
document the utility history file with
the efforts made and the agency shall
notify GSA, in writing, if the utility
continues to refuse to execute a bilateral contract.
[59 FR 67018, Dec. 28, 1994, as amended at 62
FR 64926, Dec. 9, 1997]
41.203
GSA assistance.
(a) GSA will, upon request, provide
technical and acquisition assistance, or
will delegate its contracting authority
for the furnishing of the services described in this part for any Federal
agency, mixed-ownership Government
corporation, the District of Columbia,
the Senate, the House of Representatives, or the Architect of the Capitol
and any activity under the Architect’s
direction.
(b) Agencies seeking assistance shall
provide, upon request by GSA, the information listed in 41.301.
41.204
GSA areawide contracts.
(a) Purpose. GSA enters into areawide
contracts (see 41.101) for use by Federal
agencies. Areawide contracts provide a
pre-established contractual vehicle for
ordering utility services under the conditions in paragraph (c)(1) of this section.
(b) Features. (1) Areawide contracts
generally provide for ordering utility
service at rates approved and/or established by a regulatory body and published in a tariff or rate schedule. However, agencies are permitted to negotiate other rates and terms and conditions of service with the supplier (see
paragraph (c) of this section). Rates
other than those published may require
the approval of the regulatory body.
(2) Areawide contracts are negotiated
with utility service suppliers for the
provision of service within the supplier’s franchise territory or service
area.
(3) Due to the regulated nature of the
utility industry, as well as statutory
restrictions associated with the procurement of electricity (see 41.201(d)),
competition is typically not available
within the entire geographical area
covered by an areawide contract, although it may be available at specific
locations within the utility’s service
area. When competing suppliers are
available, the provisions of paragraph
(c)(1) of this section apply.
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Federal Acquisition Regulation
41.205
(c) Procedures for obtaining service. (1)
Any Federal agency having a requirement for utility services within an area
covered by an areawide contract shall
acquire services under that areawide
contract unless—
(i) Service is available from more
than one supplier; or
(ii) The head of the contracting activity or designee otherwise determines
that use of the areawide contract is not
advantageous to the Government. If
service is available from more than one
supplier, service shall be acquired
using competitive acquisition procedures (see 41.202(a)). The determination
required by paragraph (c)(1)(ii) of this
section shall be documented in the contract file with an information copy furnished to GSA at the address in
41.301(a).
(2) Each areawide contract includes
an authorization form for ordering
service, connection, disconnection, or
change in service. Upon execution of an
authorization by the contracting officer and utility supplier, the utility
supplier is required to furnish services,
without further negotiation, at the
current, applicable published or unpublished rates, unless other rates, and/or
terms and conditions are separately negotiated by the Federal agency with
the supplier.
(3) The contracting officer shall execute the Authorization, and attach it
to a Standard Form (SF) 26, Award/
Contract, along with any modifications
such as connection charges, special facilities, or service arrangements. The
contracting officer shall also attach
any specific fiscal, operational, and administrative requirements of the agency, applicable rate schedules, technical
information and detailed maps or drawings of delivery points, details on Government ownership, maintenance, or
repair of facilities, and other information deemed necessary to fully define
the service conditions in the Authorization/contract.
(d) List of areawide contracts. A list of
current GSA areawide contracts is
available from the GSA office specified
at 41.301(a). The list identifies the
types of services and the geographic
area served. A copy of the contract
may also be obtained from this office.
(e) Notification. Agencies shall provide GSA at the address specified at
41.301(a) a copy of each SF 26 and executed Authorization issued under an
areawide contract within 30 days after
execution.
41.205
Separate contracts.
(a) In the absence of an areawide contract or interagency agreement (see
41.206), agencies shall acquire utility
services by separate contract subject
to this part, and subject to agency contracting authority.
(b) If an agency enters into a separate contract, the contracting officer
shall document the contract file with
the following information:
(1) The number of available suppliers.
(2) Any special equipment, service reliability, or facility requirements and
related costs.
(3) The utility supplier’s rates, connection charges, and termination liability.
(4) Total estimated contract value
(including costs in subparagraphs (b)
(2) and (3) of this subsection).
(5) Any technical or special contract
terms required.
(6) Any unusual characteristics of
services required.
(7) The utility’s wheeling or transportation policy for utility service.
(c) If requesting GSA assistance with
a separate contract, the requesting
agency shall furnish the technical and
acquisition data specified in 41.205(b),
41.301, and such other data as GSA may
deem necessary.
(d) A contract exceeding a 1-year period, but not exceeding ten years (except pursuant to 41.103), may be justified, and is usually required, where any
of the following circumstances exist:
(1) The Government will obtain lower
rates, larger discounts, or more favorable terms and conditions of service;
(2) A proposed connection charge,
termination liability, or any other facilities charge to be paid by the Federal Government will be reduced or
eliminated; or
(3) The utility service supplier refuses to render the desired service except under a contract exceeding a 1year period.
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41.206
41.206
48 CFR Ch. 1 (10–1–03 Edition)
Interagency agreements.
Agencies shall use interagency agreements (e.g., consolidated purchase,
joint use, or cross-service agreements)
when acquiring utility service or facilities from other Government agencies
and shall comply with the policies and
procedures at subpart 17.5, Interagency
Acquisitions under the Economy Act.
Subpart 41.3—Requests for
Assistance
41.301
Requirements.
(a) Requests for delegations of GSA
contracting authority, assistance with
a proposed contract as provided in
41.203, and the submission of other information required by this part, shall
be sent or submitted to the General
Services Administration (GSA) region
in which service is required. The names
and locations of GSA regional offices
are available from the Public Utilities
Division (PPU), Public Buildings Service, Washington, DC 20405.
(b) Requests for contracting assistance for utility services shall be sent
not later than 120 days prior to the
date new services are required to commence an existing contract will expire.
Requests for assistance shall contain
the following information:
(1) A technical description or specification of the type, quantity, and
quality of service required, and a delivery schedule.
(2) A copy of any service proposal or
proposed contract.
(3) Copies of all current published or
unpublished rates of the utility supplier.
(4) Identification of any unusual factors affecting the acquisition.
(5) Identification of all available
sources or methods of supply, an analysis of the cost effectiveness of each,
and a statement of the ability of each
source to provide the required services,
including the location and a description of each available supplier’s facilities at the nearest point of service, and
the cost of providing or obtaining necessary backup and other ancillary services.
(c) For new utility service requirements, the agency shall furnish the in-
formation in paragraph (a) of this section and the following as applicable:
(1) The date initial service is required.
(2) For the first 12 months of full
service, estimated maximum demand,
monthly consumption, other pertinent
information (e.g., demand side management, load or energy management,
peak shaving, on site generation, load
shaping), and annual cost of the service.
(3) Known or estimated time schedule
for growth to ultimate requirements.
(4) Estimated ultimate maximum demand and ultimate monthly consumption.
(5) A simple schematic diagram or
line drawing showing the meter locations, the location of the new utility
facilities to be constructed on Federal
property by the Federal agency, and
any required new connection facilities
on either side of the delivery point to
be constructed by the utility supplier
to provide the new services.
(6) Accounting and appropriation
data to cover the required utility services and any connection charges required to be paid by the agency receiving such utility services.
(7) The following data concerning
proposed facilities and related charges
or costs:
(i) Proposed refundable or nonrefundable connection charge, termination liability, or other facilities charge to be
paid by the agency, together with a description of the supplier’s proposed facilities and estimated construction
costs, and its rationale for the charge
(e.g., tariff provisions or policies).
(ii) A copy of the acquiring agency’s
estimate to make its own connection
to the supplier’s facilities through use
of its own resources or by separate contract. When feasible, the acquiring
agency shall provide its estimates to
construct and operate its own utility
facilities in lieu of participating in a
cost-sharing
construction
program
with the proposed utility supplier.
(d) For existing utility service, the
agency shall furnish GSA the information in paragraph (b) of this section
and the following, as applicable:
(1) A copy of the most recent 12months’ service invoices.
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Federal Acquisition Regulation
41.501
(2) A tabulation, by month, for the
most recent 12 months, showing the actual utility demands, consumption,
connection charges, fuel adjustment
charges, and the average monthly cost
per unit of consumption.
(3) An estimate, by month, for the
next 12 months, showing the estimated
maximum demands, monthly consumption, other pertinent information (e.g.,
demand side management, load or energy management, peak shaving, on
site generation, load shaping), and annual cost of the service.
(4) Accounting and appropriation
data to cover the costs for the continuation of utility services.
(5) A statement noting whether the
transformer, or other system components, on either side of the delivery
point are owned by the Federal agency
or the utility supplier, and if the metering is on the primary or secondary
side of the transformer.
Subpart 41.4—Administration
41.401
Monthly and annual review.
Agencies shall review utility service
invoices on a monthly basis and all
utility accounts, with annual values
exceeding the simplified acquisition
threshold, on an annual basis. Annual
reviews of accounts with annual values
at or below the simplified acquisition
threshold shall be conducted when
deemed advantageous to the Government. The purpose of the monthly review is to ensure the accuracy of utility service invoices. The purpose of the
annual review is to ensure that the
utility supplier is furnishing the services to each facility under the utility’s
most economical, applicable rate and
to examine competitive markets for
more advantageous service offerings.
The annual review shall be based upon
the facility’s usage, conditions and
characteristics of service at each individual delivery point for the most recent 12 months. If a more advantageous
rate is appropriate, the Federal agency
shall request the supplier to make such
rate change immediately.
[59 FR 67018, Dec. 28, 1994, as amended at 60
FR 34759, July 3, 1995]
41.402 Rate changes and regulatory
intervention.
(a) When a change is proposed to
rates or terms and conditions of service
to the Government, the agency shall
promptly determine whether the proposed change is reasonable, justified,
and not discriminatory.
(b) If a change is proposed to rates or
terms and conditions of service that
may be of interest to other Federal
agencies, and intervention before a regulatory body is considered justified,
the matter shall be referred to GSA.
The agency may request from GSA a
delegation of authority for the agency
to intervene on behalf of the consumer
interests of the Federal executive
agencies (see 41.301).
(c) Pursuant to 52.241–7, Change in
Rates or Terms and Conditions of Service for Regulated Services, if a regulatory body approves a rate change,
any rate change shall be made a part of
the contract by unilateral contract
modification or otherwise documented
in accordance with agency procedures.
The approved applicable rate shall be
effective on the date determined by the
regulatory body and resulting rates
and charges shall be paid promptly to
avoid late payment provisions. Copies
of the modification containing the approved rate change shall be sent to the
agency’s paying office or office responsible for verifying billed amounts (see
41.401).
(d) If the utility supplier is not regulated and the rates, terms, and conditions of service are subject to negotiation pursuant to the clause at 52.241–8,
Change in Rates or Terms and Conditions of Service for Unregulated Services, any rate change shall be made a
part of the contract by contract modification, with copies sent to the agency’s paying office or office responsible
for verifying billed amounts.
Subpart 41.5—Solicitation
Provision and Contract Clauses
41.501 Solicitation provision and contract clauses.
(a) Because the terms and conditions
under which utility suppliers furnish
service may vary from area to area, the
differences may influence the terms
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41.601
48 CFR Ch. 1 (10–1–03 Edition)
and conditions appropriate to a particular utility’s contracting situation.
To accommodate requirements that are
peculiar to the contracting situation,
this section prescribes provisions and
clauses on a ‘‘substantially the same
as’’ basis (see 52.101) which permits the
contracting officer to prepare and utilize variations of the prescribed provision and clauses in accordance with
agency procedures.
(b) The contracting officer shall insert in solicitations for utility services
a provision substantially the same as
the provision at 52.241–1, Electric Service Territory Compliance Representation, when proposals from alternative
electric suppliers are sought.
(c) The contracting officer shall insert in solicitations and contracts for
utility services clauses substantially
the same as the clauses at—
(1) 52.241–2, Order of Precedence—
Utilities;
(2) 52.241–3, Scope and Duration of
Contract;
(3) 52.241–4, Change in Class of Service;
(4) 52.241–5, Contractor’s Facilities;
and
(5) 52.241–6, Service Provisions.
(d) The contracting officer shall insert clauses substantially the same as
the clauses listed below in solicitations
and contracts under the prescribed conditions—
(1) 52.241–7, Change in Rates or Terms
and Conditions of Service for Regulated Services, when the utility services are subject to a regulatory body.
(Except for GSA areawide contracts,
the contracting officer shall insert in
the blank space provided in the clause
the name of the contracting officer.
For GSA areawide contracts, the contracting officer shall insert the following: ‘‘GSA and each areawide customer with annual billings that exceed
$250,000.’’)
(2) 52.241–8, Change in Rates or Terms
and Conditions of Service for Unregulated Services, when the utility services are not subject to a regulatory
body.
(3) 52.241–9, Connection Charge, when
a refundable connection charge is required to be paid by the Government to
compensate the contractor for furnishing additional facilities necessary
to supply service. (Use Alternate I to
the clause if a nonrefundable charge is
to be paid. When conditions require the
incorporation of a nonrecurring, nonrefundable service charge or a termination liability, see paragraphs (d)(6)
and (d)(4) of this section.)
(4) 52.241–10, Termination Liability,
when payment is to be made to the
contractor upon termination of service
in conjunction with or in lieu of a connection charge upon completion of the
facilities.
(5) 52.241–11, Multiple Service Locations (as defined in 41.101), when providing for possible alternative service
locations, except under areawide contracts, is required.
(6) 52.241–12, Nonrefundable, Nonrecurring Service Charge, when the
Government is required to pay a nonrefundable, nonrecurring membership
fee, a charge for initiation of service,
or a contribution for the cost of facilities construction. The Government
may provide for inclusion of such
agreed amount or fee as a part of the
connection charge, a part of the initial
payment for services, or as periodic
payments to fulfill the Government’s
obligation.
(7) 52.241–13, Capital Credits, when
the Federal Government is a member
of a cooperative and is entitled to capital credits, consistent with the bylaws
and governing documents of the cooperative.
(e) Depending on the conditions that
are appropriate for each acquisition,
the contracting officer shall also insert
in solicitations and contracts for utility services the provisions and clauses
prescribed elsewhere in the FAR.
[59 FR 67018, Dec. 28, 1994, as amended at 60
FR 14377, Mar. 17, 1995]
Subpart 41.6—Forms
41.601
Utility services forms.
(a) If acquiring utility services under
other than an areawide contract, a purchase order, or an interagency agreement, the Standard Form (SF) 33, Solicitation, Offer and Award; SF 26,
Award/Contract; or SF 1447, Solicitation/Contract, shall be used.
(b) The contracting officer shall incorporate the applicable rate schedule
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Federal Acquisition Regulation
41.702
in each contract, purchase order or
modification.
Subpart 41.7—Formats
41.701 Formats for utility service specifications.
(a) The following specification formats for use in acquiring utility services are available from the address
specified at 41.301(a) and may be used
and modified at the agency’s discretion:
(1) Electric service.
(2) Water service.
(3) Steam service.
(4) Sewage service.
(5) Natural gas service.
(b) Contracting officers may modify
the specification format referenced in
paragraph (a) of this section and attach
technical items, details on Government
ownership of facilities and maintenance or repair obligations, maps or
drawings of delivery points, and other
information deemed necessary to fully
define the service conditions.
(c) The specifications and attachments (see paragraph (b) of this section) shall be inserted in Section C of
the utility service solicitation and contract.
41.702 Formats for annual utility service review.
(a) Formats for use in conducting annual reviews of the following utility
services are available from the address
specified at 41.301(a) and may be used
at the agency’s discretion:
(1) Electric service.
(2) Gas service.
(3) Water and sewage service.
(b) Contracting officers may modify
the annual utility service review format as necessary to fully cover the
service used.
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SUBCHAPTER G—CONTRACT MANAGEMENT
PART 42—CONTRACT ADMINISTRATION AND AUDIT SERVICES
Sec.
42.000
42.001
42.002
42.003
Scope of part.
[Reserved]
Interagency agreements.
Cognizant Federal agency.
Subpart 42.1—Contract Audit Services
42.101 Contract audit responsibilities.
42.102 Assignment of contract audit services.
42.103 Contract audit services directory.
Subpart 42.2—Contract Administration
Services
42.201 Contract administration responsibilities.
42.202 Assignment of contract administration.
42.203 Contract administration services directory.
Subpart 42.8—Disallowance of Costs
Subpart 42.3—Contract Administration
Office Functions
42.301
42.302
42.702 Purpose.
42.703 General.
42.703–1 Policy.
42.703–2 Certificate of indirect costs.
42.704 Billing rates.
42.705 Final indirect cost rates.
42.705–1 Contracting officer determination
procedure.
42.705–2 Auditor determination procedure.
42.705–3 Educational institutions.
42.705–4 State and local governments.
42.705–5 Nonprofit organizations other than
educational and state and local governments.
42.706 Distribution of documents.
42.707 Cost-sharing rates and limitations on
indirect cost rates.
42.708 Quick-closeout procedure.
42.709 Scope.
42.709–1 General.
42.709–2 Responsibilities.
42.709–3 Assessing the penalty.
42.709–4 Computing interest.
42.709–5 Waiver of the penalty.
42.709–6 Contract clause.
42.800
42.801
42.802
42.803
General.
Contract administration functions.
Scope of subpart.
Notice of intent to disallow costs.
Contract clause.
Disallowing costs after incurrence.
Subpart 42.4—Correspondence and Visits
Subpart 42.9—Bankruptcy
42.401 Contract correspondence.
42.402 Visits to contractors’ facilities.
42.403 Evaluation of contract administration offices.
42.900 Scope of subpart.
42.901 General.
42.902 Procedures.
42.903 Solicitation provision and contract
clause.
Subpart 42.5—Postaward Orientation
42.500 Scope of subpart.
42.501 General.
42.502 Selecting contracts for postaward orientation.
42.503 Postaward conferences.
42.503–1 Postaward
conference
arrangements.
42.503–2 Postaward conference procedure.
42.503–3 Postaward conference report.
42.504 Postaward letters.
42.505 Postaward subcontractor conferences.
Subpart 42.10 [Reserved]
Subpart 42.11—Production Surveillance
and Reporting
42.1101 General.
42.1102 Applicability.
42.1103 Policy.
42.1104 Surveillance requirements.
42.1105 Assignment of criticality designator.
42.1106 Reporting requirements.
42.1107 Contract clause.
Subpart 42.6—Corporate Administrative
Contracting Officer
42.601
42.602
42.603
General.
Assignment and location.
Responsibilities.
Subpart 42.7—Indirect Cost Rates
42.700
42.701
Scope of subpart.
Definition.
Subpart 42.12—Novation and Change-ofName Agreements
42.1200 Scope of subpart.
42.1201 [Reserved]
42.1202 Responsibility for executing agreements.
42.1203 Processing agreements.
42.1204 Applicability of novation agreements.
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Federal Acquisition Regulation
42.003
42.1205 Agreement to recognize contractor’s
change of name.
Subpart 42.13—Suspension of Work, StopWork Orders, and Government Delay
of Work
42.1301
42.1302
42.1303
42.1304
42.1305
General.
Suspension of work.
Stop-work orders.
Government delay of work.
Contract clauses.
Subpart 42.14—Traffic and Transportation
Management
42.1401 General.
42.1402 Volume movements within the contiguous United States.
42.1403 Shipping documents covering f.o.b.
origin shipments.
42.1404 Shipments by parcel post or other
classes of mail.
42.1404–1 Parcel post eligible shipments.
42.1404–2 Contract clauses.
42.1405 Discrepancies incident to shipment
of supplies.
42.1406 Report of shipment.
42.1406–1 Advance notice.
42.1406–2 Contract clause.
Subpart 42.15—Contractor Performance
Information
42.1500
42.1501
42.1502
42.1503
Scope of subpart.
General.
Policy.
Procedures.
Subpart 42.16—Small Business Contract
Administration
42.1601
General.
Subpart 42.17—Forward Pricing Rate
Agreements
42.1701
Procedures.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42370, Sept. 19, 1983, unless
otherwise noted.
42.000
Scope of part.
This part prescribes policies and procedures for assigning and performing
contract administration and contract
audit services.
42.001
[Reserved]
42.002
Interagency agreements.
(a) Agencies shall avoid duplicate audits, reviews, inspections, and examinations of contractors or subcontractors, by more than one agency, through
the use of interagency agreements.
(b) Subject to the fiscal regulations
of the agencies and applicable interagency agreements, the requesting
agency shall reimburse the servicing
agency for rendered services in accordance with the Economy Act (31 U.S.C.
1535).
(c) When an interagency agreement is
established, the agencies are encouraged to consider establishing procedures for the resolution of issues that
may arise under the agreement.
[63 FR 9062, Feb. 23, 1998, as amended at 65
FR 36014, June 6, 2000]
42.003
Cognizant Federal agency.
(a) For contractors other than educational institutions and nonprofit organizations, the cognizant Federal
agency normally will be the agency
with the largest dollar amount of negotiated contracts, including options. For
educational institutions and nonprofit
organizations, the cognizant Federal
agency is established according to Subsection G.11 of OMB Circular A–21, Cost
Principles for Educational Institutions,
and Attachment A, Subsection E.2, of
OMB Circular A–122, Cost Principles for
Nonprofit Organizations, respectively.
(b) Once a Federal agency assumes
cognizance for a contractor, it should
remain cognizant for at least 5 years to
ensure continuity and ease of administration. If, at the end of the 5-year period, another agency has the largest
dollar amount of negotiated contracts,
including options, the two agencies
shall coordinate and determine which
will assume cognizance. However, if
circumstances warrant it and the affected agencies agree, cognizance may
transfer prior to the expiration of the
5-year period.
[63 FR 9062, Feb. 23, 1998]
[63 FR 9062, Feb. 23, 1998]
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42.101
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 42.1—Contract Audit
Services
SOURCE: 63 FR 9062, Feb. 23, 1998, unless
otherwise noted.
42.101 Contract audit responsibilities.
(a) The auditor is responsible for—
(1) Submitting information and advice to the requesting activity, based
on the auditor’s analysis of the contractor’s financial and accounting
records or other related data as to the
acceptability of the contractor’s incurred and estimated costs;
(2) Reviewing the financial and accounting aspects of the contractor’s
cost control systems; and
(3) Performing other analyses and reviews that require access to the contractor’s financial and accounting
records supporting proposed and incurred costs.
(b) Normally, for contractors other
than educational institutions and nonprofit organizations, the Defense Contract Audit Agency (DCAA) is the responsible Government audit agency.
However, there may be instances where
an agency other than DCAA desires
cognizance of a particular contractor.
In those instances, the two agencies
shall agree on the most efficient and
economical approach to meet contract
audit requirements. For educational
institutions and nonprofit organizations, audit cognizance will be determined according to the provisions of
OMB Circular A–133, Audits of Institutions of Higher Education and Other
Non-Profit Institutions.
42.102 Assignment of contract audit
services.
(a) As provided in agency procedures
or
interagency
agreements,
contracting officers may request audit
services directly from the responsible
audit agency cited in the Directory of
Federal Contract Audit Offices. The
audit request should include a suspense
date and should identify any information needed by the contracting officer.
(b) The responsible audit agency may
decline requests for services on a caseby-case basis, if resources of the audit
agency are inadequate to accomplish
the tasks. Declinations shall be in
writing.
42.103 Contract audit services directory.
(a) DCAA maintains and distributes
the Directory of Federal Contract
Audit Offices. The directory identifies
cognizant audit offices and the contractors over which they have cognizance. Changes to audit cognizance
shall be provided to DCAA so that the
directory can be updated.
(b) Agencies may obtain a copy of the
directory or information concerning
cognizant audit offices by contacting
the—Defense Contract Audit Agency,
ATTN: CMO, Publications Officer, 8725
John J. Kingman Road, Suite 2135, Fort
Belvoir, VA 22060–6219.
Subpart 42.2—Contract
Administration Services
SOURCE: 63 FR 9062, Feb. 23, 1998, unless
otherwise noted.
42.201 Contract
administration
responsibilities.
(a) For each contract assigned for administration, the contract administration office (CAO) (see 48 CFR 2.101)
shall—
(1) Perform the functions listed in
42.302(a) to the extent that they apply
to the contract, except for the functions specifically withheld;
(2) Perform the functions listed in
42.302(b) only when and to the extent
specifically authorized by the contracting officer; and
(3) Request supporting contract administration under 42.202(e) and (f)
when it is required.
(b) The Defense Contract Management Agency and other agencies offer a
wide variety of contract administration and support services.
[63 FR 9062, Feb. 23, 1998, as amended at 66
FR 2141, Jan. 10, 2001]
42.202 Assignment of contract administration.
(a) Delegating functions. As provided
in agency procedures, contracting officers may delegate contract administration or specialized support services, either through interagency agreements
or by direct request to the cognizant
CAO listed in the Federal Directory of
Contract
Administration
Services
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Federal Acquisition Regulation
42.203
Components. The delegation should include—
(1) The name and address of the CAO
designated to perform the administration (this information also shall be entered in the contract);
(2) Any special instructions, including any functions withheld or any specific authorization to perform functions listed in 42.302(b);
(3) A copy of the contract to be administered; and
(4) Copies of all contracting agency
regulations or directives that are—
(i) Incorporated into the contract by
reference; or
(ii) Otherwise necessary to administer the contract, unless copies have
been provided previously.
(b) Special instructions. As necessary,
the contracting officer also shall advise the contractor (and other activities as appropriate) of any functions
withheld from or additional functions
delegated to the CAO.
(c) Delegating additional functions. For
individual contracts or groups of contracts, the contracting office may delegate to the CAO functions not listed in
42.302: Provided that—
(1) Prior coordination with the CAO
ensures the availability of required resources;
(2) In the case of authority to issue
orders under provisioning procedures in
existing contracts and under basic ordering agreements for items and services identified in the schedule, the head
of the contracting activity or designee
approves the delegation; and
(3) The delegation does not require
the CAO to undertake new or follow-on
acquisitions.
(d) Rescinding functions. The contracting officer at the requesting agency may rescind or recall a delegation
to administer a contract or perform a
contract administration function, except for functions pertaining to cost
accounting standards and negotiation
of forward pricing rates and indirect
cost rates (also see 42.003). The requesting agency must coordinate with the
CAO to establish a reasonable transition period prior to rescinding or recalling the delegation.
(e) Secondary delegations of contract
administration. (1) A CAO that has been
delegated administration of a contract
under paragraph (a) or (c) of this section, or a contracting office retaining
contract administration, may request
supporting contract administration
from the CAO cognizant of the contractor location where performance of
specific contract administration functions is required. The request shall—
(i) Be in writing;
(ii) Clearly state the specific functions to be performed; and
(iii) Be accompanied by a copy of pertinent contractual and other necessary
documents.
(2) The prime contractor is responsible for managing its subcontracts.
The CAO’s review of subcontracts is
normally limited to evaluating the
prime contractor’s management of the
subcontracts (see Part 44). Therefore,
supporting contract administration
shall not be used for subcontracts unless—
(i) The Government otherwise would
incur undue cost;
(ii) Successful completion of the
prime contract is threatened; or
(iii) It is authorized under paragraph
(f) of this section or elsewhere in this
regulation.
(f) Special surveillance. For major system acquisitions (see Part 34), the contracting officer may designate certain
high risk or critical subsystems or
components for special surveillance in
addition to requesting supporting contract administration. This surveillance
shall be conducted in a manner consistent with the policy of requesting
that the cognizant CAO perform contract administration functions at a
contractor’s facility (see 42.002).
(g) Refusing delegation of contract administration. An agency may decline a
request for contract administration
services on a case-by-case basis if resources of the agency are inadequate to
accomplish the tasks. Declinations
shall be in writing.
42.203 Contract administration services directory.
The Defense Contract Management
Agency (DCMA) maintains and distributes the Federal Directory of Contract
Administration Services Components.
The directory lists the names and telephone numbers of those DCMA and
other agency offices that offer contract
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42.301
48 CFR Ch. 1 (10–1–03 Edition)
administration services within designated geographic areas and at specified contractor plants. Federal agencies may obtain a free copy of the directory on disk by writing to—Defense
Contract Management Agency, ATTN:
DCMA–FBP, 8725 John J. Kingman
Road, Fort Belvoir, VA 22060–6221, or
access it on the Internet at http://
www.dcma.mil/casbook/casbook.htm.
[63 FR 9062, Feb. 23, 1998, as amended at 66
FR 2141, Jan. 10, 2001]
Subpart 42.3—Contract
Administration Office Functions
42.301
General.
When a contract is assigned for administration under Subpart 42.2, the
contract administration office (CAO)
shall perform contract administration
functions in accordance with 48 CFR
Chapter I, the contract terms, and, unless otherwise agreed to in an interagency agreement (see 42.002), the applicable regulations of the servicing
agency.
[63 FR 9063, Feb. 23, 1998]
42.302 Contract administration functions.
(a) The contracting officer normally
delegates the following contract administration functions to a CAO. The
contracting officer may retain any of
these functions, except those in paragraphs (a)(5), (a)(9), and (a)(11) of this
section, unless the cognizant Federal
agency (see 2.101) has designated the
contracting officer to perform these
functions.
(1) Review the contractor’s compensation structure.
(2) Review the contractor’s insurance
plans.
(3) Conduct post-award orientation
conferences.
(4) Review and evaluate contractors’
proposals under subpart 15.4 and, when
negotiation will be accomplished by
the contracting officer, furnish comments and recommendations to that officer.
(5) Negotiate forward pricing rate
agreements (see 15.407–3).
(6) Negotiate advance agreements applicable to treatment of costs under
contracts currently assigned for administration (see 31.109).
(7) Determine the allowability of
costs suspended or disapproved as required (see subpart 42.8), direct the suspension or disapproval of costs when
there is reason to believe they should
be suspended or disapproved, and approve final vouchers.
(8) Issue Notices of Intent to Disallow
or not Recognize Costs (see subpart
42.8).
(9) Establish final indirect cost rates
and billing rates for those contractors
meeting the criteria for contracting officer determination in subpart 42.7.
(10) Attempt to resolve issues in controversy, using ADR procedures when
appropriate (see subpart 33.2); prepare
findings of fact and issue decisions
under the Disputes clause on matters
in which the administrative contracting officer (ACO) has the authority to take definitive action.
(11) In connection with Cost Accounting Standards (see 48 CFR 30.601 and 48
CFR Chapter 99 (FAR Appendix))—
(i) Determine the adequacy of the
contractor’s disclosure statements;
(ii) Determine whether disclosure
statements are in compliance with
Cost Accounting Standards and part 31;
(iii) Determine the contractor’s compliance with Cost Accounting Standards and disclosure statements, if applicable; and
(iv) Negotiate price adjustments and
execute
supplemental
agreements
under the Cost Accounting Standards
clauses at 48 CFR 52.230–2, 52.230–3,
52.230–4, 52.230–5, and 52.230–6.
(12) Review and approve or disapprove the contractor’s requests for
payments under the progress payments
or
performance-based
payments
clauses.
(13) Make payments on assigned contracts when prescribed in agency acquisition regulations.
(14) Manage special bank accounts.
(15) Ensure timely notification by the
contractor of any anticipated overrun
or underrun of the estimated cost
under cost-reimbursement contracts.
(16) Monitor the contractor’s financial condition and advise the contracting officer when it jeopardizes
contract performance.
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42.302
(17) Analyze quarterly limitation on
payments statements and recover overpayments from the contractor.
(18) Issue tax exemption forms.
(19) Ensure processing and execution
of duty-free entry certificates.
(20) For classified contracts, administer those portions of the applicable
industrial security program delegated
to the CAO (see Subpart 4.4).
(21) Issue work requests under maintenance, overhaul, and modification
contracts.
(22) Negotiate prices and execute supplemental agreements for spare parts
and other items selected through provisioning procedures when prescribed by
agency acquisition regulations.
(23) Negotiate and execute contractual documents for settlement of partial and complete contract terminations for convenience, except as otherwise prescribed by part 49.
(24) Negotiate and execute contractual documents settling cancellation
charges under multi-year contracts.
(25) Process and execute novation and
change of name agreements under subpart 42.12.
(26) Perform property administration
(see part 45).
(27) Approve contractor acquisition
or fabrication of special test equipment
under the clause at 52.245–18, Special
Test Equipment.
(28) Perform necessary screening, redistribution, and disposal of contractor
inventory.
(29) Issue contract modifications requiring the contractor to provide packing, crating, and handling services on
excess Government property. When the
ACO determines it to be in the Government’s interests, the services may be
secured from a contractor other than
the contractor in possession of the
property.
(30) In facilities contracts—
(i) Evaluate the contractor’s requests
for facilities and for changes to existing facilities and provide appropriate
recommendations to the contracting
officer;
(ii) Ensure required screening of facility items before acquisition by the
contractor;
(iii) Approve use of facilities on a
noninterference basis in accordance
with the clause at 52.245–9, Use and
Charges;
(iv) Ensure payment by the contractor of any rental due; and
(v) Ensure reporting of items no
longer needed for Government production.
(31) Perform production support, surveillance, and status reporting, including timely reporting of potential and
actual slippages in contract delivery
schedules.
(32) Perform preaward surveys (see
Subpart 9.1).
(33) Advise and assist contractors regarding their priorities and allocations
responsibilities and assist contracting
offices in processing requests for special assistance and for priority ratings
for privately owned capital equipment.
(34) Monitor contractor industrial
labor relations matters under the contract; apprise the contracting officer
and, if designated by the agency, the
cognizant labor relations advisor, of
actual or potential labor disputes; and
coordinate the removal of urgently required material from the strikebound
contractor’s plant upon instruction
from, and authorization of, the contracting officer.
(35) Perform traffic management
services, including issuance and control of Government bills of lading and
other tran portation documents.
(36) Review the adequacy of the contractor’s traffic operations.
(37) Review and evaluate preservation, packaging, and packing.
(38) Ensure contractor compliance
with contractual quality assurance requirements (see part 46).
(39) Ensure contractor compliance
with contractual safety requirements.
(40) Perform engineering surveillance
to assess compliance with contractual
terms for schedule, cost, and technical
performance in the areas of design, development, and production.
(41) Evaluate for adequacy and perform surveillance of contractor engineering efforts and management systems that relate to design, development, production, engineering changes,
subcontractors, tests, management of
engineering resources, reliability and
maintainability, data control systems,
configuration management, and independent research and development.
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42.302
48 CFR Ch. 1 (10–1–03 Edition)
(42) Review and evaluate for technical adequacy the contractor’s logistics support, maintenance, and modification programs.
(43) Report to the contracting office
any inadequacies noted in specifications.
(44) Perform engineering analyses of
contractor cost proposals.
(45) Review and analyze contractorproposed engineering and design studies and submit comments and recommendations to the contracting office, as required.
(46) Review engineering change proposals for proper classification, and
when required, for need, technical adequacy of design, producibility, and impact on quality, reliability, schedule,
and cost; submit comments to the contracting office.
(47) Assist in evaluating and make
recommendations for acceptance or rejection of waivers and deviations.
(48) Evaluate and monitor the contractor’s procedures for complying
with procedures regarding restrictive
markings on data.
(49) Monitor the contractor’s value
engineering program.
(50) Review, approve or disapprove,
and maintain surveillance of the contractor’s purchasing system (see part
44).
(51) Consent to the placement of subcontracts.
(52) Review, evaluate, and approve
plant or division-wide small, small disadvantaged and women-owned small
business master subcontracting plans.
(53) Obtain the contractor’s currently
approved company- or division-wide
plans for small, small disadvantaged
and women-owned small business subcontracting for its commercial products, or, if there is no currently approved plan, assist the contracting officer in evaluating the plans for those
products.
(54) Assist the contracting officer,
upon request, in evaluating an offeror’s
proposed small, small disadvantaged
and women-owned small business subcontracting plans, including documentation of compliance with similar
plans under prior contracts.
(55) By periodic surveillance, ensure
the contractor’s compliance with
small,
small
disadvantaged
and
women-owned small business subcontracting plans and any labor surplus
area contractual requirements; maintain documentation of the contractor’s
performance under and compliance
with these plans and requirements; and
provide advice and assistance to the
firms involved, as appropriate.
(56) Maintain surveillance of flight
operations.
(57) Assign and perform supporting
contract administration.
(58) Ensure timely submission of required reports.
(59) Issue administrative changes,
correcting errors or omissions in typing, contractor address, facility or activity code, remittance address, computations, which do not require additional contract funds, and other such
changes (see 43.101).
(60) Cause release of shipments from
contractor’s plants according to the
shipping instructions. When applicable,
the order of assigned priority shall be
followed; shipments within the same
priority shall be determined by date of
the instruction.
(61) Obtain contractor proposals for
any contract price adjustments resulting from amended shipping instructions. Review all amended shipping instructions on a periodic, consolidated
basis to ensure that adjustments are
timely made. Except when the ACO has
settlement authority, the ACO shall
forward the proposal to the contracting
officer for contract modification. The
ACO shall not delay shipments pending
completion and formalization of negotiations of revised shipping instructions.
(62) Negotiate and/or execute supplemental agreements, as required, making changes in packaging subcontractors or contract shipping points.
(63) Cancel unilateral purchase orders
when notified of nonacceptance by the
contractor. The CAO shall notify the
contracting officer when the purchase
order is canceled.
(64) Negotiated and execute one-time
supplemental agreements providing for
the extension of contract delivery
schedules up to 90 days on contracts
with an assigned Critically Designator
of C (see 42.1105). Notification that the
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contract delivery schedule is being extended shall be provided to the contracting office. Subsequent extensions
on any individual contract shall be authorized only upon concurrence of the
contracting office.
(65) Accomplish administrative closeout procedures (see 4.804–5).
(66) Determine that the contractor
has a drug-free workplace program and
drug free awareness program (see subpart 23.5).
(67) Support the program, product,
and project offices regarding program
reviews, program status, program performance and actual or anticipated
program problems.
(68) Monitor the contractor’s environmental practices for adverse impact
on contract performance or contract
cost, and for compliance with environmental requirements specified in the
contract. ACO responsibilities include—
(i) Requesting environmental technical assistance, if needed;
(ii) Monitoring contractor compliance with specifications requiring the
use of environmentally preferable products, energy-efficient products, and
materials or delivery of end products
with specified recovered material content. This must occur as part of the
quality assurance procedures set forth
in Part 46; and
(iii) As required in the contract, ensuring that the contractor complies
with the reporting requirements relating to recovered material content utilized in contract performance (see subpart 23.4).
(69) Administer commercial financing
provisions and monitor contractor security to ensure its continued adequacy to cover outstanding payments,
when on-site review is required.
(70) Deobligate excess funds after
final price determination.
(b) The CAO shall perform the following functions only when and to the
the extent specifically authorized by
the contracting office:
(1) Negotiate or negotiate and execute supplemental agreements incorporating contractor proposals resulting
from change orders issued under the
Changes clause. Before completing negotiations, coordinate any delivery
schedule change with the contracting
office.
(2) Negotiate prices and execute
priced exhibits for unpriced orders
issued by the contracting officer under
basic ordering agreements.
(3) Negotiate or negotiate and execute supplemental agreements changing contract delivery schedules.
(4) Negotiate or negotiate and execute supplemental agreements providing for the deobligation of unexpended dollar balances considered excess to known contract requirements.
(5) Issue amended shipping instructions and, when necessary, negotiate
and execute supplemental agreements
incorporating contractor proposals resulting from these instructions.
(6) Negotiate changes to interim billing prices.
(7) Negotiate and definitize adjustments to contract prices resulting from
exercise of an economic price adjustment clause (see subpart 16.2).
(8) Issue change orders and negotiate
and execute resulting supplemental
agreements under contracts for ship
construction, conversion, and repair.
(9) Execute supplemental agreements
on firm-fixed price supply contracts to
reduce required contract line item
quantities and deobligate excess funds
when notified by the contractor of an
inconsequential delivery shortage, and
it is determined that such action is in
the best interests of the Government,
notwithstanding the default provisions
of the contract. Such action will be
taken only upon the written request of
the contractor and, in no event shall
the total downward contract price adjustment resulting from an inconsequential delivery shortage exceed
$250.00 or 5 percent of the contract
price, whichever is less.
(10) Execute supplemental agreements to permit a chance in place of
inspection at origin specified in firm
fixed-price supply contracts awarded to
nonmanufacturers, as deemed necessary to protect the Government’s interests.
(11) Prepare evaluations of contractor performance in accordance
with subpart 42.15.
(c) Any additional contract administration functions not listed in 42.302(a)
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42.401
48 CFR Ch. 1 (10–1–03 Edition)
and (b), or not otherwise delegated, remain the responsibility of the contracting office.
[48 FR 42370, Sept. 19, 1983, as amended at 54
FR 34756, Aug. 21, 1989; 54 FR 48989, Nov. 28,
1989; 55 FR 21708, May 25, 1990; 55 FR 38517,
Sept. 18, 1990; 56 FR 15154, Apr. 15, 1991; 59 FR
11382, Mar. 10, 1994; 59 FR 67043, Dec. 28, 1994;
60 FR 16719, Mar. 31, 1995; 60 FR 28498, May 31,
1995; 60 FR 48264, Sept. 18, 1995; 60 FR 49717,
Sept. 26, 1995; 61 FR 18918, Apr. 29, 1996; 62 FR
237, Jan. 2, 1997; 62 FR 40237, July 25, 1997; 62
FR 44812, Aug. 22, 1997; 62 FR 51271, Sept. 30,
1997; 63 FR 9063, Feb. 23, 1998; 64 FR 72445,
Dec. 27, 1999; 66 FR 2133, Jan. 10, 2001; 66 FR
65353, Dec. 18, 2001]
Subpart 42.4—Correspondence
and Visits
42.401 Contract correspondence.
(a) The contracting officer (or other
contracting agency personnel) normally shall (1) forward correspondence
relating to assigned contract administration functions through the cognizant contract administration office
(CAO) to the contractor and (2) provide
a copy for the CAO’s file. When urgency requires sending such correspondence directly to the contractor,
a copy shall be sent concurrently to
the CAO.
(b) The CAO shall send the contracting office a copy of pertinent correspondence conducted between the
CAO and the contractor.
42.402 Visits to contractors’ facilities.
(a) Government personnel planning
to visit a contractor’s facility in connection with one or more Government
contracts shall provide prior notification to the cognizant CAO, with the
following information, sufficiently in
advance to permit the CAO to make
necessary arrangements. Such notification is for the purpose of eliminating
duplicative reviews, requests, investigations, and audits relating to the
contract administration functions in
subpart 42.3 delegated to CAO’s and
shall, as a minimum, include the following (see also paragraph (b) of this
section):
(1) Visitors’ names, official positions,
and security clearances.
(2) Date and duration of visit.
(3) Name and address of contractor
and personnel to be contacted.
(4) Contract number, program involved, and purpose of visit.
(5) If desired, visitors to a contractor’s plant may request that a representative of the CAO accompany
them. In any event, the CAO has final
authority to decide whether a representative shall accompany a visitor.
(b) If the visit will result in reviewing, auditing, or obtaining any information from the contractor relating to
contract administration functions, the
prospective visitor shall identify the
information in sufficient detail so as to
permit the CAO, after consultation
with the contractor and the cognizant
audit office, to determine whether such
information, adequate to fulfill the requirement, has recently been reviewed
by or is available within the Government. If so, the CAO will discourage
the visit and refer the prospective visitor to the Government office where
such information is located. Where the
office is the CAO, such information will
be immediately forwarded or otherwise
made available to the requestor.
(c) Visitors shall fully inform the
CAO of any agreements reached with
the contractor or other results of the
visit that may affect the CAO.
[48 FR 42370, Sept. 19, 1983, as amended at 53
FR 662, Jan. 11, 1988; 53 FR 17859, May 18,
1988]
42.403 Evaluation of contract administration offices.
Onsite inspections or evaluations of
the performance of the assigned functions of a contract administration office shall be accomplished only by or
under the direction of the agency of
which that office is a part.
Subpart 42.5—Postaward
Orientation
42.500
Scope of subpart.
This subpart prescribes policies and
procedures for the postaward orientation of contractors and subcontractors
through (a) a conference or (b) a letter
or other form of written communication.
42.501
General.
(a) A postaward orientation aids both
Government and contractor personnel
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to (l) achieve a clear and mutual understanding of all contract requirements
and (2) identify and resolve potential
problems. However, it is not a substitute for the contractor’s fully understanding the work requirements at the
time offers are submitted, nor is it to
be used to alter the final agreement arrived at in any negotiations leading to
contract award.
(b) Postaward orientation is encouraged to assist small business, small disadvantaged and women-owned small
business concerns (see part 19).
(c) While cognizant Government or
contractor personnel may request the
contracting officer to arrange for orientation, it is up to the contracting officer to decide whether a postaward
orientation in any form is necessary.
(d) Maximum benefits will be realized
when orientation is conducted promptly after award.
[48 FR 42370, Sept. 19, 1983, as amended at 60
FR 48264, Sept. 18, 1995]
42.502 Selecting
contracts
postaward orientation.
for
When deciding whether postaward
orientation is necessary and, if so,
what form it shall take, the contracting officer shall consider, as a
minimum, the—
(a) Nature and extent of the preaward
survey and any other prior discussions
with the contractor;
(b) Type, value, and complexity of
the contract;
(c) Complexity and acquisition history of the product or service;
(d) Requirements for spare parts and
related equipment;
(e) Urgency of the delivery schedule
and relationship of the product or service to critical programs;
(f) Length of the planned production
cycle;
(g) Extent of subcontracting;
(h) Contractor’s performance history
and experience with the product or
service;
(i) Contractor’s status, if any, as a
small business, small disadvantaged or
women-owned small business concern;
(j) Contractor’s performance history
with small, small disadvantaged and
women-owned small business subcontracting programs;
(k) Safety precautions required for
hazardous materials or operations; and
(l) Complex financing arrangements,
such as progress payments, advance
payments, or guaranteed loans.
[48 FR 42370, Sept. 19, 1983, as amended at 60
FR 48264, Sept. 18, 1995]
42.503
Postaward conferences.
42.503–1 Postaward
rangements.
conference
(a) The contracting officer who decides that a conference is needed is responsible for—
(1) Establishing the time and place of
the conference;
(2) Preparing the agenda, when necessary;
(3) Notifying appropriate Government representatives (e.g., contracting/
contract administration office) and the
contractor;
(4) Designating or acting as the
chairperson;
(5) Conducting a preliminary meeting
of Government personnel; and
(6) Preparing a summary report of
the conference.
(b) When the contracting office initiates a conference, the arrangements
may be made by that office or, at its
request, by the contract administration office.
42.503–2 Postaward conference procedure.
The chairperson of the conference
shall conduct the meeting. Unless a
contract change is contemplated, the
chairperson shall emphasize that it is
not the purpose of the meeting to
change the contract. The contracting
officer may make commitments or give
directions within the scope of the contracting officer’s authority and shall
put in writing and sign any commitment or direction, whether or not it
changes the contract. Any change to
the contract that results from the
postaward conference shall be made
only by a contract modification referencing the applicable terms of the
contract. Participants without authority to bind the Government shall not
take action that in any way alters the
contract. The chairperson shall include
in the summary report (see 42.503–3
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42.503–3
48 CFR Ch. 1 (10–1–03 Edition)
below) all information and guidance
provided to the contractor.
[66 FR 42370, Sept. 19, 1983, as amended at 66
FR 2133, Jan. 10, 2001]
42.503–3 Postaward conference report.
The chairperson shall prepare and
sign a report of the postaward conference. The report shall cover all
items discussed, including areas requiring resolution, controversial matters,
the names of the participants assigned
responsibility for further actions, and
the due dates for the actions. The
chairperson shall furnish copies of the
report to the contracting office, the
contract administration office, the
contractor, and others who require the
information.
42.504 Postaward letters.
In some circumstances, a letter or
other written form of communication
to the contractor may be adequate
postaward orientation (in lieu of a conference). The letter should identify the
Government representative responsible
for administering the contract and cite
any unusual or significant contract requirements. The rules on changes to
the contract in 42.503–2 also apply here.
42.505 Postaward subcontractor conferences.
(a) The prime contractor is generally
responsible for conducting postaward
conferences with subcontractors. However, the prime contractor may invite
Government representatives to a conference with subcontractors, or the
Government may request that the
prime contractor initiate a conference
with subcontractors. The prime contractor should ensure that representatives from involved contract administration offices are invited.
(b) Government representatives (1)
must recognize the lack of privity of
contract between the Government and
subcontractors, (2) shall not take action that is inconsistent with or alters
subcontracts, and (3) shall ensure that
any changes in direction or commitment affecting the prime contract or
contractor resulting from a subcontractor conference are made by written
direction of the contracting officer to
the prime contractor in the same manner as described in 42.503–2.
Subpart 42.6—Corporate
Administrative Contracting Officer
42.601 General.
Contractors with more than one
operational location (e.g., division,
plant, or subsidiary) often have corporate-wide policies, procedures, and
activities requiring Government review
and approval and affecting the work of
more than one administrative contracting officer (ACO). In these circumstances, effective and consistent
contract administration may require
the assignment of a corporate administrative contracting officer (CACO) to
deal with corporate management and
to perform selected contract administration functions on a corporate-wide
basis.
42.602 Assignment and location.
(a) A CACO may be assigned only
when (1) the contractor has at least
two locations with resident ACO’s or
(2) the need for a CACO is approved by
the agency head or designee (for this
purpose, a nonresident ACO will be
considered as resident if at least 75 percent of the ACO’s effort is devoted to a
single contractor). One of the resident
ACO’s may be designated to perform
the CACO functions, or a full-time
CACO may be assigned. In determining
the location of the CACO, the responsible agency shall take into account
such factors as the location(s) of the
corporate records, corporate office,
major plant, cognizant government
auditor, and overall cost effectiveness.
(b) A decision to initiate or discontinue a CACO assignment should be
based on such factors as (1) the benefits
of coordination and liaison at the corporate level, (2) the volume of Government sales, (3) the degree of control exercised by the contractor’s corporate
office over Government-oriented lowertier operating elements, and (4) the impact of corporate policies and procedures on those elements.
(c) Responsibility for assigning a
CACO shall be determined as follows:
(1) When all locations of a corporate
entity are under the contract administration cognizance of a single agency,
that agency is responsible.
(2) When the locations are under the
contract administration cognizance of
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more than one agency, the agencies
concerned shall agree on the responsible agency (normally on the basis of
the agency with the largest dollar balance, including options, of affected
contracts). In such cases, agencies may
also consider geographic location.
(d) The directory of contract administration services components referenced in 42.203 includes a listing of
CACO’s and the contractors for which
they are assigned responsibility.
[48 FR 42370, Sept. 19, 1983, as amended at 63
FR 9064, Feb. 23, 1998]
42.603 Responsibilities.
(a) The CACO shall perform, on a corporate-wide basis, the contract administration functions as designated by
the responsible agency. Typical CACO
functions include (1) the determination
of final indirect cost rates for cost-reimbursement contracts, (2) establishment of advance agreements or recommendations on corporate/home office expense allocations, and (3) administration of Cost Accounting Standards
(CAS) applicable to corporate-level and
corporate-directed accounting practices.
(b) The CACO shall—
(1) Fully utilize the responsible contract audit agency financial and advisory accounting services, including (i)
advice regarding the acceptability of
corporate-wide policies and (ii) advisory audit reports;
(2) Keep cognizant ACO’s and auditors informed of important matters
under consideration and determinations made; and
(3) Solicit their advice and participation as appropriate.
[48 FR 42370, Sept. 19, 1983, as amended at 63
FR 9064, Feb. 23, 1998]
Subpart 42.7—Indirect Cost Rates
42.700 Scope of subpart.
This subpart prescribes policies and
procedures for establishing (a) billing
rates and (b) final indirect cost rates.
42.701 Definition.
Billing rate as used in this subpart
means an indirect cost rate (1) established temporarily for interim reimbursement of incurred indirect costs
and (2) adjusted as necessary pending
establishment of final indirect cost
rates.
[48 FR 42370, Sept. 19, 1983, as amended at 59
FR 11387, Mar. 10, 1994; 63 FR 9064, Feb. 23,
1998; 66 FR 2133, Jan. 10, 2001]
42.702
Purpose.
(a) Establishing final indirect cost
rates under this subpart provides—
(1) Uniformity of approach with a
contractor when more than one contract or agency is involved;
(2) Economy of administration; and
(3) Timely settlement under cost-reimbursement contracts.
(b) Establishing billing rates provides
a method for interim reimbursement of
indirect costs at estimated rates subject to adjustment during contract performance and at the time the final indirect cost rates are established.
42.703
General.
42.703–1
Policy.
(a) A single agency (see 42.705–1) shall
be responsible for establishing final indirect cost rates for each business unit.
These rates shall be binding on all
agencies and their contracting offices,
unless otherwise specifically prohibited
by statute. An agency shall not perform an audit of indirect cost rates
when the contracting officer determines that the objectives of the audit
can reasonably be met by accepting the
results of an audit that was conducted
by any other department or agency of
the Federal Government (10 U.S.C.
2313(d) and 41 U.S.C. 254d(d)).
(b) Billing rates and final indirect
cost rates shall be used in reimbursing
indirect costs under cost-reimbursement contracts and in determining
progress payments under fixed-price
contracts.
(c) To ensure compliance with 10
U.S.C. 2324(a) and 41 U.S.C. 256(a)—
(1) Final indirect cost rates shall be
used for contract closeout for a business unit, unless the quick-closeout
procedure in 42.708 is used. These final
rates shall be binding for all cost-reimbursement contracts at the business
unit, subject to any specific limitation
in a contract or advance agreement;
and
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48 CFR Ch. 1 (10–1–03 Edition)
(2) Established final indirect cost
rates shall be used in negotiating the
final price of fixed-price incentive and
fixed-price redeterminable contracts
and in other situations requiring that
indirect costs be settled before contract prices are established, unless the
quick-closeout procedure in 42.708 is
used.
[48 FR 42370, Sept. 19, 1983, as amended at 60
FR 42661, Aug. 16, 1995. Redesignated at 60 FR
42664, Aug. 16, 1995, as amended at 62 FR 274,
Jan. 2, 1997; 63 FR 9064, Feb. 23, 1998]
42.703–2
Certificate of indirect costs.
(a) General. In accordance with 10
U.S.C. 2324(h) and 41 U.S.C. 256(h), a
proposal shall not be accepted and no
agreement shall be made to establish
final indirect cost rates unless the
costs have been certified by the contractor.
(b) Waiver of certification. (1) The
agency head, or designee, may waive
the certification requirement when—
(i) It is determined to be in the interest of the United States; and
(ii) The reasons for the determination are put in writing and made available to the public.
(2) A waiver may be appropriate for a
contract with—
(i) A foreign government or international organization, such as a subsidiary body of the North Atlantic
Treaty Organization;
(ii) A state or local government subject to OMB Circular A–87;
(iii) An educational institution subject to OMB Circular A–21; and
(iv) A nonprofit organization subject
to OMB Circular A–122.
(c) Failure to certify. (1) If the contractor has not certified its proposal
for final indirect cost rates and a waiver is not appropriate, the contracting
officer may unilaterally establish the
rates.
(2) Rates established unilaterally
should be—
(i) Based on audited historical data
or other available data as long as unallowable costs are excluded; and
(ii) Set low enough to ensure that unallowable costs will not be reimbursed.
(d) False certification. The contracting
officer should consult with legal counsel to determine appropriate action
when a contractor’s certificate of final
indirect costs is thought to be false.
(e) Penalties for unallowable costs. 10
U.S.C. 2324(a) through (d) and 41 U.S.C.
256 (a) through (d) prescribe penalties
for submission of unallowable costs in
final indirect cost rate proposals (see
42.709 for penalties and contracting officer responsibilities).
(f) Contract clause. (1) Except as provided in paragraph (f)(2) of this subsection, the clause at 52.242–4, Certification of Final Indirect Costs, shall be
incorporated into all solicitations and
contracts which provide for establishment of final indirect cost rates.
(2) The Department of Energy may
provide an alternate clause in its agency supplement for its Management and
Operating contracts.
[60 FR 42664, Aug. 16, 1995, as amended at 62
FR 237, Jan. 2, 1997; 62 FR 10710, Mar. 10, 1997;
63 FR 9064, Feb. 23, 1998]
42.704 Billing rates.
(a) The contracting officer (or cognizant Federal agency official) or auditor responsible under 42.705 for establishing the final indirect cost rates also
shall be responsible for determining
the billing rates.
(b) The contracting officer (or cognizant Federal agency official) or auditor shall establish billing rates on the
basis of information resulting from recent review, previous rate audits or experience, or similar reliable data or experience of other contracting activities. In establishing billing rates, the
contracting officer (or cognizant Federal agency official) or auditor should
ensure that the billing rates are as
close as possible to the final indirect
cost rates anticipated for the contractor’s fiscal period, as adjusted for any
unallowable costs. When the contracting officer (or cognizant Federal
agency official) or auditor determines
that the dollar value of contracts requiring use of billing rates does not
warrant submission of a detailed billing rate proposal, the billing rates may
be established by making appropriate
adjustments from the prior year’s indirect cost experience to eliminate unallowable and nonrecurring costs and to
reflect new or changed conditions.
(c) Once established, billing rates
may be prospectively or retroactively
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revised by mutual agreement of the
contracting officer (or cognizant Federal agency official) or auditor and the
contractor at either party’s request, to
prevent substantial overpayment or
underpayment. When agreement cannot be reached, the billing rates may
be unilaterally determined by the contracting officer (or cognizant Federal
agency official).
(d) The elements of indirect cost and
the base or bases used in computing
billing rates shall not be construed as
determinative of the indirect costs to
be distributed or of the bases of distribution to be used in the final settlement.
(e) When the contractor provides to
the cognizant contracting officer the
certified final indirect cost rate proposal in accordance with 42.705–(b) or
42.705–(b), the contractor and the Government may mutually agree to revise
billing rates to reflect the proposed indirect cost rates, as approved by the
Government to reflect historically disallowed amounts from prior years’ audits, until the proposal has been audited and settled. The historical decrement will be determined by either the
cognizant contracting officer (42.705–
1(b)) or the cognizant auditor (42.705–
2(b)).
[48 FR 42370, Sept. 19, 1983, as amended at 61
FR 69296, Dec. 31, 1996; 63 FR 9064, Feb. 23,
1998]
42.705 Final indirect cost rates.
(a) Final indirect cost rates shall be
established on the basis of—
(1) Contracting officer determination
procedure (see 42.705–1) or
(2) Auditor determination procedure
(see 42.705–2).
(b) Within 120 days (or longer period,
if approved in writing by the contracting officer,) after settlement of
the final annual indirect cost rates for
all years of a physically complete contract, the contractor must submit a
completion invoice or voucher reflecting the settled amounts and rates. To
determine whether a period longer
than 120 days is appropriate, the contracting officer should consider whether
there
are
extenuating
circumstances, such as the following:
(1) Pending closeout of subcontracts
awaiting Government audit.
(2) Pending contractor, subcontractor, or Government claims.
(3) Delays in the disposition of Government property.
(4) Delays in contract reconciliation.
(5) Any other pertinent factors.
(c)(1) If the contractor fails to submit
a completion invoice or voucher within
the time specified in paragraph (b) of
this section, the contracting officer
may—
(i) Determine the amounts due to the
contractor under the contract; and
(ii) Record this determination in a
unilateral modification to the contract.
(2) This contracting officer determination must be issued as a final decision in accordance with 33.211.
[61 FR 69296, Dec. 31, 1996, as amended at 67
FR 6119, Feb. 8, 2002]
42.705–1 Contracting
officer
mination procedure.
(a) Applicability and responsibility.
Contracting officer determination shall
be used for the following, with the indicated cognizant contracting officer (or
cognizant Federal agency official) responsible for establishing the final indirect cost rates:
(1) Business units of a multidivisional corporation under the cognizance of a corporate administrative
contracting officer (see subpart 42.6),
with that officer responsible for the determination, assisted, as required, by
the administrative contracting officers
assigned to the individual business
units. Negotiations may be conducted
on a coordinated or centralized basis,
depending upon the degree of centralization within the contractor’s organization.
(2) Business units not under the cognizance of a corporate administrative
contracting officer, but having a resident administrative contracting officer
(see 42.602), with that officer responsible for the determination. For this
purpose, a nonresident administrative
contracting officer is considered as
resident if at least 75 percent of the administrative contracting officer’s time
is devoted to a single contractor.
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48 CFR Ch. 1 (10–1–03 Edition)
(3) For business units not included in
paragraph (a)(1) or (a)(2) of this subsection, the contracting officer (or cognizant Federal agency official) will determine whether the rates will be contracting officer or auditor determined.
(4) Educational institutions (see
42.705–3).
(5) State and local governments (see
42.705–4).
(6) Nonprofit organizations other
than educational and state and local
governments (see 42.705–5).
(b) Procedures. (1) In accordance with
the Allowable Cost and Payment clause
at 52.216–7 or 52.216–13, the contractor
shall submit to the contracting officer
(or cognizant Federal agency official)
and to the cognizant auditor a final indirect cost rate proposal. The required
content of the proposal and supporting
data will vary depending on such factors as business type, size, and accounting system capabilities. The contractor, contracting officer, and auditor must work together to make the
proposal, audit, and negotiation process as efficient as possible. Accordingly, each contractor shall submit an
adequate proposal to the contracting
officer (or cognizant Federal agency official) and auditor within the 6-month
period following the expiration of each
of its fiscal years. Reasonable extensions, for exceptional circumstances
only, may be requested in writing by
the contractor and granted in writing
by the contracting officer. A contractor shall support its proposal with
adequate supporting data. For guidance on what generally constitutes an
adequate final indirect cost rate proposal and supporting data, contractors
should refer to the Model Incurred Cost
Proposal in Chapter 6 of the Defense
Contract Audit Agency Pamphlet No.
7641.90, Information for Contractors,
available via the Internet at http://
www.dcaa.mil.
(2) The auditor shall submit to the
contracting officer (or cognizant Federal agency official) an advisory audit
report identifying any relevant advance agreements or restrictive terms
of specific contracts.
(3) The contracting officer (or cognizant Federal agency official) shall
head the Government negotiating
team, which includes the cognizant
auditor and technical or functional
personnel as required. Contracting offices having significant dollar interest
shall be invited to participate in the
negotiation and in the preliminary discussion of critical issues. Individuals or
offices that have provided a significant
input to the Government position
should be invited to attend.
(4) The Government negotiating team
shall develop a negotiation position.
Pursuant to 10 U.S.C. 2324(f) and 41
U.S.C. 256(f), the contracting, officer
shall—
(i) Not resolve any questioned costs
until obtaining—
(A) Adequate documentation on the
costs; and
(B) The contract auditor’s opinion on
the allowability of the costs.
(ii) Whenever possible, invite the
contract auditor to serve as an advisor
at any negotiation or meeting with the
contractor on the determination of the
contractor’s final indirect cost rates.
(5) The cognizant contracting officer
shall—
(i) Conduct negotiations;
(ii) Prepare a written indirect cost
rate agreement conforming to the requirements of the contracts;
(iii) Prepare, sign, and place in the
contractor general file (see 4.801(c)(3)) a
negotiation memorandum covering (A)
the disposition of significant matters
in the advisory audit report, (B) reconciliation of all costs questioned, with
identification of items and amounts allowed or disallowed in the final settlement as well as the disposition of period costing or allocability issues, (C)
reasons why any recommendations of
the auditor or other Government advisors were not followed, and (D) identification of cost or pricing data submitted during the negotiations and relied upon in reaching a settlement; and
(iv) Distribute resulting documents
in accordance with 42.706.
(v) Notify the contractor of the individual costs which were considered unallowable and the respective amounts
of the disallowance.
[48 FR 42370, Sept. 19, 1983, as amended at 60
FR 42661, Aug. 16, 1995; 62 FR 51258, Sept. 30,
1997; 63 FR 9064, Feb. 23, 1998; 67 FR 6120, Feb.
8, 2002]
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Federal Acquisition Regulation
42.705–3
42.705–2 Auditor determination procedure.
(a) Applicability and responsibility. (1)
The cognizant Government auditor
shall establish final indirect cost rates
for business units not covered in 42.705–
1(a).
(2) In addition, auditor determination
may be used for business units that are
covered in 42.705–1(a) when the contracting officer (or cognizant Federal
agency official) and auditor agree that
the indirect costs can be settled with
little difficulty and any of the following circumstances apply:
(i) The business unit has primarily
fixed-price contracts, with only minor
involvement in cost-reimbursement
contracts.
(ii) The administrative cost of contracting officer determination would
exceed the expected benefits.
(iii) The business unit does not have
a history of disputes and there are few
cost problems.
(iv) The contracting officer (or cognizant Federal agency official) and
auditor
agree
that
special
circumstances require auditor determination.
(b) Procedures. (1) The contractor
shall submit to the cognizant contracting officer (or cognizant Federal
agency official) and auditor a final indirect cost rate proposal in accordance
with 42.705–1(b)(1).
(2) Upon receipt of a proposal, the
auditor shall—
(i) Audit the proposal and seek agreement on indirect costs with the contractor;
(ii) Prepare an indirect cost rate
agreement conforming to the requirements of the contracts. The agreement
shall be signed by the contractor and
the auditor;
(iii) If agreement with the contractor
is not reached, forward the audit report
to the contracting officer (or cognizant
Federal agency official) identified in
the Directory of Contract Administration Services Components (see 42.203),
who will then resolve the disagreement; and
(iv) Distribute resulting documents
in accordance with 42.706.
[48 FR 42370, Sept. 19, 1983, as amended at 59
FR 67052, Dec. 28, 1994; 62 FR 51258, Sept. 30,
1997; 63 FR 9065, Feb. 23, 1998]
42.705–3 Educational institutions.
(a) General. (1) Postdetermined final
indirect cost rates shall be used in the
settlement of indirect costs for all
cost-reimbursement contracts with
educational institutions, unless predetermined final indirect cost rates are
authorized and used (see paragraph (b)
below).
(2) OMB Circular No. A–21, Cost Principles for Educational Institutions, assigns each educational institution to a
single Government agency for the negotiation of indirect cost rates and provides that those rates shall be accepted
by all Federal agencies. Cognizant Government agencies and educational institutions are listed in the Directory of
Federal Contract Audit Offices (see
42.103).
(3) The cognizant agency shall establish the billing rates and final indirect
cost rates at the educational institution, consistent with the requirements
of this subpart, subpart 31.3, and the
OMB Circular. The agency shall follow
the procedures outlined in 42.705–1(b).
(4) If the cognizant agency is unable
to reach agreement with an institution, the appeals system of the cognizant agency shall be followed for resolution of the dispute.
(b) Predetermined final indirect cost
rates. (1) Under cost-reimbursement research and development contracts with
universities, colleges, or other educational institutions (41 U.S.C. 254a),
payment for reimbursable indirect
costs may be made on the basis of predetermined final indirect cost rates.
The cognizant agency is not required
to establish predetermined rates, but if
they are established, their use must be
extended to all the institution’s Government contracts.
(2) In deciding whether the use of predetermined rates would be appropriate
for the educational institution concerned, the agency should consider
both the stability of the institution’s
indirect costs and bases over a period
of years and any anticipated changes in
the amount of the direct and indirect
costs.
(3) Unless their use is approved at a
level in the agency (see subparagraph
(a)(2) above) higher than the contracting officer, predetermined rates
shall not be used when—
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42.705–4
48 CFR Ch. 1 (10–1–03 Edition)
(i) There has been no recent audit of
the indirect costs;
(ii) There have been frequent or wide
fluctuations in the indirect cost rates
and the bases over a period of years; or
(iii) The estimated reimbursable
costs for any individual contract are
expected to exceed $1 million annually.
(4)(i) If predetermined rates are to be
used and no rates have been previously
established for the institution’s current fiscal year, the agency shall obtain from the institution a proposal for
predetermined rates.
(ii) If the proposal is found to be generally acceptable, the agency shall negotiate the predetermined rates with
the institution. The rates should be
based on an audit of the institution’s
costs for the year immediately preceding the year in which the rates are
being negotiated. If this is not possible,
an earlier audit may be used, but appropriate steps should be taken to
identify and evaluate significant variations in costs incurred or in bases
used that may have a bearing on the
reasonableness of the proposed rates.
However, in the case of smaller contracts (e.g., $100,000 or less), an audit
made at an earlier date is acceptable if
(A) there have been no significant
changes in the contractor’s organization and (B) it is reasonably apparent
that another audit would have little effect on the rates finally agreed upon
and the potential for overpayment of
indirect cost is relatively insignificant.
(5) If predetermined rates are used—
(i) The contracting officer shall include the negotiated rates and bases in
the contract Schedule; and
(ii) See 16.307(i), which prescribes the
clause at 52.216–15, Predetermined Indirect Cost Rates.
(6) Predetermined indirect cost rates
shall be applicable for a period of not
more than four years. The agency shall
obtain the contractor’s proposal for
new predetermined rates sufficiently in
advance so that the new rates, based on
current data, may be promptly negotiated near the beginning of the new
fiscal year or other period agreed to by
the parties (see paragraphs (b) and (d)
of the clause at 52.216–15, Predetermined Indirect Cost Rates).
(7) Contracting officers shall use billing rates established by the agency to
reimburse the contractor for work performed during a period not covered by
predetermined rates.
[48 FR 42370, Sept. 19, 1983, as amended at 61
FR 31622, June 20, 1996; 63 FR 9065, Feb. 23,
1998]
42.705–4
State and local governments.
OMB Circular No. A–87 concerning
cost principles for state and local governments (see subpart 31.6) establishes
the cognizant agency concept and procedures for determining a cognizant
agency for approving state and local
government indirect costs associated
with federally-funded programs and activities. The indirect cost rates negotiated by the cognizant agency will be
used by all Federal agencies that also
award contracts to these same state
and local governments.
42.705–5 Nonprofit organizations other
than educational and state and
local governments.
See OMB Circular No. A–122.
42.706
Distribution of documents.
(a) The contracting officer or auditor
shall promptly distribute executed copies of the indirect cost rate agreement
to the contractor and to each affected
contracting agency and shall provide
copies of the agreement for the contract files, in accordance with the guidance for contract modifications in subpart 4.2, Contract Distribution.
(b) Copies of the negotiation memorandum prepared under contracting officer determination or audit report prepared under auditor determination
shall be furnished, as appropriate, to
the contracting offices and Government audit offices.
42.707 Cost-sharing rates and limitations on indirect cost rates.
(a) Cost-sharing arrangements, when
authorized, may call for the contractor
to participate in the costs of the contract by accepting indirect cost rates
lower than the anticipated actual
rates. In such cases, a negotiated indirect cost rate ceiling may be incorporated into the contract for prospective application. For cost sharing
under research and development contracts, see 35.003(b).
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Federal Acquisition Regulation
42.709–1
(b)(1) Other situations may make it
prudent to provide a final indirect cost
rate ceiling in a contract. Examples of
such circumstances are when the proposed contractor—
(i) Is a new or recently reorganized
company, and there is no past or recent
record of incurred indirect costs;
(ii) Has a recent record of a rapidly
increasing indirect cost rate due to a
declining volume of sales without a
commensurate decline in indirect expenses; or
(iii) Seeks to enhance its competitive
position in a particular circumstance
by basing its proposal on indirect cost
rates lower than those that may reasonably be expected to occur during
contract performance, thereby causing
a cost overrun.
(2) In such cases, an equitable ceiling
covering the final indirect cost rates
may be negotiated and specified in the
contract.
(c) When ceiling provisions are utilized, the contract shall also provide
that (1) the Government will not be obligated to pay any additional amount
should the final indirect cost rates exceed the negotiated ceiling rates and,
(2) in the event the final indirect cost
rates are less than the negotiated ceiling rates, the negotiated rates will be
reduced to conform with the lower
rates.
42.708 Quick-closeout procedure.
(a) The contracting officer responsible for contract closeout shall negotiate the settlement of indirect costs
for a specific contract, in advance of
the determination of final indirect cost
rates, if—
(1) The contract is physically complete;
(2) The amount of unsettled indirect
cost to be allocated to the contract is
relatively insignificant. Indirect cost
amounts will be considered insignificant when—
(i) The total unsettled indirect cost
to be allocated to any one contract
does not exceed $1,000,000; and
(ii) Unless otherwise provided in
agency procedures, the cumulative unsettled indirect costs to be allocated to
one or more contracts in a single fiscal
year do not exceed 15 percent of the estimated, total unsettled indirect costs
allocable to cost-type contracts for
that fiscal year. The contracting officer may waive the 15 percent restriction based upon a risk assessment that
considers the contractor’s accounting,
estimating, and purchasing systems;
other concerns of the cognizant contract auditors; and any other pertinent
information; and
(3) Agreement can be reached on a
reasonable estimate of allocable dollars.
(b) Determinations of final indirect
costs under the quick-closeout procedure provided for by the Allowable Cost
and Payment clause at 52.216–7 or
52.216–13 shall be final for the contract
it covers and no adjustment shall be
made to other contracts for over- or
under-recoveries of costs allocated or
allocable to the contract covered by
the agreement.
(c) Indirect cost rates used in the
quick closeout of a contract shall not
be considered a binding precedent when
establishing the final indirect cost
rates for other contracts.
[48 FR 42370, Sept. 19, 1983, as amended at 55
FR 52796, Dec. 21, 1990; 61 FR 31661, June 20,
1996]
42.709
Scope.
(a) This section implements 10 U.S.C.
2324 (a) through (d) and 41 U.S.C. 256 (a)
through (d). It covers the assessment of
penalties against contractors which include unallowable indirect costs in—
(1) Final indirect cost rate proposals;
or
(2) The final statement of costs incurred or estimated to be incurred
under a fixed-price incentive contract.
(b) This section applies to all contracts in excess of $500,000, except
fixed-price contracts without cost incentives or any firm-fixed-price contracts for the purchase of commercial
items.
[60 FR 42658, Aug. 16, 1995]
42.709–1
General.
(a) The following penalties apply to
contracts covered by this section:
(1) If the indirect cost is expressly
unallowable under a cost principle in
the FAR, or an executive agency supplement to the FAR, that defines the
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42.709–2
48 CFR Ch. 1 (10–1–03 Edition)
allowability of specific selected costs,
the penalty is equal to—
(i) The amount of the disallowed
costs allocated to contracts that are
subject to this section for which an indirect cost proposal has been submitted; plus
(ii) Interest on the paid portion, if
any, of the disallowance.
(2) If the indirect cost was determined to be unallowable for that contractor before proposal submission, the
penalty is two times the amount in
paragraph (a)(1)(i) of this section.
(b) These penalties are in addition to
other administrative, civil, and criminal penalties provided by law.
(c) It is not necessary for unallowable
costs to have been paid to the contractor in order to assess a penalty.
[60 FR 42658, Aug. 16, 1995]
42.709–2
Responsibilities.
(a) The cognizant contracting officer
is responsible for—
(1) Determining whether the penalties in 42.709–1(a) should be assessed;
(2) Determining whether such penalties should be waived pursuant to
42.709–5; and
(3) Referring the matter to the appropriate criminal investigative organization for review and for appropriate coordination of remedies, if there is evidence that the contractor knowingly
submitted unallowable costs.
(b) The contract auditor, in the review and/or the determination of final
indirect cost proposals for contracts
subject to this section, is responsible
for—
(1) Recommending to the contracting
officer which costs may be unallowable
and subject to the penalties in 42.709–
1(a);
(2) Providing rationale and supporting documentation for any recommendation; and
(3) Referring the matter to the appropriate criminal investigative organization for review and for appropriate coordination of remedies, if there is evidence that the contractor knowingly
submitted unallowable costs.
[60 FR 42658, Aug. 16, 1995]
42.709–3
Assessing the penalty.
Unless a waiver is granted pursuant
to 42.709–5, the cognizant contracting
officer shall—
(a) Assess the penalty in 42.709–
1(a)(1), when the submitted cost is expressly unallowable under a cost principle in the FAR or an executive agency supplement that defines the allowability of specific selected costs; or
(b) Assess the penalty in 42.709–
1(a)(2), when the submitted cost was
determined to be unallowable for that
contractor prior to submission of the
proposal. Prior determinations of
unallowability may be evidenced by—
(1) A DCAA Form 1, Notice of Contract Costs Suspended and/or Disapproved (see 48 CFR 242.705–2), or any
similar notice which the contractor
elected not to appeal and was not withdrawn by the cognizant Government
agency;
(2) A contracting officer final decision which was not appealed;
(3) A prior executive agency Board of
Contract Appeals or court decision involving the contractor, which upheld
the cost disallowance; or
(4) A determination or agreement of
unallowability under 31.201–6.
(c) Issue a final decision (see 33.211)
which includes a demand for payment
of any penalty assessed under paragraph (a) or (b) of this section. The letter shall state that the determination
is a final decision under the Disputes
clause of the contract. (Demanding
payment of the penalty is separate
from demanding repayment of any paid
portion of the disallowed cost.)
[60 FR 42658, Aug. 16, 1995]
42.709–4
Computing interest.
For 42.709–1(a)(1)(ii), compute interest on any paid portion of the disallowed cost as follows:
(a) Consider the overpayment to have
occurred, and interest to have begun
accumulating, from the midpoint of
the contractor’s fiscal year. Use an alternate equitable method if the cost
was not paid evenly over the fiscal
year.
(b) Use the interest rate specified by
the Secretary of the Treasury pursuant
to Pub. L. 92–41 (85 Stat. 97).
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Federal Acquisition Regulation
42.801
(c) Compute interest from the date of
overpayment to the date of the demand
letter for payment of the penalty.
(d) Determine the paid portion of the
disallowed costs in consultation with
the contract auditor.
[60 FR 42659, Aug. 16, 1995]
42.709–5 Waiver of the penalty.
The cognizant contracting officer
shall waive the penalties at 42.709–1(a)
when—
(a) The contractor withdraws the
proposal before the Government formally initiates an audit of the proposal
and the contractor submits a revised
proposal (an audit will be deemed to be
formally initiated when the Government provides the contractor with
written notice, or holds an entrance
conference, indicating that audit work
on a specific final indirect cost proposal has begun);
(b) The amount of the unallowable
costs under the proposal which are subject to the penalty is $10,000 or less
(i.e., if the amount of expressly or previously determined unallowable costs
which would be allocated to the contracts specified in 42.709(b) is $10,000 or
less); or
(c) The contractor demonstrates, to
the cognizant contracting officer’s satisfaction, that—
(1) It has established policies and personnel training and an internal control
and review system that provide assurance that unallowable costs subject to
penalties are precluded from being included in the contractor’s final indirect
cost rate proposals (e.g., the types of
controls required for satisfactory participation in the Department of Defense sponsored self-governance programs, specific accounting controls
over indirect costs, compliance tests
which demonstrate that the controls
are effective, and Government audits
which have not disclosed recurring instances of expressly unallowable costs);
and
(2) The unallowable costs subject to
the penalty were inadvertently incorporated into the proposal; i.e., their inclusion resulted from an unintentional
error, notwithstanding the exercise of
due care.
[60 FR 42659, Aug. 16, 1995]
42.709–6 Contract clause.
Use the clause at 52.242–3, Penalties
for Unallowable Costs, in all solicitations and contracts over $500,000 except
fixed-price contracts without cost incentives or any firm-fixed-price contract for the purchase of commercial
items. Generally, covered contracts are
those which contain one of the clauses
at 52.216–7, 52.216–13, 52.216–16, or 52.216–
17, or a similar clause from an executive agency’s supplement to the FAR.
[60 FR 42659, Aug. 16, 1995]
Subpart 42.8—Disallowance of
Costs
42.800 Scope of subpart.
This subpart prescribes policies and
procedures for (a) issuing notices of intent to disallow costs and (b) disallowing costs already incurred during
the course of performance.
42.801 Notice of intent to disallow
costs.
(a) At any time during the performance of a contract of a type referred to
in 42.802, the cognizant contracting officer responsible for administering the
contract may issue the contractor a
written notice of intent to disallow
specified costs incurred or planned for
incurrence. However, before issuing the
notice, the contracting officer responsible for administering the contract
shall make every reasonable effort to
reach
a
satisfactory
settlement
through discussions with the contractor.
(b) A notice of intent to disallow
such costs usually results from monitoring contractor costs. The purpose of
the notice is to notify the contractor
as early as practicable during contract
performance that the cost is considered
unallowable under the contract terms
and to provide for timely resolution of
any resulting disagreement. In the
event of disagreement, the contractor
may submit to the contracting officer
a written response. Any such response
shall be answered by withdrawal of the
notice or by making a written decision
within 60 days.
(c) As a minimum, the notice shall—
(1) Refer to the contract’s Notice of
Intent to Disallow Costs clause;
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42.802
48 CFR Ch. 1 (10–1–03 Edition)
(2) State the contractor’s name and
list the numbers of the affected contracts;
(3) Describe the costs to be disallowed, including estimated dollar
value by item and applicable time periods, and state the reasons for the intended disallowance;
(4) Describe the potential impact on
billing rates and forward pricing rate
agreements;
(5) State the notice’s effective date
and the date by which written response
must be received;
(6) List the recipients of copies of the
notice; and
(7) Request the contractor to acknowledge receipt of the notice.
(d) The contracting officer issuing
the notice shall furnish copies to all
contracting officers cognizant of any
segment of the contractor’s organization.
(e) If the notice involves elements of
indirect cost, it shall not be issued
without coordination with the contracting officer or auditor having authority for final indirect cost settlement (see 42.705).
(f) In the event the contractor submits a response that disagrees with the
notice (see paragraph (b) above), the
contracting officer who issued the notice shall either withdraw the notice or
issue the written decision, except when
elements of indirect cost are involved,
in which case the contracting officer
responsible under 42.705 for determining final indirect cost rates shall
issue the decision.
42.802 Contract clause.
The contracting officer shall insert
the clause at 52.242–1, Notice of Intent
to Disallow Costs, in solicitations and
contracts when a cost-reimbursement
contract, a fixed-price incentive contract, or a contract providing for price
redetermination is contemplated.
42.803 Disallowing costs after incurrence.
Cost-reimbursement contracts, the
cost-reimbursement portion of fixedprice contracts, letter contracts that
provide for reimbursement of costs,
and time-and-material and labor-hour
contracts provide for disallowing costs
during the course of performance after
the costs have been incurred. The following procedures shall apply:
(a) Contracting officer receipt of vouchers. When contracting officers receive
vouchers directly from the contractor
and, with or without auditor assistance, approve or disapprove them, the
process shall be conducted in accordance with the normal procedures of the
individual agency.
(b) Auditor receipt of vouchers. (1)
When authorized by agency regulations, the contract auditor may be authorized to (i) receive reimbursement
vouchers directly from contractors, (ii)
approve for payment those vouchers
found acceptable, and (iii) suspend payment of questionable costs. The auditor shall forward approved vouchers for
payment to the cognizant contracting,
finance, or disbursing officer, as appropriate under the agency’s procedures.
(2) If the examination of a voucher
raises a question regarding the allowability of a cost under the contract
terms, the auditor, after informal discussion as appropriate, may, where authorized by agency regulations, issue a
notice of contract costs suspended and/
or disapproved simultaneously to the
contractor and the disbursing officer,
with a copy to the cognizant contracting officer, for deduction from
current payments with respect to costs
claimed but not considered reimbursable.
(3) If the contractor disagrees with
the deduction from current payments,
the contractor may—
(i) Submit a written request to the
cognizant contracting officer to consider whether the unreimbursed costs
should be paid and to discuss the findings with the contractor;
(ii) File a claim under the Disputes
clause, which the cognizant contracting officer will process in accordance with agency procedures; or
(iii) Do both of the above.
Subpart 42.9—Bankruptcy
SOURCE: 56 FR 15154, Apr. 15, 1991, unless
otherwise noted.
42.900 Scope of subpart.
This subpart prescribes policies and
procedures regarding actions to be
taken when a contractor enters into
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Federal Acquisition Regulation
42.1104
proceedings relating to bankruptcy. It
establishes a requirement for the contractor to notify the contracting officer upon filing a petition for bankruptcy. It further establishes minimum
requirements for agencies to follow in
the event of a contractor bankruptcy.
42.901
General.
The contract administration office
shall take prompt action to determine
the potential impact of a contractor
bankruptcy on the Government in
order to protect the interests of the
Government.
Subpart 42.11—Production
Surveillance and Reporting
42.1101
42.1102
42.902
Procedures.
(a) When notified of bankruptcy proceedings, agencies shall, as a minimum—
(1) Furnish the notice of bankruptcy
to legal counsel and other appropriate
agency offices (e.g., contracting, financial, property) and affected buying activities;
(2) Determine the amount of the Government’s potential claim against the
contractor (in assessing this impact,
identify and review any contracts that
have not been closed out, including
those physically completed or terminated);
(3) Take actions necessary to protect
the Government’s financial interests
and safeguard Government property;
and
(4) Furnish pertinent contract information to the legal counsel representing the Government.
(b) The contracting officer shall consult the legal counsel, whenever possible, prior to taking any action regarding the contractor’s bankruptcy
proceedings.
42.903 Solicitation provision and contract clause.
The contracting officer shall insert
the clause at 52.242–13, Bankruptcy, in
all solicitations and contracts exceeding the simplified acquisition threshold.
[56 FR 15154, Apr. 15, 1991, as amended at 60
FR 34759, July 3, 1995; 61 FR 39190, July 26,
1996]
Subpart 42.10 [Reserved]
General.
Production surveillance is a function
of contract administration used to determine contractor progress and to
identify any factors that may delay
performance. Production surveillance
involves Government review and analysis of (a) contractor performance
plans, schedules, controls, and industrial processes and (b) the contractor’s
actual performance under them.
Applicability.
This subpart applies to all contracts
for supplies or services other than facilities, construction contracts, and
Federal Supply Schedule contracts.
See part 37, especially subpart 37.6, regarding surveillance of contracts for
services.
[48 FR 42370, Sept. 19, 1983, as amended at 62
FR 44816, Aug. 22, 1997]
42.1103
Policy.
The contractor is responsible for
timely contract performance. The Government will maintain surveillance of
contractor performance as necessary to
protect its interests. When the contracting office retains a contract for
administration, the contracting officer
administering the contract shall determine the extent of surveillance.
42.1104
Surveillance requirements.
(a) The contract administration office determines the extent of production surveillance on the basis of (1) the
criticality (degree of importance to the
Government) assigned by the contracting officer (see 42.1105) to the supplies or services and (2) consideration
of the following factors:
(i) Contract requirements for reporting production progress and performance.
(ii) The contract performance schedule.
(iii) The contractor’s production
plan.
(iv) The contractor’s history of contract performance.
(v) The contractor’s experience with
the contract supplies or services.
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42.1105
48 CFR Ch. 1 (10–1–03 Edition)
(vi) The contractor’s financial capability.
(vii) Any supplementary written instructions from the contracting office.
(b) Contracts at or below the simplified acquisition threshold should not
normally require production surveillance.
(c) In planning and conducting surveillance, contract administration offices shall make maximum use of any
reliable contractor production control
or data management systems.
(d) In performing surveillance, contract administration office personnel
shall avoid any action that may (1) be
inconsistent with any contract requirement or (2) result in claims of waivers,
of changes, or of other contract modifications.
[48 FR 42370, Sept. 19, 1983, as amended at 60
FR 34759, July 3, 1995]
42.1105 Assignment of criticality designator.
Contracting officers shall assign a
criticality designator to each contract
in the space for designating the contract administration office, as follows:
Criticality
Designator
A
B
C
Criterion
Critical contracts, including DX-rated contracts
(see subpart 11.6), contracts citing the authority in 6.302–2 (unusual and compelling
urgency), and contracts for major systems.
Contracts (other than those designated ‘‘A’’) for
items needed to maintain a Government or
contractor production or repair line, to preclude out-of-stock conditions or to meet user
needs for nonstock items.
All contracts other than those designated ‘‘A’’
or ‘‘B.’’
[48 FR 42370, Sept. 19, 1983, as amended at 50
FR 1745, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 60 FR 48249, Sept. 18, 1995]
42.1106 Reporting requirements.
(a) When information on contract
performance status is needed, contracting officers may require contractors to submit production progress reports (see 42.1107(a)). Reporting requirements shall be limited to that information essential to Government
needs and shall take maximum advantage of data output generated by contractor management systems.
(b) Contract administration offices
shall review and verify the accuracy of
contractor reports and advise the con-
tracting officer of any required action.
The accuracy of contractor-prepared
reports shall be verified either by a
program of continuous surveillance of
the contractor’s report-preparation
system or by individual review of each
report.
(c) The contract administration office may at any time initiate a report
to advise the contracting officer (and
the inventory manager, if one is designated in the contract) of any potential or actual delay in performance.
This advice shall (1) be in writing, (2)
be provided in sufficient time for the
contracting officer to take necessary
action, and (3) provide a definite recommendation, if action is appropriate.
42.1107
Contract clause.
(a) The contracting officer shall insert the clause at 52.242–2, Production
Progress Reports, in solicitations and
contracts when production progress reporting is required; unless a facilities
contract, a construction contract, or a
Federal Supply Schedule contract is
contemplated.
(b) When the clause at 52.242–2 is
used, the contracting officer shall
specify appropriate reporting instructions in the Schedule (see 42.1106(a)).
Subpart 42.12—Novation and
Change-of-Name Agreements
42.1200
Scope of subpart.
This subpart prescribes policies and
procedures for—
(a) Recognition of a successor in interest to Government contracts when
contractor assets are transferred;
(b) Recognition of a change in a contractor’s name; and
(c) Execution of novation agreements
and change-of-name agreements by the
responsible contracting officer.
42.1201
[Reserved]
42.1202 Responsibility
agreements.
for
executing
The contracting officer responsible
for processing and executing novation
and change-of-name agreements shall
be determined as follows:
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(a) If any of the affected contracts
held by the transferor have been assigned to an administrative contracting officer (ACO) (see 2.1 and
42.202), the responsible contracting officer shall be—
(1) This ACO; or
(2) The ACO responsible for the corporate office, if affected contracts are
in more than one plant or division of
the transferor.
(b) If none of the affected contracts
held by the transferor have been assigned to an ACO, the contracting officer responsible for the largest unsettled (unbilled plus billed but unpaid)
dollar balance of contracts shall be the
responsible contracting officer.
(c) If several transferors are involved,
the responsible contracting officer
shall be—
(1) The ACO administering the largest unsettled dollar balance; or
(2) The contracting officer (or ACO)
designated by the agency having the
largest unsettled dollar balance, if
none of the affected contracts have
been assigned to an ACO.
42.1203
Processing agreements.
(a) If a contractor wishes the Government to recognize a successor in interest to its contracts or a name change,
the contractor must submit a written
request to the responsible contracting
officer (see 42.1202). If the contractor
received its contract under Subpart 8.7
under the Javits-Wagner-O’Day Act,
use the procedures at 8.716 instead.
(b) The responsible contracting officer shall—
(1) Identify and request that the contractor submit the information necessary to evaluate the proposed agreement for recognizing a successor in interest or a name change. This information should include the items identified
in 42.1204 (e) and (f) or 42.1205(a), as applicable;
(2) Notify each contract administration office and contracting office affected by a proposed agreement for recognizing a successor in interest, and
provide those offices with a list of all
affected contracts; and
(3) Request submission of any comments or objections to the proposed
transfer within 30 days after notifica-
tion. Any submission should be accompanied by supporting documentation.
(c) Upon receipt of the necessary information, the responsible contracting
officer shall determine whether or not
it is in the Government’s interest to
recognize the proposed successor in interest on the basis of—
(1) The comments received from the
affected contract administration offices and contracting offices;
(2) The proposed successor’s responsibility under subpart 9.1, Responsible
Prospective Contractors; and
(3) Any factor relating to the proposed successor’s performance of contracts with the Government that the
Government determines would impair
the proposed successor’s ability to perform the contract satisfactorily.
(d) The execution of a novation
agreement does not preclude the use of
any other method available to the contracting officer to resolve any other
issues related to a transfer of contractor assets, including the treatment
of costs.
(e) Any separate agreement between
the transferor and transferee regarding
the assumption of liabilities (e.g., longterm incentive compensation plans,
cost accounting standards noncompliances, environmental cleanup costs,
and final overhead costs) should be referenced specifically in the novation
agreement.
(f) Before novation and change-ofname agreements are executed, the responsible contracting officer shall ensure that Government counsel has reviewed them for legal sufficiency.
(g) The responsible contracting officer shall (1) forward a signed copy of
the executed novation or change-ofname agreement to the transferor and
to the transferee and (2) retain a signed
copy in the case file.
(h) Following distribution of the
agreement, the responsible contracting
officer shall—
(1) Prepare a Standard Form 30,
Amendment of Solicitation/Modification of Contract, incorporating a summary of the agreement and attaching a
complete list of contracts affected;
(2) Retain the original Standard
Form 30 with the attached list in the
case file;
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42.1204
48 CFR Ch. 1 (10–1–03 Edition)
(3) Send a signed copy of the Standard Form 30, with attached list to the
transferor and to the transferee; and
(4) Send a copy of this Standard
Form 30 with attached list to each contract administration office or contracting office involved, which shall be
responsible for further appropriate distribution.
[48 FR 42370, Sept. 19, 1983, as amended at 62
FR 64934, Dec. 9, 1997; 63 FR 1533, Jan. 9, 1998;
64 FR 51834, Sept. 24, 1999]
42.1204 Applicability
of
novation
agreements.
(a) 41 U.S.C. 15 prohibits transfer of
Government contracts from the contractor to a third party. The Government may, when in its interest, recognize a third party as the successor in
interest to a Government contract
when the third party’s interest in the
contract arises out of the transfer of—
(1) All the contractor’s assets; or
(2) The entire portion of the assets
involved in performing the contract.
(See 14.404–2(l) for the effect of novation agreements after bid opening but
before award.) Examples of such transactions include, but are not limited
to—
(i) Sale of these assets with a provision for assuming liabilities;
(ii) Transfer of these assets incident
to a merger or corporate consolidation;
and
(iii) Incorporation of a proprietorship
or partnership, or formation of a partnership.
(b) A novation agreement is unnecessary when there is a change in the ownership of a contractor as a result of a
stock purchase, with no legal change in
the contracting party, and when that
contracting party remains in control of
the assets and is the party performing
the contract. However, whether there
is a purchase of assets or a stock purchase, there may be issues related to
the change in ownership that appropriately should be addressed in a formal agreement between the contractor
and the Government (see 42.1203(e)).
(c) When it is in the Government’s interest not to concur in the transfer of
a contract from one company to another company, the original contractor
remains under contractual obligation
to the Government, and the contract
may be terminated for reasons of default, should the original contractor
not perform.
(d) When considering whether to recognize a third party as a successor in
interest to Government contracts, the
responsible contracting officer shall
identify and evaluate any significant
organizational conflicts of interest in
accordance with subpart 9.5. If the responsible contracting officer determines that a conflict of interest cannot
be resolved, but that it is in the best
interest of the Government to approve
the novation request, a request for a
waiver may be submitted in accordance
with the procedures at 9.503.
(e) When a contractor asks the Government to recognize a successor in interest, the contractor shall submit to
the responsible contracting officer
three signed copies of the proposed novation agreement and one copy each,
as applicable, of the following:
(1) The document describing the proposed transaction, e.g., purchase/sale
agreement or memorandum of understanding.
(2) A list of all affected contracts between the transferor and the Government, as of the date of sale or transfer
of assets, showing for each, as of that
date, the—
(i) Contract number and type;
(ii) Name and address of the contracting office;
(iii) Total dollar value, as amended;
and
(iv) Approximate remaining unpaid
balance.
(3) Evidence of the transferee’s capability to perform.
(4) Any other relevant information
requested by the responsible contracting officer.
(f) Except as provided in paragraph
(g) of this section, the contractor shall
submit to the responsible contracting
officer one copy of each of the following documents, as applicable, as the
documents become available:
(1) An authenticated copy of the instrument effecting the transfer of assets; e.g., bill of sale, certificate of
merger, contract, deed, agreement, or
court decree.
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Federal Acquisition Regulation
42.1204
(2) A certified copy of each resolution
of the corporate parties’ boards of directors authorizing the transfer of assets.
(3) A certified copy of the minutes of
each corporate party’s stockholder
meeting necessary to approve the
transfer of assets.
(4) An authenticated copy of the
transferee’s certificate and articles of
incorporation, if a corporation was
formed for the purpose of receiving the
assets involved in performing the Government contracts.
(5) The opinion of legal counsel for
the transferor and transferee stating
that the transfer was properly effected
under applicable law and the effective
date of transfer.
(6) Balance sheets of the transferor
and transferee as of the dates immediately before and after the transfer of
assets, audited by independent accountants.
(7) Evidence that any security clearance requirements have been met.
(8) The consent of sureties on all contracts listed under paragraph (e)(2) of
this section if bonds are required, or a
statement from the transferor that
none are required.
(g) If the Government has acquired
the documents during its participation
in the pre-merger or pre-acquisition review process, or the Government’s interests are adequately protected with
an alternative formulation of the information, the responsible contracting officer may modify the list of documents
to be submitted by the contractor.
(h) When recognizing a successor in
interest to a Government contract is
consistent with the Government’s interest, the responsible contracting officer shall execute a novation agreement
with the transferor and the transferee.
It shall ordinarily provide in part
that—
(1) The transferee assumes all the
transferor’s obligations under the contract;
(2) The transferor waives all rights
under the contract against the Government;
(3) The transferor guarantees performance of the contract by the transferee (a satisfactory performance bond
may be accepted instead of the guarantee); and
(4) Nothing in the agreement shall relieve the transferor or transferee from
compliance with any Federal law.
(i) The responsible contracting officer shall use the following format for
agreements when the transferor and
transferee are corporations and all the
transferor’s assets are transferred. This
format may be adapted to fit specific
cases and may be used as a guide in
preparing similar agreements for other
situations.
NOVATION AGREEMENT
The ABC CORPORATION (Transferor), a
corporation duly organized and existing
under the laws of llll [insert State] with
its principal office in llll [insert city]; the
XYZ CORPORATION (Transferee), [if appropriate add ‘‘formerly known as the EFG Corporation’’] a corporation duly organized and
existing under the laws of llll [insert
State] with its principal office in llll
[insert city]; and the UNITED STATES OF
AMERICA (Government) enter into this
Agreement as of llll [insert the date
transfer of assets became effective under applicable State law].
(a) THE PARTIES AGREE TO THE FOLLOWING FACTS:
(1) The Government, represented by various Contracting Officers of the llll
[insert name(s) of agency(ies)], has entered
into certain contracts with the Transferor,
namely: llll [insert contract or purchase
order identifications]; [or delete ‘‘namely’’ and
insert ‘‘as shown in the attached list marked
‘Exhibit A’ and incorporated in this Agreement
by reference.’’]. The term the contracts, as
used in this Agreement, means the above
contracts and purchase orders and all other
contracts and purchase orders, including all
modifications, made between the Government and the Transferor before the effective
date of this Agreement (whether or not performance and payment have been completed
and releases executed if the Government or
the Transferor has any remaining rights, duties, or obligations under these contracts
and purchase orders). Included in the term
the contracts are also all modifications made
under the terms and conditions of these contracts and purchase orders between the Government and the Transferee, on or after the
effective date of this Agreement.
(2) As of llll, 20l, the Transferor has
transferred to the Transferee all the assets
of the Transferor by virtue of a llll
[insert term descriptive of the legal transaction
involved] between the Transferor and the
Transferee.
(3) The Transferee has acquired all the assets of the Transferor by virtue of the above
transfer.
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42.1204
48 CFR Ch. 1 (10–1–03 Edition)
(4) The Transferee has assumed all obligations and liabilities of the Transferor under
the contracts by virtue of the above transfer.
(5) The Transferee is in a position to fully
perform all obligations that may exist under
the contracts.
(6) It is consistent with the Government’s
interest to recognize the Transferee as the
successor party to the contracts.
(7) Evidence of the above transfer has been
filed with the Government.
[When a change of name is also involved; e.g.,
a prior or concurrent change of the Transferee’s
name, an appropriate statement shall be inserted (see example in paragraph (8) below)].
(8) A certificate dated llll, 20l, signed
by the Secretary of State of llll [insert
State], to the effect that the corporate name
of EFG CORPORATION was changed to XYZ
CORPORATION on llll, 20l, has been
filed with the Government.
(b) IN CONSIDERATION OF THESE
FACTS, THE PARTIES AGREE THAT BY
THIS AGREEMENT—
(1) The Transferor confirms the transfer to
the Transferee, and waives any claims and
rights against the Government that it now
has or may have in the future in connection
with the contracts.
(2) The Transferee agrees to be bound by
and to perform each contract in accordance
with the conditions contained in the contracts. The Transferee also assumes all obligations and liabilities of, and all claims
against, the Transferor under the contracts
as if the Transferee were the original party
to the contracts.
(3) The Transferee ratifies all previous actions taken by the Transferor with respect
to the contracts, with the same force and effect as if the action had been taken by the
Transferee.
(4) The Government recognizes the Transferee as the Transferor’s successor in interest in and to the contracts. The Transferee
by this Agreement becomes entitled to all
rights, titles, and interests of the Transferor
in and to the contracts as if the Transferee
were the original party to the contracts. Following the effective date of this Agreement,
the term Contractor, as used in the contracts,
shall refer to the Transferee.
(5) Except as expressly provided in this
Agreement, nothing in it shall be construed
as a waiver of any rights of the Governmelt
against the Transferor.
(6) All payments and reimbursements previously made by the Governmelt to the
Transferor, and all other previous actions
taken by the Government under the contracts, shall be considered to have discharged those parts of the Government’s obligations under the contracts. All payments
and reimbursements made by the Government after the date of this Agreement in the
name of or to the Transferor shall have the
same force and effect as if made to the
Transferee, and shall constitute a complete
discharge of the Government’s obligations
under the contracts, to the extent of the
amounts paid or reimbursed.
(7) The Transferor and the Transferee
agree that the Government is not obligated
to pay or reimburse either of them for, or
otherwise give effect to, any costs, taxes, or
other expenses, or any related increases, directly or indirectly arising out of or resulting from the transfer or this Agreement,
other than those that the Government in the
absence of this transfer or Agreement would
have been obligated to pay or reimburse
under the terms of the contracts.
(8) The Transferor guarantees payment of
all liabilities and the performance of all obligations that the Transferee (i) assumes
under this Agreement or (ii) may undertake
in the future should these contracts be modified under their terms and conditions. The
Transferor waives notice of, and consents to,
any such future modifications.
(9) The contracts shall remain in full force
and effect, except as modified by this Agreement. Each party has executed this Agreement as of the day and year first above written.
UNITED STATES OF AMERICA,
By llllllllllllllllllllll
Title lllllllllllllllllllll
ABC CORPORATION,
By llllllllllllllllllllll
Title lllllllllllllllllllll
[CORPORATE SEAL]
XYZ CORPORATION,
By llllllllllllllllllllll
Title lllllllllllllllllllll
[CORPORATE SEAL]
CERTIFICATE
I, lllll, certify that I am the Secretary
of
ABC
CORPORATION;
that
lllll, who signed this Agreement for
this corporation, was then llll of this
corporation; and that this Agreement was
duly signed for and on behalf of this corporation by authority of its governing body and
within the scope of its corporate powers.
Witness my hand and the seal of this corporation this llll day of llll 20l.
By llllllllllllllllllllll
[CORPORATE SEAL]
CERTIFICATE
I, lllll, certify that I am the Secretary
of
XYZ
CORPORATION;
that
lllll, who signed this Agreement for
this corporation, was then lllll of this
corporation; and that this Agreement was
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Federal Acquisition Regulation
42.1205
duly signed for and on behalf of this corporation by authority of its governing body and
within the scope of its corporate powers.
Witness my hand and the seal of this corporation this llll day of llll 20l.
By llllllllllllllllllllll
[CORPORATE SEAL]
[48 FR 42370, Sept. 19, 1983, as amended at 62
FR 64935, Dec. 9, 1997; 65 FR 24325, Apr. 25,
2000]
42.1205 Agreement to recognize contractor’s change of name.
(a) If only a change of the contractor’s name is involved and the Government’s and contractor’s rights and obligations remain unaffected, the parties shall execute an agreement to reflect the name change. The contractor
shall forward to the responsible contracting officer three signed copies of
the Change-of-Name Agreement, and
one copy each of the following:
(1) The document effecting the name
change, authenticated by a proper official of the State having jurisdiction.
(2) The opinion of the contractor’s
legal counsel stating that the change
of name was properly effected under
applicable law and showing the effective date.
(3) A list of all affected contracts and
purchase orders remaining unsettled
between the contractor and the Government, showing for each the contract
number and type, and name and address of the contracting office. The
contracting officer may request the
total dollar value as amended and the
remaining unpaid balance for each contract.
(b) The following suggested format
for an agreement may be adapted for
specific cases:
CHANGE–OF–NAME AGREEMENT
The ABC CORPORATION (Contractor), a
corporation duly organized and existing
under the laws of lll [insert State], and the
UNITED STATES OF AMERICA (Government), enter into this Agreement as of
llll [insert date when the change of name
became effective under applicable State law].
(a) THE PARTIES AGREE TO THE FOLLOWING FACTS:
(1) The Government, represented by various Contracting Officers of the llll
[insert name(s) of agency(ies)], has entered
into certain contracts and purchase orders
with the XYZ CORPORATION, namely:
llll [insert contract or purchase order iden-
tifications]; [or delete ‘‘namely’’ and insert ‘‘as
shown in the attached list marked ‘Exhibit A’
and incorporated in this Agreement by reference.’’]. The term the contracts, as used in
this Agreement, means the above contracts
and purchase orders and all other contracts
and purchase orders, including all modifications, made by the Government and the Contractor before the effective date of this
Agreement (whether or not performance and
payment have been completed and releases
executed if the Government or the Contractor has any remaining rights, duties, or
obligations under these contracts and purchase orders).
(2) The XYZ CORPORATION, by an amendment to its certificate of incorporation,
dated llll, 20l, has changed its corporate name to ABC CORPORATION.
(3) This amendment accomplishes a change
of corporate name only and all rights and obligations of the Government and of the Contractor under the contracts are unaffected
by this change.
(4) Documentary evidence of this change of
corporate name has been filed with the Government.
(b) IN CONSIDERATION OF THESE
FACTS, THE PARTIES AGREE THAT—
(1) The contracts covered by this Agreement are amended by substituting the name
‘‘ABC CORPORATION’’ for the name ‘‘XYZ
CORPORATION’’ wherever it appears in the
contracts; and
(2) Each party has executed this Agreement as of the day and year first above written.
UNITED STATES OF AMERICA,
By llllllllllllllllllllll
Title lllllllllllllllllllll
ABC CORPORATION,
By llllllllllllllllllllll
Title lllllllllllllllllllll
[CORPORATE SEAL]
CERTIFICATE
I, lllll, certify that I am the Secretary
of
ABC
CORPORATION;
that
lllll, who signed this Agreement for
this corporation, was then llll of this
corporation; and that this Agreement was
duly signed for and on behalf of this corporation by authority of its governing body and
within the scope of its corporate powers.
Witness my hand and the seal of this corporation this ll day of llll 20l.
By llllllllllllllllllllll
[CORPORATE SEAL]
[48 FR 42370, Sept. 19, 1983, as amended at 56
FR 67134, Dec. 27, 1991; 65 FR 24325, Apr. 25,
2000]
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42.1301
48 CFR Ch. 1 (10–1–03 Edition)
Subpart
42.13—Suspension
of
Work, Stop-Work Orders, and
Government Delay of Work
SOURCE: 48 FR 42159, Sept. 19, 1983, unless
otherwise noted. Redesignated at 60 FR 48241,
Sept. 18, 1995.
42.1301
General.
Situations may occur during contract performance that cause the Government to order a suspension of work,
or a work stoppage. This subpart provides clauses to meet these situations
and a clause for settling contractor
claims for unordered Government
caused delays that are not otherwise
covered in the contract.
42.1302
Suspension of work.
A suspension of work under a construction or architect-engineer contract may be ordered by the contracting officer for a reasonable period
of time. If the suspension is unreasonable, the contractor may submit a
written claim for increases in the cost
of performance, excluding profit.
42.1303
Stop-work orders.
(a) Stop-work orders may be used,
when appropriate, in any negotiated
fixed-price or cost-reimbursement supply, research and development, or service contract if work stoppage may be
required for reasons such as advancement in the state-of-the-art, production or engineering breakthroughs, or
realignment of programs.
(b) Generally, a stop-work order will
be issued only if it is advisable to suspend work pending a decision by the
Government and a supplemental agreement providing for the suspension is
not feasible. Issuance of a stop-work
order shall be approved at a level higher than the contracting officer. Stopwork orders shall not be used in place
of a termination notice after a decision
to terminate has been made.
(c) Stop-work orders should include—
(1) A description of the work to be
suspended;
(2) Instructions concerning the contractor’s issuance of further orders for
materials or services;
(3) Guidance to the contractor on action to be taken on any subcontracts;
and
(4) Other suggestions to the contractor for minimizing costs.
(d) Promptly after issuing the stopwork order, the contracting officer
should discuss the stop-work order
with the contractor and modify the
order, if necessary, in light of the discussion.
(e) As soon as feasible after a stopwork order is issued, but before its expiration, the contracting officer shall
take appropriate action to—
(1) Terminate the contract;
(2) Cancel the stop-work order (any
cancellation of a stop-work order shall
be subject to the same approvals as
were required for its issuance); or
(3) Extend the period of the stopwork order if it is necessary and if the
contractor agrees (any extension of the
stop-work order shall be by a supplemental agreement).
42.1304 Government delay of work.
(a) The clause at 52.242–17, Government Delay of Work, provides for the
administrative settlement of contractor claims that arise from delays
and interruptions in the contract work
caused by the acts, or failures to act, of
the contracting officer. This clause is
not applicable if the contract otherwise
specifically provides for an equitable
adjustment because of the delay or
interruption; e.g., when the Changes
clause is applicable.
(b) The clause does not authorize the
contracting officer to order a suspension, delay, or interruption of the contract work and it shall not be used as
the basis or justification of such an
order.
(c) If the contracting officer has notice of an unordered delay or interruption covered by the clause, the contracting officer shall act to end the
delay or take other appropriate action
as soon as practicable.
(d) The contracting officer shall retain in the file a record of all negotiations leading to any adjustment made
under the clause, and related cost or
pricing data, or information other than
cost or pricing data.
[48 FR 42159, Sept. 19, 1983. Redesignated and
amended at 60 FR 48241, 48249, Sept. 18, 1995]
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Federal Acquisition Regulation
42.1305
42.1401
Contract clauses.
(a) The contracting officer shall insert the clause at 52.242–14, Suspension
of Work, in solicitations and contracts
when a fixed-price construction or architect-engineer
contract
is
contemplated.
(b)(1) The contracting officer may,
when contracting by negotiation, insert the clause at 52.242–15, Stop-Work
Order, in solicitations and contracts
for supplies, services, or research and
development.
(2) If a cost-reimbursement contract
is contemplated, the contracting officer shall use the clause with its Alternate I.
(c) The contracting officer shall insert the clause at 52.242–16, Stop-Work
Order—Facilities, in solicitations and
contracts when a facilities acquisition
contract or a consolidated facilities
contract is contemplated.
(d) The contracting officer shall insert the clause at 52.242–17, Government Delay of Work, in solicitations
and contracts when a fixed-price contract is contemplated for supplies
other than commercial or modifiedcommercial items. The clause use is
optional when a fixed-price contract is
contemplated for services, or for supplies that are commercial or modifiedcommercial items.
[48 FR 42159, Sept. 19, 1983, as amended at 50
FR 2270, Jan. 15, 1985; 50 FR 25680, June 20,
1985. Redesignated and amended at 60 FR
48241, 48249, Sept. 18, 1995]
Subpart 42.14—Traffic and
Transportation Management
42.1401
General.
(a) The contract administration office (CAO) shall ensure that instructions to contractors result in the most
efficient and economical use of carrier
services and equipment. If the transportation data regarding f.o.b. origin
contracts is insufficient for Government transportation management purposes, the CAO shall obtain the data
used in the evaluation of offers.
(b) Transportation personnel assigned to or supporting the CAO, or appropriate agency personnel, are responsible for—
(1) Furnishing timely routings and
releases for port shipments;
(2) Monitoring shipments to provide
for carload or truckload quantities
when practicable;
(3) Controlling and issuing U.S. Government bills of lading (GBL’s) and determining proper freight classification
descriptions;
(4) Reviewing documentation to ensure the proper distribution and validation of shipping documents;
(5) Developing, and advising on,
transportation
cost
differentials
brought on by proposed changes in contract terms; e.g., delivery schedules;
(6) Determining, for contract requirements, the size and carrying capability
of carrier equipment to transport overdimensional and/or overweight supplies, hazardous materials, or supplies
requiring special shipping arrangements;
(7) Developing information and reporting movements that may be the
basis for negotiating special rates for
volume movements or for rate adjustments (see 42.1402(b));
(8) Exercising control of irregularities in preservation, packing, loading,
blocking and bracing, and other causes
contributing to loss and damage; sealing of carrier equipment and documentation;
(9) Providing information on the use
of transit arrangements;
(10) Recommending, when appropriate, prepayment by contractor for
f.o.b. origin shipments or parcel post
(see 47.303–17 and 42.1404);
(11) Recommending, when appropriate, the use of commercial forms
and procedures for small shipments of
a recurring nature if transportation
costs do not exceed $100, as authorized
in 41 CFR 101–41.304–2 and, for the Department of Defense (DOD), in Chapter
32, Defense Traffic Management Regulation
(DTMR)
(AR
55–355,
NAVSUPINST 4600.70, AFM 75–2, MCO
P–4600.14A, DLAR 4500.3);
(12) Diverting, reconsigning, tracing,
and expediting shipments; and
(13) Considering the capabilities of
contractors for meeting new or emergency requirements that arise during
the contract administration and using
these capabilities when appropriate.
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42.1402
48 CFR Ch. 1 (10–1–03 Edition)
(14) Using routings through established consolidation stations when it is
in the Government’s interest.
(c) Civilian agencies shall consult
and cooperate with the Office of Transportation of the General Services Administration (GSA) as required in 41
CFR 101–40. (See 47.105, Transportation
assistance, for assistance to civilian
Government activities or to military
installations.)
[48 FR 42370, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 55 FR 52796, Dec. 21,
1990; 59 FR 11383, Mar. 10, 1994]
42.1402 Volume movements within the
contiguous United States.
(a)(1) For purposes of contract administration, a volume movement is—
(i) In DOD, the aggregate of freight
shipments amounting to or exceeding
25 carloads, 25 truckloads, or 500,000
pounds, to move during the contract
period from one origin point for delivery to one destination point or area;
and
(ii) In civilian agencies, 50 short tons
(100,000 pounds) in the aggregate to
move during the contract period from
one origin point for delivery to one destination point or area.
(2) Transportation personnel assigned
to or supporting the CAO, or appropriate agency personnel, shall report
planned and actual volume movements
in accordance with agency regulations.
DOD activities report to the Military
Traffic
Management
Command
(MTMC) under the Defense Traffic
Management Regulation (DTMR). Civilian agencies report to GSA, Office of
Transportation, or other designated offices under the Federal Property Management Regulations (FPMR), specifically 41 CFR 101–40.305–2.
(b) Reporting of volume movements
permits MTMC and GSA transportation personnel to determine the reasonableness of applicable current rates
and, when appropriate, to negotiate adjusted or modified rates.
[48 FR 42370, Sept. 19, 1983, as amended at 59
FR 11383, Mar. 10, 1994; 68 FR 28084, May 22,
2003]
42.1403 Shipping documents covering
f.o.b. origin shipments.
(a) Except as provided in 47.303–17,
when a contract specifies delivery of
supplies f.o.b. origin with transportation costs to be paid by the Government, the contractor shall make shipments on U.S. Government bills of lading (GBL’s), or on other shipping documents prescribed by MTMC in the case
of seavan containers, furnished by the
CAO or the appropriate agency transportation office. Each agency shall establish appropriate procedures by
which the contractor shall obtain
GBL’s. The contracting officer shall
not authorize the contractor to ship on
commercial bills of lading for conversion to GBL’s unless delivery is extremely urgent and GBL’s are not readily available.
(b) The possible application of reduced rates under section 10721 of the
Interstate Commerce Act for shipments on commercial bills of lading
and the Commercial Bill of Lading Notations clause are discussed at 47.104.
(c)(1) The limited authority for the
use of commercial forms and procedures to acquire freight or express
transportation for small shipments of a
recurring nature when transportation
costs do not exceed $100, is prescribed
in the Transportation Documentation
and Audit Regulation, specifically 41
CFR 101–41.304–2.
(2)
For
DOD
shipments,
corresponding guidance is in Chapter 32 of
the DTMR.
[48 FR 42370, Sept. 19, 1983. Redesignated and
amended at 55 FR 52796, Dec. 21, 1990; 59 FR
11383, Mar. 10, 1994]
42.1404 Shipments by parcel post or
other classes of mail.
42.1404–1 Parcel
ments.
post
eligible
(a)(1) Use of parcel post or other
classes of mail permits direct movements from source of supply to the
user, without the intermediate documentation that is required when supplies are transported through depots or
air or water terminals. However, the
use of parcel post and other classes of
mail shall be confined to deliveries of
mailable matter that meet the size,
weight, and distance limitations prescribed by the U.S. Postal Service. Parcel post eligible shipments for overseas
destinations will not be sent via Small
Package Delivery services or parcel
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Federal Acquisition Regulation
42.1405
post to CONUS military air or water
terminals. These shipments will be
mailed through the APO or FPO to the
overseas user.
(2) When parcel post or other classes
of mail are used by contractors, they
shall prepay the postage costs by using
their own mailing labels or stamps and
include prepaid postage costs as separate items in the invoices for supplies
shipped.
(b)(1) Authority for contractors to
use indicia mail may be obtained by
submitting Postal Service (PS) Form
3601, Application to Mail Without
Affixing Postage Stamps, to the U.S.
Postal Service for approval, following
agency procedures. If approval is granted, the agency shall follow the U.S.
Postal Service permit requirements.
(2) When indicia mail is used, the
contractor will be provided with a completed PS Form 3601 and official penalty permit imprint mailing labels, envelopes, or cards printed on the top
right side in a rectangular box: Postage
and Fees Paid (first line); Government
Agency Name (second line); and, the
proper permit imprint number (G–000)
on the third line. These must also bear
in the upper left corner in every case
the printed return address of the agency concerned above the printed phrases
‘‘Official Business’’ and ‘‘Penalty for
Private Use, $300.’’ The name and address of a private person or firm shall
not be shown.
(c)(1) When a contractor uses its own
label to ship to a post office servicing
military and other agency consignees
outside the customs territory of the
United States, the contractor shall
stamp or imprint the parcel immediately above the label in 1⁄4-inch block
letters with the—
(i) Name of the agency; and
(ii) Words ‘‘Official Mail—Contents
for Official Use— Exempt from Customs Requirements.’’
(2) This marking permits identification and expedites handling within the
postal system, but the contractor must
pay postage if—
(i) Required by the contract; or
(ii) The contract provides for reimbursement for the cost of postage.
(d) Contractors may not insure shipments at Government expense for the
purpose of recovery in case of loss and/
or damage, except that minimum insurance required for the purposes of obtaining receipts at point of origin and
upon delivery is authorized.
[48 FR 42370, Sept. 19, 1983, as amended at 53
FR 27467, July 20, 1988; 57 FR 60587, Dec. 21,
1992; 68 FR 28084, May 22, 2003]
42.1404–2
Contract clauses.
(a) The contracting officer shall insert the clause at 52.242–10, F.o.b. Origin—Government Bills of Lading or
Prepaid Postage, in solicitations and
contracts when f.o.b. origin shipments
are to be made using Government bills
of lading or prepaid postage.
(b) The contracting officer shall insert the clause at 52.242–11, F.o.b. Origin—Government Bills of Lading or Indicia Mail, in solicitations and contracts when f.o.b. origin shipments are
to be made using Government bills of
lading or indicia mail, if indicia mail
has been authorized by the U.S. Postal
Service.
42.1405 Discrepancies incident to shipment of supplies.
(a) Discrepancies incident to shipment include overage, shortage, loss,
damage, and other discrepancies between the quantity and/or condition of
supplies received from commercial carriers and the quantity and/or condition
of these supplies as shown on the covering bill of lading or other transportation document. Regulations and procedures for reporting and adjusting discrepancies in Government shipments
are in subpart 40.7 of the Federal Property Management Regulations (41 CFR
101–40.7). (Military installations shall
consult Reporting of Transportation Discrepancies in Shipments, AR 55–38,
NAVSUP INST 4610.33C, AFR 75–18,
MCO P4610.19D, DLAR 4500.15).
(b) Generally, when the place of delivery is f.o.b. origin, the Government
consignee at destination is also accountable for the supplies, and all
claims or reports dealing with discrepancies shall be initiated at that point
in accordance with the property accountability regulations of the agency
concerned.
(c) If supplies are acquired on an
f.o.b. destination basis, any claim arising from a discrepancy occurring in
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42.1406
48 CFR Ch. 1 (10–1–03 Edition)
transit is a matter for settlement between the contractor and the carrier.
However, the Government consignee
shall (1) notify the carrier of the discrepancy by noting the exception on
the carrier’s delivery receipt and (2)
furnish all available data to the CAO or
appropriate agency office, which shall
promptly transmit the data to the contractor.
[48 FR 42370, Sept. 19, 1983, as amended at 59
FR 11383, Mar. 10, 1994]
42.1406
Report of shipment.
42.1406–1
[60 FR 16719, Mar. 31, 1995, as amended at 65
FR 36014, June 6, 2000]
Advance notice.
Military (and as required, civilian
agency)
storage
and
distribution
points, depots, and other receiving activities require advance notice of shipments en route from contractors’
plants. Generally, this notification is
required only for classified material;
sensitive, controlled, and certain other
protected material; explosives, and
some other hazardous materials; selected shipments requiring movement
control; or minimum carload or truckload shipments. It facilitates arrangements for transportation control,
labor, space, and use of materials handling equipment at destination. Also,
timely receipt of notices by the consignee transportation office precludes
the incurring of demurrage and vehicle
detention charges.
[48 FR 42370, Sept. 19, 1983, as amended at 54
FR 48989, Nov. 28, 1989]
42.1406–2
42.1500 Scope of subpart.
This subpart provides policies and establishes responsibilities for recording
and maintaining contractor performance information. This subpart does
not apply to procedures used by agencies in determining fees under award or
incentive fee contracts. However, the
fee amount paid to contractors should
be reflective of the contractor’s performance and the past performance
evaluation should closely parallel the
fee determinations.
Contract clause.
The contracting officer shall insert
the clause at 52.242–12, Report of Shipment (REPSHIP), in solicitations and
contracts when advance notice of shipment is required for safety or security
reasons, or where carload or truckload
shipments will be made to DoD installations or, as required, to civilian agency facilities.
[54 FR 48989, Nov. 28, 1989]
Subpart 42.15—Contractor
Performance Information
SOURCE: 60 FR 16719, Mar. 31, 1995, unless
otherwise noted.
42.1501 General.
Past performance information is relevant information, for future source selection purposes, regarding a contractor’s actions under previously awarded
contracts. It includes, for example, the
contractor’s record of conforming to
contract requirements and to standards of good workmanship; the contractor’s record of forecasting and controlling costs; the contractor’s adherence
to contract schedules, including the administrative aspects of performance;
the contractor’s history of reasonable
and cooperative behavior and commitment to customer satisfaction; and
generally, the contractor’s businesslike concern for the interest of the customer.
42.1502 Policy.
(a) Except as provided in paragraph
(b) of this section, agencies shall prepare an evaluation of contractor performance for each contract in excess of
$1,000,000 (regardless of the date of contract award) and for each contract in
excess of $100,000 beginning not later
than January 1, 1998 (regardless of the
date of contract award), at the time
the work under the contract is completed. In addition, interim evaluations
should be prepared as specified by the
agencies to provide current information for source selection purposes, for
contracts with a period of performance,
including options, exceeding one year.
This evaluation is generally for the entity, division, or unit that performed
the contract. The content and format
of performance evaluations shall be established in accordance with agency
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Federal Acquisition Regulation
42.1601
procedures and should be tailored to
the size, content, and complexity of the
contractual requirements.
(b) Agencies shall not evaluate performance for contracts awarded under
48 CFR part 8, subpart 8.7. Agencies
shall evaluate construction contractor
performance and architect/engineer
contractor performance in accordance
with 48 CFR 36.201 and 36.604, respectively.
[60 FR 16719, Mar. 31, 1995 as amended at 62
FR 51258, Sept. 30, 1997; 68 FR 28096, May 22,
2003]
42.1503 Procedures.
(a) Agency procedures for the past
performance evaluation system shall
generally provide for input to the evaluations from the technical office, contracting office and, where appropriate,
end users of the product or service.
(b) Agency evaluations of contractor
performance prepared under this subpart shall be provided to the contractor
as soon as practicable after completion
of the evaluation. Contractors shall be
given a minimum of 30 days to submit
comments, rebutting statements, or
additional information. Agencies shall
provide for review at a level above the
contracting officer to consider disagreements between the parties regarding the evaluation. The ultimate conclusion on the performance evaluation
is a decision of the contracting agency.
Copies of the evaluation, contractor response, and review comments, if any,
shall be retained as part of the evaluation. These evaluations may be used to
support future award decisions, and
should therefore be marked ‘‘Source
Selection Information’’. Evaluation of
Federal Prison Industries (FPI) performance may be used to support a
clearance request (see 8.605) when FPI
is a mandatory source in accordance
with subpart 8.6. The completed evaluation shall not be released to other
than Government personnel and the
contractor whose performance is being
evaluated during the period the information may be used to provide source
selection information. Disclosure of
such information could cause harm
both to the commercial interest of the
Government and to the competitive position of the contractor being evaluated as well as impede the efficiency of
Government operations. Evaluations
used in determining award or incentive
fee payments may also be used to satisfy the requirements of this subpart. A
copy of the annual or final past performance evaluation shall be provided
to the contractor as soon as it is finalized.
(c) Departments and agencies shall
share past performance information
with other departments and agencies
when requested to support future
award decisions. The information may
be provided through interview and/or
by sending the evaluation and comment documents to the requesting
source selection official.
(d) Any past performance information systems, including automated systems, used for maintaining contractor
performance information and/or evaluations should include appropriate
management and technical controls to
ensure that only authorized personnel
have access to the data.
(e) The past performance information
shall not be retained to provide source
selection information for longer than
three years after completion of contract performance.
60 FR 16719, Sept. 30, 1997, as amended at 62
FR 51258, Sept. 30, 1997; 68 FR 28096, May 22,
2003]
Subpart 42.16—Small Business
Contract Administration
42.1601
General.
The contracting officer shall make
every reasonable effort to respond in
writing within 30 days to any written
request to the contracting officer from
a small business concern with respect
to a contract administration matter.
In the event the contracting officer
cannot respond to the request within
the 30-day period, the contracting officer shall, within the period, transmit
to the contractor a written notification of the specific date the contracting officer expects to respond.
This provision shall not apply to a request for a contracting officer decision
under the Contract Disputes Act of 1978
(41 U.S.C. 601–613).
[60 FR 48230, Sept. 18, 1995]
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42.1701
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 42.17—Forward Pricing
Rate Agreements
SOURCE: 62 FR 51258, Sept. 30, 1997, unless
otherwise noted.
42.1701 Procedures.
(a) Negotiation of forward pricing
rate agreements (FPRA’s) may be requested by the contracting officer or
the contractor or initiated by the administrative contracting officer (ACO).
In determining whether or not to establish such an agreement, the ACO
should consider whether the benefits to
be derived from the agreement are
commensurate with the effort of establishing and monitoring it. Normally,
FPRA’s should be negotiated only with
contractors having a significant volume of Government contract proposals.
The cognizant contract administration
agency shall determine whether an
FPRA will be established.
(b) The ACO shall obtain the contractor’s proposal and require that it include cost or pricing data that are accurate, complete, and current as of the
date of submission. The ACO shall invite the cognizant contract auditor and
contracting offices having a significant
interest to participate in developing a
Government objective and in the negotiations. Upon completing negotiations, the ACO shall prepare a price negotiation memorandum (PNM) (see
15.406–3) and forward copies of the PNM
and FPRA to the cognizant auditor and
to all contracting offices that are
known to be affected by the FPRA. A
Certificate of Current Cost or Pricing
Data shall not be required at this time
(see 15.407–3(c)).
(c) The FPRA shall provide specific
terms and conditions covering expiration, application, and data requirements for systematic monitoring to ensure the validity of the rates. The
agreement shall provide for cancellation at the option of either party and
shall require the contractor to submit
to the ACO and to the cognizant contract auditor any significant change in
cost or pricing data.
(d) When an FPRA is invalid, the
contractor should submit and negotiate a new proposal to reflect the
changed conditions. If an FPRA has
not been established or has been invali-
dated, the ACO will issue a forward
pricing rate recommendation (FPRR)
to buying activities with documentation to assist negotiators. In the absence of an FPRA or FPRR, the ACO
shall include support for rates utilized.
(e) The ACO may negotiate continuous updates to the FPRA. The FPRA
will provide specific terms and conditions covering notification, application, and data requirements for systematic monitoring to ensure the validity of the rates.
PART 43—CONTRACT
MODIFICATIONS
Sec.
43.000
Scope of part.
Subpart 43.1—General
43.101 Definitions.
43.102 Policy.
43.103 Types of contract modifications.
43.104 Notification of contract changes.
43.105 Availability of funds.
43.106 [Reserved]
43.107 Contract clause.
Subpart 43.2—Change Orders
43.201
43.202
43.203
43.204
43.205
General.
Authority to issue change orders.
Change order accounting procedures.
Administration.
Contract clauses.
43.301
Use of forms.
Subpart 43.3—Forms
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42386, Sept. 19, 1983, unless
otherwise noted.
43.000
Scope of part.
This part prescribes policies and procedures for preparing and processing
contract modifications for all types of
contracts including construction and
architect-engineer contracts. It does
not apply to—
(a) Orders for supplies or services not
otherwise changing the terms of contracts or agreements (e.g., delivery orders under indefinite-delivery contracts); or
(b) Modifications for extraordinary
contractual relief (see part 50).
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Federal Acquisition Regulation
43.103
Subpart 43.1—General
43.101 Definitions.
As used in this part—
Administrative change means a unilateral (see 43.103(b)) contract change, in
writing, that does not affect the substantive rights of the parties (e.g., a
change in the paying office or the appropriation data).
(a) For a solicitation amendment,
change
order,
or
administrative
change, the effective date shall be the
issue date of the amendment, change
order, or administrative change.
(b) For a supplemental agreement,
the effective date shall be the date
agreed upon by the contracting parties.
(c) For a modification issued as a
confirming notice of termination for
the convenience of the Government,
the effective date of the confirming notice shall be the same as the effective
date of the initial notice.
(d) For a modification converting a
termination for default to a termination for the convenience of the Government, the effective date shall be the
same as the effective date of the termination for default.
(e) For a modification confirming the
termination contracting officer’s previous letter determination of the
amount due in settlement of a contract
termination for convenience, the effective date shall be the same as the effective date of the previous letter determination.
[48 FR 42386, Sept. 19, 1983, as amended at 66
FR 2133, Jan. 10, 2001]
43.102 Policy.
(a) Only contracting officers acting
within the scope of their authority are
empowered to execute contract modifications on behalf of the Government.
Other Government personnel shall
not—
(1) Execute contract modifications;
(2) Act in such a manner as to cause
the contractor to believe that they
have authority to bind the Government; or
(3) Direct or encourage the contractor to perform work that should be
the subject of a contract modification.
(b) Contract modifications, including
changes that could be issued unilaterally, shall be priced before their execu-
tion if this can be done without adversely affecting the interest of the
Government. If a significant cost increase could result from a contract
modification and time does not permit
negotiation of a price, at least a maximum price shall be negotiated unless
impractical.
(c) The Federal Acquisition Streamlining Act of 1994, Public Law 103–355
(FASA), and Section 4402 of the
Clinger-Cohen Act of 1996, Public Law
104–106, authorize, but do not require,
contracting officers, if requested by the
prime contractor, to modify contracts
without requiring consideration to incorporate changes authorized by FASA
or Clinger-Cohen Act amendments into
existing contracts. Contracting officers
are encouraged, if appropriate, to modify contracts without requiring consideration to incorporate these new policies. The contract modification should
be accomplished by inserting into the
contract, as a minimum, the current
version of the applicable FAR clauses.
[48 FR 42386, Sept. 19, 1983, as amended at 61
FR 18915, Apr. 29, 1996; 61 FR 69298, Dec. 31,
1996]
43.103 Types
tions.
of
contract
modifica-
Contract modifications are of the following types:
(a) Bilateral. A bilateral modification
(supplemental agreement) is a contract
modification that is signed by the contractor and the contracting officer. Bilateral modifications are used to—
(1) Make negotiated equitable adjustments resulting from the issuance of a
change order;
(2) Definitize letter contracts; and
(3) Reflect other agreements of the
parties modifying the terms of contracts.
(b) Unilateral. A unilateral modification is a contract modification that is
signed only by the contracting officer.
Unilateral modifications are used, for
example, to—
(1) Make administrative changes;
(2) Issue change orders;
(3) Make changes authorized by
clauses other than a changes clause
(e.g., Property clause, Options clause,
or Suspension of Work clause); and
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43.104
48 CFR Ch. 1 (10–1–03 Edition)
(4) Issue termination notices.
[48 FR 42386, Sept. 19, 1983, as amended at 66
FR 2133, Jan. 10, 2001]
43.104 Notification
of
contract
changes.
(a) When a contractor considers that
the Government has effected or may effect a change in the contract that has
not been identified as such in writing
and signed by the contracting officer,
it is necessary that the contractor notify the Government in writing as soon
as possible. This will permit the Government to evaluate the alleged change
and (1) confirm that it is a change, direct the mode of further performance,
and plan for its funding; (2) countermand the alleged change; or (3) notify
the contractor that no change is considered to have occurred.
(b) The clause at 52.243–7, Notification of Changes, which is prescribed in
43.107, (1) incorporates the policy expressed in paragraph (a) above; (2) requires the contractor to notify the
Government promptly of any Government conduct that the contractor considers a change to the contract, and (3)
specifies the responsibilities of the contractor and the Government with respect to such notifications.
[48 FR 42386, Sept. 19, 1983, as amended at 56
FR 41744, Aug. 22, 1991]
43.105 Availability of funds.
(a) The contracting officer shall not
execute a contract modification that
causes or will cause an increase in
funds without having first obtained a
certification of fund availability, except for modifications to contracts
that—
(1) Are conditioned on availability of
funds (see 32.703–2); or
(2) Contain a limitation of cost or
funds clause (see 32.704).
(b) The certification required by
paragraph (a) above shall be based on
the negotiated price, except that modifications executed before agreement on
price may be based on the best available estimate of cost.
43.106
[Reserved]
43.107 Contract clause.
The contracting officer may insert a
clause substantially the same as the
clause at 52.243–7, Notification of
Changes, in solicitations and contracts.
The clause is available for use primarily in negotiated research and development or supply contracts for the
acquisition of major weapon systems or
principal subsystems. If the contract
amount is expected to be less than
$1,000,000, the clause shall not be used,
unless the contracting officer anticipates that situations will arise that
may result in a contractor alleging
that the Government has effected
changes other than those identified as
such in writing and signed by the contracting officer.
[48 FR 42386, Sept. 19, 1983. Redesignated at
54 FR 20497, May 11, 1989]
Subpart 43.2—Change Orders
43.201 General.
(a) Generally, Government contracts
contain a changes clause that permits
the contracting officer to make unilateral changes, in designated areas, within the general scope of the contract.
These are accomplished by issuing
written change orders on Standard
Form 30, Amendment of Solicitation/
Modification of Contract (SF 30), unless otherwise provided (see 43.301).
(b) The contractor must continue
performance
of
the
contract
as
changed, except that in cost-reimbursement or incrementally funded contracts the contractor is not obligated
to continue performance or incur costs
beyond the limits established in the
Limitation of Cost or Limitation of
Funds clause (see 32.705–2).
(c) The contracting officer may issue
a change order by telegraphic message
under
unusual
or
urgent
circumstances; provided, that—
(1) Copies of the message are furnished promptly to the same addressees that received the basic contract;
(2) Immediate action is taken to confirm the change by issuance of a SF 30;
(3) The message contains substantially the information required by the
SF 30 (except that the estimated
change in price shall not be indicated),
including in the body of the message
the statement, ‘‘Signed by (Name),
Contracting Officer’’; and
(4) The contracting officer manually
signs the original copy of the message.
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Federal Acquisition Regulation
43.204
43.202 Authority to issue change orders.
Change orders shall be issued by the
contracting officer except when authority is delegated to an administrative contracting officer (see 42.202(c)).
43.203 Change order accounting procedures.
(a) Contractors’ accounting systems
are seldom designed to segregate the
costs of performing changed work.
Therefore, before prospective contractors submit offers, the contracting officer should advise them of the possible
need to revise their accounting procedures to comply with the cost segregation requirements of the Change Order
Accounting clause at 52.243–6.
(b) The following categories of direct
costs normally are segregable and accountable under the terms of the
Change Order Accounting clause:
(1) Nonrecurring costs (e.g., engineering costs and costs of obsolete or reperformed work).
(2) Costs of added distinct work
caused by the change order (e.g., new
subcontract work, new prototypes, or
new retrofit or backfit kits).
(3) Costs of recurring work (e.g.,
labor and material costs).
43.204 Administration.
(a) Change order documentation. When
change orders are not forward priced,
they require two documents: the
change order and a supplemental agreement reflecting the resulting equitable
adjustment in contract terms. If an equitable adjustment in the contract
price or delivery terms or both can be
agreed upon in advance, only a supplemental agreement need be issued, but
administrative changes and changes
issued pursuant to a clause giving the
Government a unilateral right to make
a change (e.g., an option clause) initially require only one document.
(b) Definitization. (1) Contracting officers shall negotiate equitable adjustments resulting from change orders in
the shortest practicable time.
(2) Administrative contracting officers negotiating equitable adjustments
by delegation under 42.302(b)(1), shall
obtain the contracting officer’s concurrence before adjusting the contract delivery schedule.
(3) Contracting offices and contract
administration offices, as appropriate,
shall establish suspense systems adequate to ensure accurate identification
and prompt definitization of unpriced
change orders.
(4) The contracting officer shall ensure that a cost analysis is made, if appropriate, under 15.404–1(c) and shall
consider the contractor’s segregable
costs of the change, if available. If additional funds are required as a result
of the change, the contracting officer
shall secure the funds before making
any adjustment to the contract.
(5) When the contracting officer requires a field pricing review of requests
for equitable adjustment, the contracting officer shall provide a list of
any significant contract events which
may aid in the analysis of the request.
This list should include—
(i) Date and dollar amount of contract award and/or modification;
(ii) Date of submission of initial contract proposal and dollar amount;
(iii) Date of alleged delays or disruptions;
(iv) Performance dates as scheduled
at date of award and/or modification;
(v) Actual performance dates;
(vi) Date entitlement to an equitable
adjustment was determined or contracting officer decision was rendered,
if applicable;
(vii) Date of certification of the request for adjustment if certification is
required; and
(viii) Dates of any pertinent Government actions or other key events during contract performance which may
have an impact on the contractor’s request for equitable adjustment.
(c) Complete and final equitable adjustments. To avoid subsequent controversies that may result from a supplemental agreement containing an equitable adjustment as the result of a
change order, the contracting officer
should—
(1) Ensure that all elements of the
equitable adjustment have been presented and resolved; and
(2) Include, in the supplemental
agreement, a release similar to the following:
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43.205
48 CFR Ch. 1 (10–1–03 Edition)
CONTRACTOR’S STATEMENT OF
RELEASE
In consideration of the modification(s)
agreed to herein as complete equitable adjustments
for
the
Contractor’s..........(describe).......... ‘‘proposal(s) for
adjustment,’’ the Contractor hereby releases
the Government from any and all liability
under this contract for further equitable adjustments attributable to such facts or circumstances giving rise to the ‘‘proposal(s)
for adjustment’’ (except for..........)
[48 FR 42386, Sept. 19, 1983, as amended at 56
FR 15154, Apr. 15, 1991; 62 FR 51271, Sept. 30,
1997]
43.205 Contract clauses.
(a)(1) The contracting officer shall
insert the clause at 52.243–1, Changes—
Fixed-Price, in solicitations and contracts when a fixed-price contract for
supplies is contemplated.
(2) If the requirement is for services,
other than architect-engineer or other
professional services, and no supplies
are to be furnished, the contracting officer shall use the clause with its Alternate I.
(3) If the requirement is for services
(other than architect-engineer services, transportation, or research and
development) and supplies are to be
furnished, the contracting officer shall
use the clause with its Alternate II.
(4) If the requirement is for architect-engineer or other professional
services, the contracting officer shall
use the clause with its Alternate III.
(5) If the requirement is for transportation services, the contracting officer
shall use the clause with its Alternate
IV.
(6) If it is desired to include the
clause in solicitations and contracts
when a research and development contract is contemplated, the contracting
officer shall use the clause with its Alternate V.
(b)(1) The contracting officer shall
insert the clause at 52.243–2, Changes—
Cost-Reimbursement, in solicitations
and contracts when a cost-reimbursement contract for supplies is contemplated.
(2) If the requirement is for services
and no supplies are to be furnished, the
contracting officer shall use the clause
with its Alternate I.
(3) If the requirement is for services
and supplies are to be furnished, the
contracting officer shall use the clause
with its Alternate II.
(4) If the requirement is for construction, the contracting officer shall use
the clause with its Alternate III.
(5) If a facilities contract is contemplated, the contracting officer shall
use the clause with its Alternate IV.
(6) If it is desired to include the
clause in solicitations and contracts
when a research and development contract is contemplated, the contracting
officer shall use the clause with its Alternate V.
(c) Insert the clause at 52.243–3,
Changes—Time-and-Materials
or
Labor-Hours, in solicitations and contracts when a time-and-materials or
labor-hour contract is contemplated.
The contracting officer may vary the
30-day period in paragraph (c) of the
clause according to agency procedures.
(d) The contracting officer shall insert the clause at 52.243–4, Changes, in
solicitations and contracts for (1) dismantling, demolition, or removal of
improvements; and (2) construction,
when a fixed-price contract is contemplated and the contract amount is
expected to exceed the simplified acquisition threshold.
(e) The contracting officer shall insert the clause at 52.243–5, Changes and
Changed Conditions, in solicitations
and contracts for construction, when
the contract amount is not expected to
exceed
the
simplified
acquisition
threshold.
(f) The contracting officer may insert
a clause, substantially the same as the
clause at 52.243–6, Change Order Accounting, in solicitations and contracts
for supply and research and development contracts of significant technical
complexity, if numerous changes are
anticipated. The clause may be included in solicitations and contracts
for construction if deemed appropriate
by the contracting officer.
[48 FR 42386, Sept. 19, 1983, as amended at 56
FR 15154, Apr. 15, 1991; 60 FR 34760, July 3,
1995; 61 FR 39190, July 26, 1996; 65 FR 46072,
July 26, 2000]
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Federal Acquisition Regulation
44.101
Subpart 44.2—Consent to Subcontracts
Subpart 43.3—Forms
43.301
Use of forms.
(a)(1) The Standard Form 30 (SF 30),
Amendment of Solicitation/Modification of Contract, exclusive of actions
processed under part 15, shall (except
for the options stated in 43.301(a)(2) or
actions processed under part 15) be
used for—
(i) Any amendment to a solicitation;
(ii) Change orders issued under the
Changes clause of the contract;
(iii) Any other unilateral contract
modification issued under a contract
clause authorizing such modification
without the consent of the contractor;
(iv) Administrative changes such as
the correction of typographical mistakes, changes in the paying office, and
changes in accounting and appropriation data;
(v) Supplemental agreements (see
43.103); and
(vi) Removal, reinstatement, or addition of funds to a contract.
(2) The SF 30 may be used for (i)
modifications that change the price of
contracts for the acquisition of petroleum as a result of economic price adjustment, (ii) termination notices, and
(iii) purchase order modifications as
specified in 13.302–3.
(3) If it is anticipated that a change
will result in a price change, the estimated amount of the price change shall
not be shown on copies of SF 30 furnished to the contractor.
(b) The Optional Form 336 (OF 336),
Continuation Sheet, or a blank sheet of
paper, may be used as a continuation
sheet for a contract modification.
[48 FR 42386, Sept. 19, 1983, as amended at 50
FR 26903, June 28, 1985; 51 FR 27120, July 29,
1986; 62 FR 51259, Sept. 30, 1997; 62 FR 64926,
Dec. 9, 1997]
PART 44—SUBCONTRACTING
POLICIES AND PROCEDURES
Sec.
44.000
Subpart 44.3—Contractors’ Purchasing
Systems Reviews
44.301 Objective.
44.302 Requirements.
44.303 Extent of review.
44.304 Surveillance.
44.305 Granting, withholding, or withdrawing approval.
44.305–1 Responsibilities.
44.305–2 Notification.
44.305–3 Withholding or withdrawing approval.
44.306 Disclosure of approval status.
44.307 Reports.
Subpart 44.4—Subcontracts for Commercial Items and Commercial Components
44.400
44.401
44.402
44.403
Scope of subpart.
Applicability.
Policy requirements.
Contract clause.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42388, Sept. 19, 1983, unless
otherwise noted.
44.000 Scope of part.
(a) This part prescribes policies and
procedures for consent to subcontracts
or
advance
notification
of
subcontracts, and for review, evaluation,
and approval of contractors’ purchasing systems.
(b) The consent and advance notification requirements of subpart 44.2 are
not applicable to prime contracts for
commercial items acquired pursuant to
part 12.
[63 FR 34060, June 22, 1998]
Subpart 44.1—General
44.101 Definitions.
As used in this part—
Approved purchasing system means a
contractor’s purchasing system that
has been reviewed and approved in accordance with this part.
Scope of part.
Subpart 44.1—General
44.101
44.201 Consent and advance notification requirements.
44.201–1 Consent requirements.
44.201–2 Advance notification requirements.
44.202 Contracting officer’s evaluation.
44.202–1 Responsibilities.
44.202–2 Considerations.
44.203 Consent limitations.
44.204 Contract clauses.
Definitions.
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44.201
48 CFR Ch. 1 (10–1–03 Edition)
Contractor means the total contractor
organization or a separate entity of it,
such as an affiliate, division, or plant,
that performs its own purchasing.
Contractor purchasing system review
(CPSR) means the complete evaluation
of a contractor’s purchasing of material and services, subcontracting, and
subcontract management from development of the requirement through
completion of subcontract performance.
Facilities (see 45.301).
Subcontract means any contract as
defined in subpart 2.1 entered into by a
subcontractor to furnish supplies or
services for performance of a prime
contract or a subcontract. It includes
but is not limited to purchase orders,
and changes and modifications to purchase orders.
Subcontractor means any supplier,
distributor, vendor, or firm that furnishes supplies or services to or for a
prime contractor or another subcontractor.
[48 FR 42388, Sept. 19, 1983, as amended at 50
FR 26903, June 28, 1985; 66 FR 2133, Jan. 10,
2001]
Subpart 44.2—Consent to
Subcontracts
44.201 Consent and advance notification requirements.
44.201–1
Consent requirements.
(a) If the contractor has an approved
purchasing system, consent is required
for subcontracts specifically identified
by the contracting officer in the subcontracts clause of the contract. The
contracting officer may require consent to subcontract if the contracting
officer has determined that an individual consent action is required to
protect the Government adequately because of the subcontract type, complexity, or value, or because the subcontract needs special surveillance.
These can be subcontracts for critical
systems, subsystems, components, or
services. Subcontracts may be identified by subcontract number or by class
of items (e.g., subcontracts for engines
on a prime contract for airframes).
(b) If the contractor does not have an
approved purchasing system, consent
to subcontract is required for cost-reimbursement,
time-and-materials,
labor-hour, or letter contracts, and
also for unpriced actions (including unpriced modifications and unpriced delivery orders) under fixed-price contracts that exceed the simplified acquisition threshold, for—
(1) Cost-reimbursement, time-andmaterials, or labor-hour subcontracts;
and
(2) Fixed-price subcontracts that exceed—
(i) For the Department of Defense,
the Coast Guard, and the National Aeronautics and Space Administration,
the greater of the simplified acquisition threshold or 5 percent of the total
estimated cost of the contract; or
(ii) For civilian agencies other than
the Coast Guard and the National Aeronautics and Space Administration, either the simplified acquisition threshold or 5 percent of the total estimated
cost of the contract.
(c) Consent may be required for subcontracts under prime contracts for architect-engineer services.
(d) The contracting officer’s written
authorization for the contractor to
purchase from Government sources (see
part 51) constitutes consent.
[63 FR 34060, June 22, 1998]
44.201–2 Advance notification requirements.
Under cost-reimbursement contracts,
even if the contractor has an approved
purchasing system and consent to subcontract is not required under 44.201–1,
the contractor is required by statute
(10 U.S.C. 2306(e) or 41 U.S.C. 254(b)) to
notify the agency before the award of—
(a)
Any
cost-plus-fixed-fee
subcontract; or
(b) Any fixed-price subcontract that
exceeds—
(1) For the Department of Defense,
the Coast Guard, and the National Aeronautics and Space Administration,
the greater of the simplified acquisition threshold or 5 percent of the total
estimated cost of the contract; or
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Federal Acquisition Regulation
44.202–2
(2) For civilian agencies other than
the Coast Guard and the National Aeronautics and Space Administration, either the simplified acquisition threshold or 5 percent of the total estimated
cost of the contract.
[63 FR 34060, June 22, 1998]
44.202 Contracting
tion.
officer’s
evalua-
44.202–1 Responsibilities.
(a) The cognizant administrative contracting officer (ACO) is responsible for
consent to subcontracts, except when
the contracting officer retains the contract for administration or withholds
the consent responsibility from delegation to the ACO. In such cases, the contract administration office should assist the contracting office in its evaluation as requested.
(b) The contracting officer responsible for consent shall review the contractor’s notification and supporting
data to ensure that the proposed subcontract is appropriate for the risks involved and consistent with current policy and sound business judgment.
(c) Designation of specific subcontractors during contract negotiations does not in itself satisfy the requirements for advance notification or
consent pursuant to the clause at
52.244–2. However, if, in the opinion of
the contracting officer, the advance notification or consent requirements
were satisfied for certain subcontracts
evaluated during negotiations, the contracting officer shall identify those
subcontracts in paragraph (k) of the
clause at 52.244–2.
[48 FR 42388, Sept. 19, 1983, as amended at 55
FR 52796, Dec. 21, 1990; 63 FR 34060, June 22,
1998]
44.202–2 Considerations.
(a) The contracting officer responsible for consent must, at a minimum,
review the request and supporting data
and consider the following:
(1) Is the decision to subcontract consistent with the contractor’s approved
make-or-buy program, if any (see
15.407–2)?
(2) Is the subcontract for special test
equipment or facilities that are available from Government sources (see subpart 45.3)?
(3) Is the selection of the particular
supplies, equipment, or services technically justified?
(4) Has the contractor complied with
the prime contract requirements regarding—
(i) Small business subcontracting, including, if applicable, its plan for subcontracting with small, veteran-owned,
service-disabled
veteran-owned,
HUBZone, small disadvantaged and
women-owned small business concerns
(see part 19); and
(ii) Purchase from nonprofit agencies
designated by the Committee for Purchase From People Who Are Blind or
Severely
Disabled
(Javits-WagnerO’Day Act (JWOD) (41 U.S.C. 48))(see
part 8)?
(5) Was adequate price competition
obtained or its absence properly justified?
(6) Did the contractor adequately assess and dispose of subcontractors’ alternate proposals, if offered?
(7) Does the contractor have a sound
basis for selecting and determining the
responsibility of the particular subcontractor?
(8) Has the contractor performed adequate cost or price analysis or price
comparisons and obtained accurate,
complete, and current cost or pricing
data, including any required certifications?
(9) Is the proposed subcontract type
appropriate for the risks involved and
consistent with current policy?
(10) Has adequate consideration been
obtained for any proposed subcontract
that will involve the use of Government-furnished facilities?
(11) Has the contractor adequately
and reasonably translated prime contract technical requirements into subcontract requirements?
(12) Does the prime contractor comply with applicable cost accounting
standards for awarding the subcontract?
(13) Is the proposed subcontractor on
the List of Parties Excluded from Federal Procurement and Nonprocurement
Programs (see subpart 9.4)?
(b) Particularly careful and thorough
consideration under paragraph (a)
above is necessary when—
(1) The prime contractor’s purchasing
system or performance is inadequate;
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44.203
48 CFR Ch. 1 (10–1–03 Edition)
(2) Close working relationships or
ownership affiliations between the
prime and subcontractor may preclude
free competition or result in higher
prices;
(3) Subcontracts are proposed for
award on a non-competitive basis, at
prices that appear unreasonable, or at
prices higher than those offered to the
Government
in
comparable
circumstances; or
(4) Subcontracts are proposed on a
cost-reimbursement,
time-and-materials, or labor-hour basis.
of the prime contractor’s right to appeal or the prosecution of an appeal by
the prime contractor on the subcontractor’s behalf. The clause may
also provide that the prime contractor
and subcontractor shall be equally
bound by the contracting officer’s or
board’s decision. The clause may not
attempt to obligate the contracting officer or the appeals board to decide
questions that do not arise between the
Government and the prime contractor
or that are not cognizable under the
clause at 52.233–1, Disputes.
[48 FR 42388, Sept. 19, 1983, as amended at 60
FR 33066, June 26, 1995; 60 FR 48264, Sept. 18,
1995; 62 FR 51271, Sept. 30, 1997; 63 FR 34060,
June 22, 1998; 66 FR 65368, Dec. 18, 2001]
44.204
44.203 Consent limitations.
(a) The contracting officer’s consent
to a subcontract or approval of the
contractor’s purchasing system does
not constitute a determination of the
acceptability of the subcontract terms
or price, or of the allowability of costs,
unless the consent or approval specifies
otherwise.
(b) Contracting officers shall not consent to—
(1) Cost-reimbursement subcontracts
if the fee exceeds the fee limitations of
16.301–3;
(2) Subcontracts providing for payment on a cost-plus-a-percentage-ofcost basis;
(3) Subcontracts obligating the contracting officer to deal directly with
the subcontractor;
(4) Subcontracts that make the results of arbitration, judicial determination, or voluntary settlement between the prime contractor and subcontractor binding on the Government;
or
(5) Repetitive or unduly protracted
use of cost-reimbursement, time-andmaterials, or labor-hour subcontracts
(contracting officers should follow the
principles of 16.103(c)).
(c) Contracting officers should not
refuse consent to a subcontract merely
because it contains a clause giving the
subcontractor the right of indirect appeal to an agency board of contract appeals if the subcontractor is affected by
a dispute between the Government and
the prime contractor. Indirect appeal
means assertion by the subcontractor
Contract clauses.
(a)(1) The contracting officer shall
insert the clause at 52.244–2, Subcontracts, in solicitations and contracts when contemplating—
(i) A cost-reimbursement contract;
(ii) A letter contract that exceeds the
simplified acquisition threshold;
(iii) A fixed-price contract that exceeds the simplified acquisition threshold under which unpriced contract actions (including unpriced modifications
or unpriced delivery orders) are anticipated;
(iv) A time-and-materials contract
that exceeds the simplified acquisition
threshold; or
(v) A labor-hour contract that exceeds the simplified acquisition threshold.
(2) If a cost-reimbursement contract
is contemplated—
(i) For the Department of Defense,
the Coast Guard, and the National Aeronautics and Space Administration,
the contracting officer shall use the
clause with its Alternate I; or
(ii) For civilian agencies other than
the Coast Guard and the National Aeronautics and Space Administration,
the contracting officer shall use the
clause with its Alternate II.
(3) Use of this clause is not required
in—
(i)
Fixed-price
architect-engineer
contracts; or
(ii) Contracts for mortuary services,
refuse services, or shipment and storage of personal property, when an
agency-prescribed clause on approval
of subcontractors’ facilities is required.
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Federal Acquisition Regulation
44.303
(b) The contracting officer may insert the clause at 52.244–4, Subcontractors and Outside Associates and Consultants (Architect-Engineer Services),
in architect-engineer contracts.
(c) The contracting officer shall,
when contracting by negotiation, insert the clause at 52.244–5, Competition
in Subcontracting, in solicitations and
contracts when the contract amount is
expected to exceed the simplified acquisition threshold, unless—
(1)
A
firm-fixed-price
contract,
awarded on the basis of adequate price
competition or whose prices are set by
law or regulation, is contemplated; or
(2) A time-and-materials, labor-hour,
or architect-engineer contract is contemplated.
[63 FR 34060, June 22, 1998, as amended at 64
FR 51845, Sept. 24, 1999]
Subpart 44.3—Contractors’
Purchasing Systems Reviews
44.301
Objective.
The objective of a contractor purchasing system review (CPSR) is to
evaluate the efficiency and effectiveness with which the contractor spends
Government funds and complies with
Government policy when subcontracting. The review provides the administrative contracting officer (ACO)
a basis for granting, withholding, or
withdrawing approval of the contractor’s purchasing system.
44.302
Requirements.
(a) The ACO shall determine the need
for a CPSR based on, but not limited
to, the past performance of the contractor, and the volume, complexity
and dollar value of subcontracts. If a
contractor’s sales to the Government
(excluding competitively awarded firmfixed-price and competitively awarded
fixed-price with economic price adjustment contracts and sales of commercial items pursuant to Part 12) are expected to exceed $25 million during the
next 12 months, perform a review to determine if a CPSR is needed. Sales include those represented by prime contracts, subcontracts under Government
prime contracts, and modifications.
Generally, a CPSR is not performed for
a specific contract. The head of the
agency responsible for contract administration may raise or lower the $25
million review level if it is considered
to be in the Government’s best interest.
(b) Once an initial determination has
been made under paragraph (a) of this
section, at least every three years the
ACO shall determine whether a purchasing system review is necessary. If
necessary, the cognizant contract administration office will conduct a purchasing system review.
[63 FR 70288, Dec. 18, 1998]
44.303
Extent of review.
A CPSR requires an evaluation of the
contractor’s purchasing system. Unless
segregation of subcontracts is impracticable, this evaluation shall not include subcontracts awarded by the contractor exclusively in support of Government contracts that are competitively awarded firm-fixed-price, competitively awarded fixed-price with
economic price adjustment, or awarded
for commercial items pursuant to part
12. The considerations listed in 44.202–2
for consent evaluation of particular
subcontracts also shall be used to
evaluate the contractor’s purchasing
system, including the contractor’s policies, procedures, and performance
under that system. Special attention
shall be given to—
(a) The degree of price competition
obtained;
(b) Pricing policies and techniques,
including methods of obtaining accurate, complete, and current cost or
pricing data and certification as required;
(c) Methods of evaluating subcontractor responsibility, including the
contractor’s use of the List of Parties
Excluded from Federal Procurement
and Nonprocurement Programs (see
9.404) and, if the contractor has subcontracts with parties on the list, the
documentation, systems, and procedures the contractor has established to
protect the Government’s interests (see
9.405–2).
(d) Treatment accorded affiliates and
other concerns having close working
arrangements with the contractor;
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44.304
48 CFR Ch. 1 (10–1–03 Edition)
(e) Policies and procedures pertaining to small business concerns, including
small
disadvantaged
and
women-owned small business concerns;
(f) Planning, award, and postaward
management of major subcontract programs;
(g) Compliance with Cost Accounting
Standards in awarding subcontracts;
(h) Appropriateness of types of contracts used (see 16.103); and
(i) Management control systems, including internal audit procedures, to
administer progress payments to subcontractors.
[48 FR 42388, Sept. 19, 1983, as amended at 52
FR 9039, Mar. 20, 1987; 54 FR 19827, May 8,
1989; 60 FR 33066, June 26, 1995; 60 FR 48264,
Sept. 18, 1995; 62 FR 12719, Mar. 17, 1997; 63 FR
70288, Dec. 18, 1998]
44.304 Surveillance.
(a) The ACO shall maintain a sufficient level of surveillance to ensure
that the contractor is effectively managing its purchasing program.
(b) Surveillance shall be accomplished in accordance with a plan developed by the ACO with the assistance
of subcontracting, audit, pricing, technical, or other specialists as necessary.
The plan should cover pertinent phases
of a contractor’s purchasing system
(preaward, postaward, performance,
and contract completion) and pertinent
operations that affect the contractor’s
purchasing and subcontracting. The
plan should also provide for reviewing
the effectiveness of the contractor’s
corrective actions taken as a result of
previous Government recommendations. Duplicative reviews of the same
areas by CPSR and other surveillance
monitors should be avoided.
[48 FR 42388, Sept. 19, 1983, as amended at 59
FR 67054, Dec. 28, 1994; 62 FR 12719, Mar. 17,
1997]
44.305 Granting, withholding, or withdrawing approval.
44.305–1 Responsibilities.
The cognizant ACO is responsible for
granting, withholding, or withdrawing
approval of a contractor’s purchasing
system. The ACO shall—
(a) Approve a purchasing system only
after determining that the contractor’s
purchasing policies and practices are
efficient and provide adequate protection of the Government’s interests; and
(b) Promptly notify the contractor in
writing of the granting, withholding,
or withdrawal of approval.
[62 FR 12719, Mar. 17, 1997]
44.305–2
Notification.
(a) The notification granting system
approval shall include—
(1) Identification of the plant or
plants covered by the approval;
(2) The effective date of approval; and
(3) A statement that system approval—
(i) Applies to all Federal Government
contracts at that plant to the extent
that
cross-servicing
arrangements
exist;
(ii) Waives the contractual requirement for advance notification in fixedprice contracts, but not for cost-reimbursement contracts;
(iii) Waives the contractual requirement for consent to subcontracts in
fixed-price contracts and for specified
subcontracts in cost-reimbursement
contracts but not for those subcontracts, if any, selected for special
surveillance and identified in the contract Schedule; and
(iv) May be withdrawn at any time at
the ACO’s discretion.
(b) In exceptional circumstances,
consent to certain subcontracts or
classes of subcontracts may be required
even though the contractor’s purchasing system has been approved. The
system approval notification shall
identify the class or classes of subcontracts requiring consent. Reasons
for selecting the subcontracts include
the fact that a CPSR or continuing
surveillance has revealed sufficient
weaknesses in a particular area of subcontracting to warrant special attention by the ACO.
(c) When recommendations are made
for improvement of an approved system, the contractor shall be requested
to reply within 15 days with a position
regarding the recommendations.
[48 FR 42388, Sept. 19, 1983, as amended at 62
FR 12719, Mar. 17, 1997]
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44.402
44.305–3 Withholding or withdrawing
approval.
(a) The ACO shall withhold or withdraw approval of a contractor’s purchasing system when there are major
weaknesses or when the contractor is
unable to provide sufficient information upon which to make an affirmative determination. The ACO may
withdraw approval at any time on the
basis of a determination that there has
been a deterioration of the contractor’s
purchasing system or to protect the
Government’s interest. Approval shall
be withheld or withdrawn when there is
a recurring noncompliance with requirements, including but not limited
to—
(1) Cost or pricing data (see 15.403);
(2) Implementation of cost accounting standards (see 48 CFR chapter 99
(Appendix B, FAR loose-leaf edition);
(3) Advance notification as required
by the clauses prescribed in 44.204; or
(4) Small business subcontracting
(see subpart 19.7).
(b) When approval of the contractor’s
purchasing system is withheld or withdrawn, the ACO shall within 10 days
after completing the in-plant review (1)
inform the contractor in writing, (2)
specify the deficiencies that must be
corrected to qualify the system for approval, and (3) request the contractor
to furnish within 15 days a plan for accomplishing the necessary actions. If
the plan is accepted, the ACO shall
make a follow-up review as soon as the
contractor notifies the ACO that the
deficiencies have been corrected.
[48 FR 42388, Sept. 19, 1983, as amended at 59
FR 67043, Dec. 28, 1994; 62 FR 51271, Sept. 30,
1997]
44.306
Disclosure of approval status.
Upon request, the ACO may inform a
contractor that the purchasing system
of a proposed subcontractor has been
approved or disapproved, but shall caution that the Government will not keep
the contractor advised of any changes
in the approval status. If the proposed
subcontractor’s purchasing system has
not been reviewed, the contractor shall
be so advised.
[62 FR 12719, Mar. 17, 1997]
44.307
Reports.
The ACO shall distribute copies of
CPSR reports; notifications granting,
withholding, or withdrawing system
approval;
and
Government
recommendations for improvement of an
approved system, including the contractor’s response, to at least—
(a) The cognizant contract audit office;
(b) Activities prescribed by the cognizant agency; and
(c) The contractor (except that furnishing copies of the contractor’s response is optional).
[62 FR 12719, Mar. 17, 1997]
Subpart 44.4—Subcontracts for
Commercial Items and Commercial Components
SOURCE: 60 FR 48249, Sept. 18, 1995, unless
otherwise noted.
44.400
Scope of subpart.
This subpart prescribes the policies
limiting the contract clauses a prime
contractor may be required to apply to
any subcontractors that are furnishing
commercial items or commercial components in accordance with Section
8002(b)(2) (Public Law 103–355).
44.401
Applicability.
This subpart applies to all contracts
and subcontracts. For the purpose of
this subpart, the term ‘‘subcontract’’
has the same meaning as defined in
part 12.
44.402
Policy requirements.
(a) Contractors and subcontractors at
all tiers shall, to the maximum extent
practicable:
(1) Be required to incorporate commercial items or nondevelopmental
items as components of items delivered
to the Government; and
(2) Not be required to apply to any of
its divisions, subsidiaries, affiliates,
subcontractors or suppliers that are
furnishing commercial items or commercial components any clause, except
those—
(i) Required to implement provisions
of law or executive orders applicable to
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44.403
48 CFR Ch. 1 (10–1–03 Edition)
subcontractors furnishing commercial
items or commercial components; or
(ii) Determined to be consistent with
customary commercial practice for the
item being acquired.
(b) The clause at 52.244–6, Subcontracts for Commercial Items and
Commercial Components, implements
the policy in paragraph (a) of this section. Notwithstanding any other clause
in the prime contract, only those
clauses identified in the clause at
52.244–6 are required to be in subcontracts for commercial items or
commercial components.
(c) Agencies may supplement the
clause at 52.244–6 only as necessary to
reflect agency unique statutes applicable to the acquisition of commercial
items.
44.403 Contract clause.
The contracting officer shall insert
the clause at 52.244–6, Subcontracts for
Commercial Items and Commercial
Components, in solicitations and contracts for supplies or services other
than commercial items.
PART 45—GOVERNMENT PROPERTY
Sec.
45.000
Scope of part.
45.302–1 Policy.
45.302–2 Facilities contracts.
45.302–3 Other contracts.
45.302–4 Contractor use of Governmentowned and -operated test facilities.
45.302–5 Standby or layaway requirements.
45.302–6 Required
Government
property
clauses for facilities contracts.
45.302–7 Optional property-related clauses
for facilities contracts.
45.303 Providing material.
45.303–1 Policy.
45.303–2 Procedures.
45.304 Providing motor vehicles.
45.305 [Reserved]
45.306 Providing special tooling.
45.306–1 Providing existing special tooling.
45.306–2 Special tooling under cost-reimbursement contracts.
45.306–3 Special tooling under fixed-price
contracts.
45.306–4 [Reserved]
45.306–5 Contract clause.
45.307 Providing special test equipment.
45.307–1 General.
45.307–2 Acquiring special test equipment.
45.307–3 Contract clause.
45.308 Providing Government production
and research property ‘‘as is.’’
45.308–1 General.
45.308–2 Contract clause.
45.309 Providing Government production
and research property under special restrictions.
45.310 Providing agency-peculiar property.
45.311 Providing Government property by
transfer.
Subpart 45.1—General
45.101 Definitions.
45.102 Policy.
45.103 Responsibility and liability for Government property.
45.104 Review and correction of contractors’
property control systems.
45.105 Records of Government property.
45.106 Government property clauses.
Subpart 45.2—Competitive Advantage
45.201 General.
45.202 Evaluation procedures.
45.202–1 Rental equivalents.
45.202–2 Rent.
45.202–3 Other costs and savings.
45.203 Postaward utilization requests.
45.204 Residual value of special tooling and
special test equipment.
45.205 Solicitation requirements.
Subpart 45.3—Providing Government
Property to Contractors
45.300
45.301
45.302
Scope of subpart.
Definitions.
Providing facilities.
Subpart 45.4—Contractor Use and Rental
of Government Property
45.400 Scope of subpart.
45.401 Policy.
45.402 Authorizing use of Government production and research property.
45.403 Rental—Use and Charges clause.
45.404 Rent-free use.
45.405 Contracts with foreign governments
or international organizations.
45.406 Use of Government production and
research property on independent research and development programs.
45.407 Non-Government use of plant equipment.
Subpart 45.5—Management of Government Property in the Possession of
Contractors
45.500 Scope of subpart.
45.501 Definitions.
45.502 Contractor responsibility.
45.502–1 Receipts for Government property.
45.502–2 Discrepancies incident to shipment.
45.503 Relief from responsibility.
45.504 Contractor’s liability.
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45.101
45.505 Records and reports of Government
property.
45.505–1 Basic information.
45.505–2 Records of pricing information.
45.505–3 Records of material.
45.505–4 Records of special tooling and special test equipment.
45.505–5 Records of plant equipment.
45.505–6 Special reports of plant equipment.
45.505–7 Records of real property.
45.505–8 Records of scrap or salvage.
45.505–9 Records of related data and information.
45.505–10 Records of completed products.
45.505–11 Records of transportation and installation costs of plant equipment.
45.505–12 Records of misdirected shipments.
45.505–13 Records of property returned for
rework.
45.505–14 Reports of Government property.
45.506 Identification.
45.507 Segregation of Government property.
45.508 Physical inventories.
45.508–1 Inventories upon termination or
completion.
45.508–2 Reporting results of inventories.
45.508–3 Quantitative and monetary control.
45.509 Care, maintenance, and use.
45.509–1 Contractor’s maintenance program.
45.509–2 Use of Government property.
45.510 Property in possession of subcontractors.
45.511 Audit of property control system.
Subpart 45.6—Reporting, Redistribution,
and Disposal of Contractor Inventory
45.600 Scope of subpart.
45.601 Definitions.
45.602 [Reserved]
45.603 Disposal methods.
45.604 Restrictions on purchase or retention
of contractor inventory.
45.605 Contractor-acquired property.
45.605–1 Purchase or retention at cost.
45.605–2 Return to suppliers.
45.605–3 Cost-reimbursement contracts.
45.606 Inventory schedules.
45.606–1 Submission.
45.606–2 Common items.
45.606–3 Acceptance.
45.606–4 Withdrawals.
45.606–5 Instructions for preparing and submitting schedules of contractor inventory.
45.607 Scrap.
45.607–1 General.
45.607–2 Recovering precious metals.
45.608 Screening of contractor inventory.
45.608–1 General.
45.608–2 Standard screening.
45.608–3 Agency screening.
45.608–4 Limited screening.
45.608–5 Special items screening.
45.608–6 Waiver of screening requirements.
45.608–7 Reimbursement of costs for transfer
of contractor inventory.
45.608–8 Report of excess personal property
(SF 120).
45.609 Donations.
45.610 Sale of surplus contractor inventory.
45.610–1 Responsibility.
45.610–2 Exemptions from sale by GSA.
45.610–3 Proceeds of sale.
45.610–4 Contractor inventory in foreign
countries.
45.611 Destruction or abandonment.
45.612 Removal and storage.
45.612–1 General.
45.612–2 Special storage at the contractor’s
risk.
45.612–3 Special storage at the Government’s expense.
45.613 Property disposal determinations.
45.614 Subcontractor inventory.
45.615 Accounting for contractor inventory.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42392, Sept. 19, 1983, unless
otherwise noted.
45.000
Scope of part.
This part prescribes policies and procedures for providing Government
property to contractors, contractors’
use and management of Government
property, and reporting, redistributing,
and disposing of contractor inventory.
It does not apply to providing property
under any statutory leasing authority,
except as to non-Government use of
plant equipment under 45.407; to property to which the Government has acquired a lien or title solely because of
partial, advance, or progress payments;
or to disposal of real property.
Subpart 45.1—General
45.101 Definitions.
(a) Contractor-acquired property, as
used in this part, means property acquired or otherwise provided by the
contractor for performing a contract
and to which the Government has title.
Government-furnished
property,
as
used in this part, means property in
the possession of, or directly acquired
by, the Government and subsequently
made available to the contractor.
Government property means all property owned by or leased to the Government or acquired by the Government
under the terms of the contract. It includes
both
Government-furnished
property and contractor-acquired property as defined in this section.
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45.102
48 CFR Ch. 1 (10–1–03 Edition)
Plant equipment, as used in this part,
means personal property of a capital
nature (including equipment, machine
tools, test equipment, furniture, vehicles, and accessory and auxiliary
items) for use in manufacturing supplies, in performing services, or for any
administrative or general plant purpose. It does not include special tooling
or special test equipment.
Property, as used in this part, means
all property, both real and personal. It
includes facilities, material, special
tooling, special test equipment, and
agency-peculiar property.
Real property, as used in this part,
means land and rights in land, ground
improvements, utility distribution systems, and buildings and other structures. It does not include foundations
and other work necessary for installing
special tooling, special test equipment,
or plant equipment.
Special test equipment, as used in this
part, means either single or multipurpose integrated test units engineered,
designed, fabricated, or modified to accomplish special purpose testing in
performing a contract. It consists of
items or assemblies of equipment, including standard or general purpose
items or components, that are interconnected and interdependent so as to
become a new functional entity for special testing purposes. It does not include material, special tooling, facilities (except foundations and similar
improvements necessary for installing
special test equipment), and plant
equipment items used for general plant
testing purposes.
Special tooling, as used in this part,
means jigs, dies, fixtures, molds, patterns, taps, gauges, other equipment
and manufacturing aids, all components of these items, and replacement
of these items, which are of such a specialized nature that without substantial modification or alteration their
use is limited to the development or
production of particular supplies or
parts thereof or to the performance of
particular services. It does not include
material, special test equipment, facilities (except foundations and similar
improvements necessary for installing
special tooling), general or special machine tools, or similar capital items.
(b) Additional definitions also applying throughout this part appear in
those subparts where the terms are
most frequently used.
[48 FR 42392, Sept. 19, 1983, as amended at 51
FR 19716, May 30, 1986; 51 FR 33270, Sept. 19,
1986; 53 FR 27468, July 20, 1988]
45.102 Policy.
Contractors are ordinarily required
to furnish all property necessary to
perform Government contracts. However, if contractors possess Government property, agencies shall—
(a) Eliminate to the maximum practical extent any competitive advantage
that might arise from using such property;
(b) Require contractors to use Government property to the maximum
practical extent in performing Government contracts;
(c) Permit the property to be used
only when authorized;
(d) Charge appropriate rentals when
the property is authorized for use on
other than a rent-free basis;
(e) Require contractors to be responsible and accountable for, and keep the
Government’s official records of Government property in their possession or
control (but see 45.105);
(f) Require contractors to review and
provide justification for retaining Government property not currently in use;
and
(g) Ensure maximum practical reutilization of contractor inventory (see
45.601) within the Government.
45.103 Responsibility and liability for
Government property.
(a) Contractors are responsible and
liable for Government property in their
possession, unless otherwise provided
by the contract.
(b) Generally, Government contracts
do not hold contractors liable for loss
of or damage to Government property
when the property is provided under—
(1) Negotiated fixed-price contracts
for which the contract price is not
based upon an exception at 15.403–1;
(2) Cost-reimbursement contracts;
(3) Facilities contracts; or
(4) Negotiated or sealed bid service
contracts performed on a Government
installation where the contracting officer determines that the contractor has
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45.105
little direct control over the Government property because it is located on
a Government installation and is subject to accessibility by personnel other
than the contractor’s employees and
that by placing the risk on the contractor, the cost of the contract would
be substantially increased.
(c) When justified by the circumstances, the contract may require
the contractor to assume greater liability for loss of or damage to Government property than that contemplated
by the Government property clauses or
the clause at 52.245–8, Liability for the
Facilities. For example, this may be
the case when the contractor is using
Government property primarily for
commercial work rather than Government work.
(d) If the Government provides Government property directly to a subcontractor, the terms of paragraph (b)
above shall apply to the subcontractor.
(e) Subcontractors are liable for loss
of or damage to Government property
furnished through a prime contractor.
However, if the prime contract is of a
type listed in subparagraph (b)(1) or (2)
above, the prime contractor may, after
obtaining the contracting officer’s consent, reduce the subcontractor’s liability by including in the subcontract a
clause similar to paragraph (g), Limited risk of loss, as provided in Alternate I of the clause at 52.245–2, Government Property (Fixed-Price Contracts),
(for fixed-price contracts) or similar to
the same paragraph of the clause at
52.245–5, Government Property (CostReimbursement, Time-and-Material, or
Labor-Hour Contracts) (for cost-reimbursement contracts). Before consenting to a clause that reduces the
subcontractor’s liability, the contracting officer should ensure that the
Government’s interests are sufficiently
protected.
(f) A prime contractor that provides
Government property to a subcontractor shall not be relieved of any responsibility to the Government that
the prime contractor may have under
the terms of the prime contract.
[48 FR 42392, Sept. 19, 1983, as amended at 53
FR 663, Jan. 11, 1988; 60 FR 48218, Sept. 18,
1995; 62 FR 51271, Sept. 30, 1997]
45.104 Review and correction of contractors’ property control systems.
(a) The review and approval of a contractor’s property control system shall
be accomplished by the agency responsible for contract administration at a
contractor’s plant or installation. The
review and approval of a contractor’s
property control system by one agency
shall be binding on all other departments and agencies based on interagency agreements.
(b) The contracting officer or the representative assigned the responsibility
as property administrator shall review
contractors’ property control systems
to assure compliance with the Government property clauses of the contract.
(c) The property administrator shall
notify the contractor in writing when
its property control system does not
comply with subpart 45.5 or other contract requirements and shall request
prompt correction of deficiencies. If
the contractor does not correct the deficiencies within a reasonable period,
the property administrator shall request action by the contracting officer
administering the contract. The contracting officer shall—
(1) Notify the contractor in writing
of any required corrections and establish a schedule for completion of actions;
(2) Caution the contractor that failure to take the required corrective actions within the time specified will result in withholding or withdrawing system approval; and
(3) Advise the contractor that its liability for loss of or damage to Government property may increase if approval
is withheld or withdrawn.
45.105 Records of Government property.
(a) Contractor records of Government
property established and maintained
under the terms of the contract are the
Government’s
official
Government
property records. Duplicate official
records shall not be furnished to or
maintained by Government personnel,
except as provided in paragraph (b)
below.
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45.106
48 CFR Ch. 1 (10–1–03 Edition)
(b) Contracts may provide for the
contracting office to maintain the Government’s official Government property records when the contracting office retains contract administration
and Government property is furnished
to a contractor—(1) for repair or servicing and return to the shipping organization, (2) for use on a Government
installation, (3) under a local support
service contract, (4) under a contract
with a short performance period, or (5)
when otherwise determined by the contracting officer to be in the Government’s interest.
[48 FR 42392, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 57 FR 60588, Dec. 21,
1992]
45.106
Government property clauses.
This section prescribes the principal
Government property clauses. Other
clauses pertaining to Government
property are prescribed in subpart 45.3.
(a) The contracting officer shall insert the clause at 52.245–1, Property
Records, in solicitations and contracts
when the conditions in 45.105(b) exist
and the Government maintains the
Government’s
official
Government
property records.
(b)(1) The contracting officer shall
insert the clause at 52.245–2, Government Property (Fixed-Price Contracts),
in solicitations and contracts when a
fixed-price contract is contemplated,
except as provided in paragraphs (d)
and (e) below.
(2) If the contract is—
(i) A negotiated fixed-price contract
for which prices are not based on an exception at 15.403–1; or
(ii) A fixed-price service contract
which is performed primarily on a Government installation, provided the contracting officer determines it to be in
the best interest of the Government
(see 45.103(b)(4)), the contracting officer
shall use the clause with its Alternate
I.
(3) If the contract is for the conduct
of basic or applied research at nonprofit institutions of higher education
or at nonprofit organizations whose
primary purpose is the conduct of scientific research (see 35.014), the contracting officer shall use the clause
with its Alternate II.
(c) The contracting officer shall insert the clause at 52.245–3, Identification of Government-Furnished Property, in addition to the clause at 52.245–
2, Government Property (Fixed-Price
Contracts), in solicitations and contracts when a fixed-price construction
contract is contemplated under which
the Government is to furnish Government property f.o.b. railroad cars at a
specified destination or f.o.b. truck at
the project site. The contract Schedule
shall specify the point of delivery and
may include special terms and conditions covering installation, preparation
for operation, or equipment testing by
the Government or by another contractor.
(d) The contracting officer may insert the clause at 52.245–4, GovernmentFurnished Property (Short Form), in
solicitations and contracts when a
fixed-price,
time-and-material,
or
labor-hour contract is contemplated
and the acquisition cost of all Government-furnished property to be involved
in the contract is $100,000 or less; unless a contract with an educational or
nonprofit
organization
is
contemplated.
(e) When the cost of the item to be
repaired does not exceed the simplified
acquisition threshold, purchase orders
for property repair need not include a
Government property clause.
(f)(1) The contracting officer shall insert the clause at 52.245–5, Government
Property (Cost-Reimbursement, Timeand-Material, or Labor-Hour Contracts), in solicitations and contracts
when a cost-reimbursement, time-andmaterial, or labor-hour contract is contemplated, except as provided in paragraph (d) above.
(2) If the contract is for the conduct
of basic or applied research at nonprofit institutions of higher education
or at nonprofit organizations whose
primary purpose is the conduct of scientific research (see 35.014), the contracting officer shall use the clause
with its Alternate I.
(g) The contracting officer shall insert the clause at 52.245–6, Liability for
Government
Property
(Demolition
Services), in addition to the clauses
prescribed at 37.304, in solicitations and
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45.203
contracts for dismantling, demolition,
or removal of improvements.
[48 FR 42392, Sept. 19, 1983, as amended at 53
FR 663, Jan. 11, 1988; 57 FR 60588, Dec. 21,
1992; 60 FR 34760, July 3, 1995; 60 FR 48218,
Sept. 18, 1995; 61 FR 39190, July 26, 1996; 62 FR
51271, Sept. 30, 1997]
Subpart 45.2—Competitive
Advantage
45.201 General.
(a) The contracting officer shall, to
the maximum practical extent, eliminate competitive advantage accruing
to a contractor possessing Government
production and research property (see
45.301). This is done by (1) adjusting the
offers of those contractors by applying,
for evaluation purposes only, a rental
equivalent evaluation factor or, (2)
when adjusting offers is not practical,
by charging the contractor rent for
using the property. Applying a rental
equivalent factor is not appropriate in
awarding negotiated contracts when
the contracting officer determines that
using the factor would not affect the
choice of contractors.
(b) In evaluating offers, the contracting officer shall also consider any
costs or savings to the Government related to providing such property, regardless of any competitive advantage
that may result (see 45.202–3).
45.202
Evaluation procedures.
45.202–1 Rental equivalents.
If a rental equivalent evaluation factor is used, it shall be equal to the rent
allocable to the proposed contract that
would otherwise have been charged for
the property, as computed in accordance with the clause at 52.245–9, Use
and Charges. (See 45.205(b) for solicitation requirements.)
45.202–2 Rent.
If using a rental equivalent evaluation factor is not practical, and the
competitive advantage is to be eliminated by charging rent, any offeror or
subcontractor may use Government
production and research property after
obtaining the written approval of the
contacting officer having cognizance of
the property. Rent shall be charged in
accordance with 45.403.
45.202–3
Other costs and savings.
(a) If furnishing Government production and research property will result
in direct measurable costs that the
Government must bear, additional factors shall be considered in evaluating
bids or proposals. These factors shall
be specified in the solicitation either
as dollar amounts or as formulas and
shall be limited to the cost of—
(1) Reactivation from storage;
(2) Rehabilitation and conversion;
and
(3) Making the property available on
an f.o.b. basis.
(b) If, under the terms of the solicitation, the contractor will bear the
transportation cost of furnishing Government production and research property or the cost of making it suitable
for use (such as when property is offered on an as is basis (see 45.308)), no
additional evaluation factors related to
those costs shall be used.
(c) If using Government production
and research property will result in
measurable savings to the Government,
the dollar amount of these savings
shall be specified in the solicitation
and used in evaluating offers. Examples
of such savings include—
(1) Savings occurring as a direct result of activating tools being maintained in idle status at known cost to
the Government; and
(2) Avoiding the costs of deactivating
and placing tools in layaway or storage
or of maintaining them in an idle
state, if the prospective costs are
known. For these costs to be included
in the evaluation, firm decisions must
have been made that the tools will be
laid away or stored if not used on the
proposed contract and that such costs
are not merely being deferred.
45.203
Postaward utilization requests.
When, after award, a contractor requests the use of special tooling or special test equipment, the administrative
contracting officer shall obtain a fair
rental or other adequate consideration
if use is authorized. The value of the
items, if known, and any amount included for them in the contract price
shall be considered.
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45.204
48 CFR Ch. 1 (10–1–03 Edition)
45.204 Residual value of special tooling and special test equipment.
(a) In awarding competitively negotiated contracts that permit the acquisition of special tooling or special test
equipment, an evaluation may be made
of the residual value of the property to
the Government. This evaluation is appropriate when the contracting officer
(1) determines that the property will
have a reasonably foreseeable usefulness and related residual value beyond
the period of use on the proposed contract and (2) anticipates that the cost
of the property (as proposed by the several offerors) may be a factor in making the award. This evaluation is not
appropriate if the contract will include
the special tooling or special test
equipment as a contract line item.
(b) The purpose of evaluating the residual value of special tooling or special test equipment is to apportion to
each proposal only that part of the
total cost of the property that represents the amount of useful life to be
consumed during contract performance. Accordingly, the proposed price
or cost may be reduced for evaluation
purposes by an amount representing
the residual value of such property to
the Government. In estimating residual value, the contracting officer shall
consider—
(1) The useful life of the special tooling and special test equipment to be
acquired;
(2) Adaptability of the property for
use by other contractors or by the Government;
(3) Reasonably foreseeable requirements for future use of the property;
and
(4) The scrap or salvage value of the
property.
(c) If the contacting officer decides to
consider the residual value of special
tooling or special test equipment, the
solicitation shall so notify offerors and
state the Government’s reasonably
foreseeable future requirements for the
property.
45.205 Solicitation requirements.
(a) When Government production and
research property (see 45.301) is offered
for use in a competitive acquisition,
solicitations will ordinarily require the
contractor to assume all costs related
to making the property available for
use (such as payment of all transportation or rehabilitation costs).
(b) The solicitation shall describe the
evaluation procedures to be followed,
including rental charges or equivalents
(see 45.202) and other costs or savings
to be evaluated (see 45.202–3), and shall
require all offerors to submit with
their offers the following information:
(1) A list or description of all Government production and research property
that the offeror or its subcontractors
propose to use on a rent-free basis. The
list shall include property offered for
use in the solicitation, as well as property already in possession of the offeror and its subcontractors under other
contracts.
(2) Identification of the facilities contract or other instrument under which
property already in possession of the
offeror and its subcontractors is held,
and the written permission for its use
from the contracting officer having
cognizance of the property.
(3) The dates during which the property will be available for use (including
the first, last, and all intervening
months) and, for any property that will
be used concurrently in performing two
or more contracts, the amounts of the
respective uses in sufficient detail to
support proration of the rent.
(4) The amount of rent that would
otherwise be charged, computed in accordance with 45.403.
(c) Solicitations shall provide that
using Government production and research property (other than as described and permitted in the solicitation (see paragraph (b) above)) will not
be authorized under the contract unless such use is approved in writing by
the contracting officer cognizant of the
property, and either rent calculated in
accordance with the clause at 52.245–9,
Use and Charges, is charged, or the
contract price is reduced by an equivalent amount. (See 45.203 for postaward
requests for special tooling and special
test equipment and 45.204(c) for solicitation requirements for special tooling
and special test equipment with residual value.)
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Federal Acquisition Regulation
45.302–1
Subpart 45.3—Providing Government Property to Contractors
45.300 Scope of subpart.
This subpart prescribes policies and
procedures for providing Government
property to contractors.
45.301 Definitions.
Agency-peculiar property, as used in
this subpart, means Government-owned
personal property that is peculiar to
the mission of one agency (e.g., military or space property). It excludes
Government material, special test
equipment, special tooling, and facilities.
Facilities, as used in this subpart and
when used in other than a facilities
contract, means property used for production, maintenance, research, development, or testing. It includes plant
equipment and real property (see
45.101). It does not include material,
special test equipment, special tooling,
or agency-peculiar property.
Facilities contract, as used in this subpart, means a contract under which
Government facilities are provided to a
contractor or subcontractor by the
Government for use in connection with
performing one or more related contracts for supplies or services. It is
used occasionally to provide special
tooling or special test equipment. Facilities contracts may take any of the
following forms:
(a) A facilities acquisition contract
providing for the acquisition, construction, and installation of facilities.
(b) A facilities use contract providing
for the use, maintenance, accountability, and disposition of facilities.
(c) A consolidated facilities contract,
which is a combination of a facilities
acquisition and a facilities use contract.
Government production and research
property, as used in this subpart, means
Government-owned facilities, Government-owned special test equipment,
and special tooling to which the Government has title or the right to acquire title.
Material, as used in this subpart,
means property that may be incorporated into or attached to a deliverable end item or that may be consumed
or expended in performing a contract.
It includes assemblies, components,
parts, raw and processed materials, and
small tools and supplies that may be
consumed in normal use in performing
a contract.
Nonprofit organization, as used in this
subpart, means any corporation, foundation, trust, or institution operated
for scientific, educational, or medical
purposes, not organized for profit, and
no part of the net earnings of which inures to the benefit of any private
shareholder or individual.
Nonseverable, as used in this subpart,
when related to Government production and research property, means
property that cannot be removed after
erection or installation without substantial loss of value or damage to the
property or to the premises where installed.
[48 FR 42392, Sept. 19, 1983, as amended at 57
FR 60589, Dec. 21, 1992
45.302
Providing facilities.
45.302–1
Policy.
(a) Contractors shall furnish all facilities required for performing Government contracts except as provided
in this subsection. Government facilities provided to contractors shall be individually identified in the solicitation, if possible, and contract. Agencies
shall not furnish facilities to contractors for any purpose, including restoration, replacement, or modernization,
except as follows:
(1) For use in a Government-owned,
contractor-operated plant operated on
a cost-plus-fee basis.
(2) For support of industrial preparedness programs.
(3) As components of special tooling
or special test equipment acquired or
fabricated at Government expense.
(4) When, as a result of the prospective contractor’s written statement asserting inability to obtain facilities,
the agency head or designeee issues a
Determination and Finding (see subpart 1.7) that the contract cannot be
fulfilled by any other practical means
or that it is in the public interest to
provide the facilities.
(i) If the contractor’s inability to
provide facilities is due to insufficient
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45.302–2
48 CFR Ch. 1 (10–1–03 Edition)
lead time, the Government may provide existing facilities until the contractor’s facilities can be installed.
(ii) Mere assertion by a contractor
that it is unable to provide facilities is
not, in itself, sufficient to justify approval. Appropriate Government officials must determine that providing
Government facilities is justified.
(iii) The determination shall include
findings that private financing of the
facilities was sought but not available
or that private financing was determined not advantageous to the Government. The determination shall also
state that the contract cannot be accomplished without Government facilities being provided.
(iv) The original determination shall
be included in the contract file.
(v) No determination is required
when the facilities are provided as
components of special tooling or special test equipment acquired or fabricated at Government expense.
(5) As otherwise authorized by law or
regulation.
(b) Agencies shall not—
(1) Furnish new facilities to contractors unless existing Government-owned
facilities are either inadequate or cannot be economically furnished;
(2) Use research and development
funds to provide contractors with new
construction or improvements of general utility, unless authorized by law;
or
(3) Provide facilities to contractors
solely for non-Government use, unless
authorized by law.
(c) Competitive solicitations shall
not include an offer by the Government
to provide new facilities, nor shall solicitations offer to furnish existing
Government facilities that must be
moved into a contractor’s plant, unless
adequate price competition cannot be
otherwise obtained. Such solicitations
shall require contractors to identify
the Government-owned facilities desired to be moved into their plants.
(d) Government facilities with a unit
cost of less than $10,000 shall not be
provided to contractors unless—
(1) The contractor is a nonprofit institution of higher education or other
nonprofit organization whose primary
purpose is the conduct of scientific research;
(2) A contractor is operating a Government-owned plant on a cost-plus-fee
basis;
(3) A contractor is performing on a
Government establishment or installation;
(4) A contractor is performing under
a contract specifying that it may acquire or fabricate special tooling, special test equipment, and components
thereof subsequent to obtaining the approval of the contracting officer; or
(5) The facilities are unavailable
from other than Government sources.
[48 FR 42392, Sept. 19, 1983, as amended at 54
FR 34756, Aug. 21, 1989]
45.302–2
Facilities contracts.
(a) Facilities shall be provided to a
contractor or subcontractor only under
a facilities contract using the appropriate clauses required by 45.302–6, except as provided in 45.302–3.
(b) All facilities provided by a contracting activity for use by a contractor at any one plant or general location shall be governed by a single facilities contract, unless the contracting officer determines this to be
impractical. Each agency should consolidate, to the maximum practical extent, its facility contracts covering
specific contractor locations.
(c) No fee shall be allowed under a facilities contract. Profit or fee (plus or
minus) shall be considered in awarding
any related supply or service contract,
consistent with the profit guidelines of
15.404–4.
(d) Special tooling and special test
equipment will normally be provided to
a contractor under a supply contract,
but may be provided under a facilities
contract when administratively desirable.
(e) Agencies shall ensure that facility
projects involving real property transactions comply with applicable laws
(e.g., 10 U.S.C. 2676 and 41 U.S.C. 12 and
14).
[48 FR 42392, Sept. 19, 1983, as amended at 62
FR 51271, Sept. 30, 1997]
45.302–3 Other contracts.
(a) Facilities may be provided to a
contractor under a contract other than
a facilities contract when one of the
following exceptions applies:
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Federal Acquisition Regulation
45.302–6
(1) The actual or estimated cumulative acquisition cost of the facilities
provided by the contracting activity to
the contractor at one plant or general
location does not exceed $1,000,000;
(2) The number of items of plant
equipment provided is ten or fewer;
(3) The contract performance period
is twelve months or less;
(4) The contract is for construction;
(5) The contract is for services and
the facilities are to be used in connection with the operation of a Government-owned plant or installation; or
(6) The contract is for work within an
establishment or installation operated
by the Government.
(b) When a facilities contract is not
used, the Government’s interest shall
normally be protected by using the appropriate Government property clause
or, in the case of subparagraph (a)(5) of
this subsection, by appropriate portions of the facilities clauses.
(c) No profit or fee shall be allowed
on the cost of the facilities when purchased for the account of the Government under other than a facilities contract. General purpose components of
special tooling or special test equipment are not facilities.
[48 FR 42392, Sept. 19, 1983, as amended at 55
FR 52796, Dec. 21, 1990; 57 FR 60588, 60589, Dec.
21, 1992]
45.302–4 Contractor use of Government-owned and -operated test facilities.
(a) Agencies may authorize onsite
use by contractors of existing Government-owned and -operated test facilities in connection with Government
contracts only when—
(1) No adequate commercial test capability is available;
(2) Substantial cost savings will result from using the Government-owned
test facilities; or
(3) Otherwise authorized by law.
(b) When such use is authorized, the
contracting officer shall obtain adequate consideration comparable to
commercial rates.
45.302–5 Standby or layaway requirements.
A facilities contract may include requirements for maintenance and storage of Government production and re-
search property in standby or layaway
status. The contract shall include appropriate specifications for the care
and maintenance of the property. If the
Government is required to pay the contractor for maintenance and storage,
the contract shall define what constitutes standby or layaway and specify when payments will begin and end.
The contract may provide for reimbursing the contractor for any State or
local property tax it is required to pay
because of its possession of or interest
in such property (see 31.205–41).
45.302–6 Required Government property clauses for facilities contracts.
(a) The contracting officer shall insert the clause at 52.245–7, Government
Property (Consolidated Facilities), in
solicitations and contracts when a consolidated facilities contract is contemplated (see 45.301).
(b) The contracting officer shall insert the clause at 52.245–8, Liability for
the Facilities, in solicitations and contracts when a consolidated facilities
contract, a facilities acquisition contract, or a facilities use contract is
contemplated (see 45.301).
(c) The contracting officer shall insert the clause at 52.245–9, Use and
Charges, in solicitations and contracts
(1) when a consolidated facilities contract or a facilities use contract (see
45.301) or (2) when a fixed-price contract is contemplated, and Government
production and research property is
provided other than on a rent-free
basis.
(d) The contracting officer shall insert the clause at 52.245–10, Government Property (Facilities Acquisition),
in solicitations and contracts when a
facilities acquisition contract is contemplated (see 45.301).
(e)(1) The contracting officer shall insert the clause at 52.245–11, Government Property (Facilities Use), in solicitations and contracts when a facilities use contract is contemplated (see
45.301).
(2) If the contract is for the conduct
of basic or applied research at nonprofit institutions of higher education,
or is awarded to a nonprofit organization whose primary purpose is the conduct of scientific research (see 35.014),
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45.302–7
48 CFR Ch. 1 (10–1–03 Edition)
the contracting officer shall use the
clause with its Alternate I.
45.302–7 Optional
property-related
clauses for facilities contracts.
(a) The contracting officer may insert the clause at 52.245–12, Contract
Purpose (Nonprofit Educational Institutions), in solicitations and contracts
when a facilities use contract is contemplated and award may be made to a
nonprofit educational institution (also
see 45.302–6).
(b) The contracting officer may insert the clause at 52.245–13, Accountable Facilities (Nonprofit Educational
Institutions), in solicitations and contracts when a facilities contract is contemplated and award may be made to a
nonprofit educational institution (also
see 45.302–6).
(c) The contracting officer may insert the clause at 52.245–14, Use of Government Facilities, in solicitations and
contracts when a facilities use contract
is contemplated and award may be
made to a nonprofit educational institution (also see 45.302–6).
(d) The contracting officer may,
under a proper delegation of authority,
insert the clause at 52.245–15, Transfer
of Title to the Facilities, in solicitations and contracts when a consolidated facilities contract, a facilities
acquisition contract, or a facilities use
contract is contemplated for the conduct of basic or applied research at
nonprofit institutions of higher education, or at nonprofit organizations
whose primary purpose is the conduct
of scientific research (see 35.015 and
45.302–6).
(e) The contracting officer may insert the clause at 52.245–16, Facilities
Equipment Modernization, in solicitations and contracts when a consolidated facilities contract, a facilities
acquisition contract, or a facilities use
contract is contemplated under which
the Government will provide modernized or replacement facilities.
45.303
Providing material.
45.303–1
Policy.
Contractors shall ordinarily furnish
all material for performing Government contracts. However, agencies
should provide material to a contractor
when necessary to achieve significant
economy, standardization, or expedited
production, or when it is otherwise in
the Government’s interest.
45.303–2
Procedures.
Solicitations shall specify material
that the Government will furnish in
sufficient detail (including requisitioning procedures) to enable offerors
to evaluate it accurately. The contracting officer shall insert the appropriate Government property clause prescribed in 45.106, in all solicitations
when the Government will provide material.
45.304
Providing motor vehicles.
(a) Contractors shall ordinarily furnish any motor vehicles needed in performing Government contracts. Agencies may provide contractors with
motor vehicles only when—
(1) The number of vehicles required
for use by contractor personnel is predictable and expected to remain fairly
constant;
(2) The proposed contract will bear
the entire cost of the vehicle program;
(3) The motor vehicles will not be
used on any contract other than that
for which the vehicles were provided,
unless approved by the appropriate department or agency official;
(4) Prospective contractors do not
have or would not be expected to have
an existing and continuing capability
for providing the vehicles from their
own resources; and
(5) Substantial savings are expected.
(b) Agencies that provide contractors
with
Government-owned-or-leased
motor vehicles are responsible for ensuring that such vehicles are used only
for the performance of the contract.
Under 41 CFR 101–38.301–1, contractors
are prohibited from using such vehicles
for home-to-work transportation consistent with Pub. L. 99–550 amending 31
U.S.C. 1344. (See subpart 51.2, Contractor Use of Interagency Fleet Management System (IFMS) Vehicles.)
[48 FR 42392, Sept. 19, 1983, as amended at 55
FR 52796, Dec. 21, 1990]
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Federal Acquisition Regulation
45.307–1
45.305
[Reserved]
45.306
Providing special tooling.
45.306–1 Providing existing special
tooling.
(a) The contracting officer shall offer
existing Government special tooling to
prospective contractors for use in Government work if it will not disrupt programs of equal or higher priority, it is
otherwise advantageous to the Government, and use of the special tooling is
authorized under 45.402(a). (See also
45.308 and 45.309.)
(b) Contracts authorizing the furnishing of existing special tooling shall
contain a description of the special
tooling, the terms and conditions of
shipment, and the terms covering the
cost of adapting and installing the
tooling.
45.306–2 Special tooling under cost-reimbursement contracts.
Title to special tooling under cost-reimbursement contracts is acquired by
the Government in all cases. The
clause used for this purpose is 52.245–5,
Government
Property
(Cost-Reimbursement,
Time-and-Material,
or
Labor-Hour Contracts).
[54 FR 48989, Nov. 28, 1989]
45.306–3 Special tooling under fixedprice contracts.
(a) Criteria for acquisition. In deciding
whether or not to acquire title to special tooling, or rights to title, under
fixed-price contracts, the contracting
officer shall consider the following factors:
(1) The current or probable future
need of the Government for the items
involved (including in-house use) and
the estimated cost of producing them if
not acquired.
(2) The estimated residual value of
the items.
(3) The administrative burden and
other expenses incident to reporting,
recordkeeping, preparation, handling
transportation, and storage.
(4) The feasibility and probable cost
of making the items available to other
offerors in the event of future acquisitions.
(5) The amount offered by the contractor for the right to retain the
items.
(6) The affect on future competition
and contract pricing.
(b) Decision not to acquire special tooling. In contracts in which the Government will not acquire title to special
tooling, or rights to title, special requirements may be included in the
Schedule of the contract (e.g., requirement governing the contractor’s capitalization of special tooling costs).
[54 FR 48989, Nov. 28, 1989]
45.306–4
[Reserved]
45.306–5
Contract clause.
The contracting officer shall insert
the clause at 52.245–17, Special Tooling,
in solicitations and contracts when a
fixed-price contract is contemplated,
and either the contract will include
special tooling provided by the Government or the Government will acquire
title or right to title in special tooling
to be acquired or fabricated by the contractor for the Government, other than
special tooling to be delivered as an
end item under the contract. The Special Tooling clause shall apply to all
special tooling accountable to the contract.
[54 FR 48989, Nov. 28, 1989]
45.307 Providing special test equipment.
45.307–1
General.
(a) Contracting officers shall offer existing Government-owned special test
equipment to contractors, consistent
with the conditions in 45.306–1(a). (See
also 45.308 and 45.309.)
(b) Contracting officers may also authorize contractors to acquire special
test equipment for the Government
when it is advantageous to the Government under the criteria in 45.306–3(a)
and existing special test equipment is
not available.
[48 FR 42392, Sept. 19, 1983, as amended at 54
FR 48990, Nov. 28, 1989]
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45.307–2
48 CFR Ch. 1 (10–1–03 Edition)
45.307–2 Acquiring special test equipment.
(a) When special test equipment or
components are known, the solicitation (and the contract) shall separately
identify each item to be furnished by
the Government or acquired or fabricated by the contractor for the Government. Individual items of less than
$5,000 may be grouped by category.
(b) Notice and approval. Under negotiated contracts containing the clause
at 52.245–18, Special Test Equipment,
the contractor must notify the contracting officer if it intends to acquire
or fabricate special test equipment.
Within 30 days of receipt of the notice,
the contracting officer shall—
(1) Review the proposed items for necessity and proper classification as special test equipment;
(2) Screen the availability of existing
Government-owned test equipment in
accordance with agency procedures;
and
(3) Notify the contractor, approving
or disapproving the acquisition or fabrication and, if it is disapproved, state
whether the equipment will be furnished by the Government.
[48 FR 42392, Sept. 19, 1983, as amended at 57
FR 60588, Dec. 21, 1992]
45.307–3 Contract clause.
The contracting officer shall insert
the clause at 52.245–18, Special Test
Equipment, in solicitations and contracts when contracting by negotiation
and the contractor will acquire or fabricate special test equipent for the
Government but the exact identification of the special test equipment to be
acquired or fabricated is unknown.
[54 FR 48990, Nov. 28, 1989]
45.308 Providing Government production and research property ‘‘as is.’’
45.308–1 General.
(a) The contracting officer may provide Government production and research property on an ‘‘as is’’ basis for
performing fixed-price, time-and-material, and labor-hour contracts. It may
also be furnished under a facilities contract, in which case the contract shall
state that the contractor will not be
reimbursed for transporting, installing,
modifying, repairing, or otherwise
making the property ready for use.
(b) When the property is provided
under other than a facilities contract,
the solicitation shall state that—
(1) Offerors may inspect the property
before submitting offers and the conditions under which it may be inspected;
(2) The property is offered in its current condition, f.o.b. present location
(provide specific locations);
(3) Offerors must satisfy themselves
that the property is suitable for their
use;
(4) The successful offeror shall bear
the cost of transporting, installing,
modifying, repairing, or otherwise
making the property suitable for use;
and
(5) Evaluations will be made in accordance with Subpart 45.2 to eliminate any competitive advantage resulting from using the property.
[54 FR 48990, Nov. 28, 1989]
45.308–2
Contract clause.
The contracting officer shall insert
the clause at 52.245–19, Government
Property Furnished ‘‘As Is,’’ in solicitations and contracts when a contract
other than a consolidated facilities
contract, a facilities acquisition contract, or a facilities use contract is
contemplated and Government production and research property is to be furnished ‘‘as is’’ (see 45.106 for additional
clauses that may be required).
[54 FR 48990, Nov. 28, 1989]
45.309 Providing Government production and research property under
special restrictions.
(a) Government production and research property, other than foundations and similar improvements necessary for installing special tooling,
special test equipment, or plant equipment, shall not be installed or constructed on land not owned by the Government in such fashion as to be nonseverable, unless the head of the contracting activity determines that the
location is necessary, and the contract
under which the property is provided
contains—
(1) A requirement for the contractor
to reimburse the Government for the
fair value of the property at contract
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Federal Acquisition Regulation
45.402
completion or termination or within a
reasonable time thereafter (for example, the provision may require the contractor to purchase the property at a
value determined by appraisal or at a
price equal to its acquisition cost less
depreciation at a specified rate);
(2) An option for the Government to
acquire the underlying land; or
(3) An alternative provision that the
agency head considers adequate to protect the Government’s interests.
(b) If patent or other proprietary
rights of a contractor may restrict the
disposal of Government production and
research property, the condition in either paragraph (a)(1) or (a)(3) above
shall be satisfied before the property is
provided.
(c) If Government production and research property is not available to all
offerors, the solicitation shall identify
the offerors to whom the property is
available.
45.310 Providing
property.
agency-peculiar
(a) Agency-peculiar property may be
furnished to contractors when necessary for use as a standard or model,
for testing the contractor’s end item
where suitable commercial equipment
is not available, to establish equipment
compatibility, or for other reasons that
the contracting officer determines to
be in the Government’s interest.
(b) Agency-peculiar property may be
furnished under a facilities contract, a
supply or service contract containing
the appropriate Government Property
clause, or a special bailment agreement.
(c) Contracting officers shall provide
special instructions for security, liability, maintenance, and/or property control, when agency-peculiar property requires special handling or safeguards.
45.311 Providing Government
erty by transfer.
prop-
Government property shall be transferred only if there is a requirement
under the gaining contract. Transfers
of Government property, as Government-furnished property, shall be documented by a modification to the gaining contract. A modification or other
documentation listing all items of
property transferred is required for the
losing contract.
[59 FR 67054, Dec. 28, 1994]
Subpart 45.4—Contractor Use and
Rental of Government Property
45.400
Scope of subpart.
This subpart prescribes policies and
procedures for contractor use and rental of Government production and research property.
45.401
Policy.
In performing Government contracts
or subcontracts, Government production and research property in the possession of contractors or subcontractors shall be used to the greatest possible extent, provided that a competitive advantage is not conferred on the
contractor or its subcontractors (see
subpart 45.2). Prior approval of the contracting officer having cognizance of
Government production and research
property is required for any use,
whether Government or non-Government, to ensure that the Government
receives adequate consideration. Government use is defined as use in support of U.S. Government contacts and
non-Government use is all other use
(including direct commercial sales to
domestic and foreign customers). As a
general rule, Government use is on a
rent-free basis. Non-Government use is
on a rental basis. When Government
production and research property is no
longer required for the performance of
Government contracts or subcontracts,
it shall not continue to be made available to a contractor for non-Government use.
[51 FR 19717, May 30, 1986]
45.402 Authorizing use of Government
production and research property.
(a) Contracting officers who believe
it to be in the Government’s interest
for a prospective contractor or subcontractor to use existing Government
production and research property shall
authorize such use in the contract. The
contracting officer shall confirm the
availability of the property before authorizing its use on either a rental or
rent-free basis.
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45.403
48 CFR Ch. 1 (10–1–03 Edition)
(b) Unless the solicitation provides
for the successful offeror to use Government production and research property in the offeror’s possession, the solicitation shall require any offeror desiring to use such property to request
the written concurrence of the contracting officer cognizant of the property. To preclude a competitive advantage, the contracting officer’s concurrence should include any information
required by subpart 45.2.
(c) The contracting officer shall review the contractor’s request for nonGovernment use of Government production and research property when
the property is no longer required for
performing Government contracts but
is retained for spares or for mobilization and readiness requirements. (Also
see 45.302–1(b)(3).)
45.403 Rental—Use
and
Charges
clause.
(a) The contracting officer shall
charge contractors rent for using Government production and research property, except as prescribed in 45.404 and
45.405. Rent shall be computed in accordance with the clause at 52.245–9,
Use and Charges. If the agency head or
designee determines it to be in the
Government’s interest, rent for classes
of production and research property
other than plant equipment identified
in item (ii) of Table I of the clause at
52.245–9, Use and Charges, may be
charged on the basis of use rather than
the rental period, or on some other equitable basis. In such cases, the clause
at 52.245–9, Use and Charges, shall be
appropriately modified.
(b) The contracting officer cognizant
of the Government production and research property shall ensure the collection of any rent due the Government
from the contractor.
45.404 Rent-free use.
(a) The rental required by 45.403
above does not apply to the following
Government production and research
property:
(1) That which is located in Government-owned,
contractor-operated
plants operated on a cost-plus-fee basis
(but see 45.405).
(2) That which is left in place or installed on contractor-owned property
for mobilization or future Government
production purposes. However, rent
computed in accordance with 45.403(a)
shall apply to that portion of property
or its capacity used or authorized for
use.
(3) Items of equipment that are part
of a general program approved by the
Federal Emergency Management Agency (FEMA) and present unusual problems in relation to the time required
for their preparation for shipment, installation, and operation because of
size, complexity, or performance characteristics.
(4) Any other Government production
and research property that may be excepted by FEMA.
(b) The contracting officer cognizant
of the Government production and research property may grant written authorization for rent-free use of production and research property in the possession of nonprofit organizations when
used for research, development, or educational work and—
(1) The use of the property is directly
or indirectly in the national interest;
(2) The property will not be used for
the direct benefit of a profitmaking organization; and
(3) The Government receives some direct benefit (such as rights to use the
results of the work without charge)
from its use. As a minimum, the contractor shall furnish a report on the
work for which the property was provided.
(c) If the contracting officer has obtained adequate price or other consideration, Government production and
research property may also be used
rent-free under—
(1) Prime contracts that specifically
authorize such use without charge; and
(2) Subcontracts of any tier, if the
contracting officer awarding the prime
contract has specifically authorized
rent-free use by the subcontractor.
(d) After award, a contract may be
modified to eliminate rent for using
Government production and research
property. In this case, the contract
shall be equitably adjusted to reflect
the elimination of rent and any other
amount attributable thereto.
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45.501
45.405 Contracts with foreign governments or international organizations.
Requests by, or for the benefit of, foreign governments or international organizations to use Government production and research property shall be
processed and costs shall be recovered
or rental charged in accordance with
agency procedures.
45.406 Use of Government production
and research property on independent research and development
programs.
The contracting officer cognizant of
Government production and research
property in the possession of a contractor may authorize a contractor to
use the property on an independent research and development (IR&D) program, if—
(a) Such use will not conflict with
the primary use of the property or enable the contractor to retain property
that could otherwise be released;
(b) The contractor agrees not to include as a charge against any Government contract the rental value of the
property used on its IR&D program;
and
(c) A rental charge for the portion of
the contractor’s IR&D program cost allocated to commercial work, computed
in accordance with 45.403, is deducted
from any agreed-upon Government
share of the contractor’s IR&D costs.
45.407 Non-Government use of plant
equipment.
Requirements for authorization and
dollar thresholds for non-Government
use of specific types of plant equipment
shall be set at the agency level. The
following general policies and requirements shall be used by agencies in
supplementing this section:
(a) The contracting officer’s advance
written approval shall be required for
any non-Government use of active
plant equipment. Before authorizing
non-Government use exceeding 25 percent, the contracting officer shall obtain approval of the head (or designee)
of the agency that awarded the contract to which the property is accountable.
(b) The approvals under paragraph (a)
above may be granted only when it is
in the Government’s interest—
(1) To keep the equipment in a high
state of operational readiness through
regular use;
(2) Because substantial savings to the
Government would accrue through
overhead cost-sharing and receipt of
rental; or
(3) To avoid an inequity to a contractor who is required by the Government to retain the equipment in place.
(c) If the contractor’s request for
non-Government use in excess of 25
percent is approved, the contracting officer may require the contractor to insure the property against loss or damage. Facilities contracts may be modified to require such insurance.
Subpart 45.5—Management of
Government Property in the
Possession of Contractors
45.500 Scope of subpart.
This subpart prescribes the minimum
requirements contractors must meet in
establishing and maintaining control
over Government property. It applies
to contractors organized for profit and,
except as otherwise noted, to non-profit organizations. In order for the special requirements in this subpart governing nonprofit organizations to
apply, the contract must identify the
contractor as a nonprofit organization.
If there is any inconsistency between
this subpart and the terms of the contract under which the Government
property is provided, the terms of the
contract shall govern.
45.501 Definitions.
Accessory item, as used in this subpart, means an item that facilitates or
enhances the operation of plant equipment but which is not essential for its
operation.
Agency-peculiar property (see 45.301).
Auxiliary item, as used in this subpart,
means an item without which the basic
unit of plant equipment cannot operate.
Contractor-acquired
property
(see
45.101).
Custodial records, as used in this subpart, means written memoranda of any
kind, such as requisitions, issue hand
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45.502
48 CFR Ch. 1 (10–1–03 Edition)
receipts, tool checks, and stock record
books, used to control items issued
from tool cribs, tool rooms, and stockrooms.
Discrepancies incident to shipment, as
used in this subpart, means all deficiencies incident to shipment of Government property to or from a contractor’s facility whereby differences exist
between the property purported to
have been shipped and property actually received. Such deficiencies include
loss, damage, destruction, improper
status and condition coding, errors in
identity or classification, and improper
consignment.
Facilities (see 45.301).
Government-furnished property (see
45.101).
Government property (see 45.101).
Individual item record, as used in this
subpart, means a separate card, form,
document or specific line(s) of computer data used to account for one item
of property.
Material (see 45.301).
Nonprofit organization (see 45.301).
Plant equipment (see 45.101).
Property administrator, as used in this
subpart, means an authorized representative of the contracting officer
assigned to administer the contract requirements and obligations relating to
Government property.
Real property (see 45.101).
Salvage, as used in this subpart,
means property that, because of its
worn, damaged, deteriorated, or incomplete condition or specialized nature,
has no reasonable prospect of sale or
use as serviceable property without
major repairs, but has some value in
excess of its scrap value.
Scrap, as used in this subpart, means
personal property that has no value except for its basic material content.
Special test equipment (see 45.101).
Special tooling (see 45.101).
Stock record, as used in this subpart,
means a perpetual inventory record
which shows by nomenclature the
quantities of each item received and
issued and the balance on hand.
Summary record, as used in this subpart, means a separate card, form, document or specific line(s) of computer
data used to account for multiple quantities of a line item of special tooling,
special test equipment, or plant equipment costing less than $5,000 per unit.
Utility distribution system, as used in
this subpart, includes distribution and
transmission lines, substations, or installed equipment forming an integral
part of the system by which gas, water,
steam, electricity, sewerage, or other
utility services are transmitted between the outside building or structure
in which the services are used and the
point of origin, disposal, or connection
with some other system. It does not include communication services.
Work-in-process, as used in this subpart, means material that has been released to manufacturing, engineering,
design or other services under the contract and includes undelivered manufactured parts, assemblies, and products, either complete or incomplete.
[48 FR 42392, Sept. 19, 1983, as amended at 59
FR 11384, Mar. 10, 1994]
45.502 Contractor responsibility.
(a) The contractor is directly responsible and accountable for all Government property in accordance with the
requirements of the contract. This includes Government property in the possession or control of a subcontractor.
The contractor shall establish and
maintain a system in accordance with
this subpart to control, protect, preserve, and maintain all Government
property. This property control system
shall be in writing unless the property
administrator determines that maintaining a written system is unnecessary. The system shall be reviewed and,
if satisfactory, approved in writing by
the property administrator.
(b) The contractor shall maintain
and make available the records required by this subpart and account for
all Government property until relieved
of that responsibility. The contractor
shall furnish all necessary data to substantiate any request for relief from responsibility.
(c)(1) The contractor shall be responsible for the control of Government
property under this subpart 45.5 upon—
(i) Delivery of Government-furnished
property into its custody or control;
(ii) Delivery, when property is purchased by the contractor and the contract calls for reimbursement by the
Government (this requirement does not
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alter or modify contractual requirements relating to passage of title);
(iii) Approval of its claim for reimbursement by the Government or upon
issuance for use in contract performance, whichever is earlier, of property
withdrawn
from
contractor-owned
stores and charged directly to the contract; or
(iv) Acceptance of title by the Government when title is acquired pursuant to specific contract clauses or as a
result of change orders or contract termination.
(2) Property to which the Government has acquired a lien or title solely
as a result of advance, progress, or partial payments is not subject to the requirements of this subpart.
(d) The contractor shall require subcontractors provided Government property under the prime contract to comply with the requirements of this subpart. Procedures for assuring subcontractor compliance shall be included in
the contractor’s property control system. Where the property administrator
assigned to the contract has requested
supporting property administration
from another contract administration
office, the contractor may accept the
system approval of the supporting
property administrator instead of performing duplicative actions to assure
the subcontractor’s compliance.
(e) If the property administrator
finds any portion of the contractor’s
property control system to be inadequate, the contractor must take any
necessary corrective action before the
system can be approved. If the contractor and property administrator
cannot agree regarding the adequacy of
control and corrective action, the matter shall be referred to the contracting
officer.
(f) When Government property (excluding misdirected shipments, see
45.505–12) is disclosed to be in the possession or control of the contractor but
not provided under any contract, the
contractor shall promptly (1) record
such property according to the established property control procedure and
(2) furnish to the property administrator all known circumstances and
data pertaining to its receipt and a
statement as to whether there is a need
for its retention.
(g) The contractor shall promptly report all Government property in excess
of the amounts needed to complete full
performance under the contracts providing it or authorizing its use.
(h) When unrecorded Government
property is found, both the cause of the
discrepancy and actions taken or needed to prevent recurrence shall be determined and reported to the property administrator.
[48 FR 42392, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986]
45.502–1 Receipts
property.
for
Government
The contractor shall furnish written
receipts for all or specified classes of
Government property only when the
property administrator deems it essential for maintaining minimum acceptable property controls. If evidence of
receipt is required for contractor-acquired property, the contractor shall
provide it before submitting its request
for payment for the property. For Government-furnished property, the contractor shall provide the required receipt immediately upon receipt of the
property.
45.502–2 Discrepancies
shipment.
incident
(a) Government-furnished property. If
overages, shortages, or damages are
discovered upon receipt of Government-furnished property, the contractor shall provide a statement of
the condition and apparent causes to
the property administrator and to
other activities specified in the approved property control system. Only
that quantity of property actually received will be recorded on the official
records.
(b) Contractor-acquired property. The
contractor shall take all actions necessary in adjusting overages, shortages, or damages in shipment of contractor-acquired property from a vendor or supplier. However, when the
shipment has moved by Government
bill of lading and carrier liability is indicated, the contractor shall report the
discrepancy in accordance with paragraph (a) above.
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45.503
48 CFR Ch. 1 (10–1–03 Edition)
45.503 Relief from responsibility.
(a) Unless the contract or contracting officer provides otherwise, the
contractor shall be relieved of property
control responsibility for Government
property by—
(1) Reasonable and proper consumption of property in the performance of
the contract as determined by the
property administrator;
(2) Retention by the contractor, with
the approval of the contracting officer,
of property for which the Government
has received consideration;
(3) The authorized sale of property,
provided the proceeds are received by
or credited to the Government;
(4) Shipment from the contractor’s
plant, under Government instructions,
except when shipment is to a subcontractor or other location of the contractor; or
(5) A determination by the contracting officer of the contractor’s liability for any property that is lost,
damaged, destroyed, or consumed in
excess of that normally anticipated in
a manufacturing or processing operation, if—
(i) The determination is furnished to
the contractor in writing;
(ii) The Government is reimbursed
where required by the determination;
and
(iii) Property rendered unserviceable
by damage is properly disposed of, and
the determination is cross-referenced
to the shipping or other documents evidencing disposal.
(b) Nonprofit organizations are relieved of responsibility for Government
property when title to the property is
transferred to the contractor (see
35.014).
45.504 Contractor’s liability.
(a) Subject to the terms of the contract and the circumstances surrounding the particular case, the contractor may be liable for shortages,
loss, damages, or destruction of Government property. The contractor may
also be liable when the use or consumption of Government property unreasonably exceeds the allowances provided
for by the contract, the bill of material, or other appropriate criteria.
(b) The contractor shall investigate
and report to the property adminis-
trator all cases of loss, damage, or destruction of Government property in
its possession or control as soon as the
facts become known or when requested
by the property administrator. A report shall also be furnished when completed and accepted products or end
items are lost, damaged, or destroyed
while in the contractor’s possession or
control.
(c) The contractor shall require any
of its subcontractors possessing or controlling Government property accountable under the contract to investigate
and report all instances of loss, damage, or destruction of such property.
45.505 Records and reports of Government property.
(a) The contractor’s property control
records shall constitute the Government’s official property records unless
an exception has been authorized. The
contractor shall establish and maintain adequate control records for all
Government property, including property provided to and in the possession
or control of a subcontractor. The
property control records specified in
this section are the minimum required
by the Government. Unless the property administrator directs otherwise,
when a subcontractor has an approved
property control system for Government property provided under its own
prime contracts, the contractor shall
use the records created and maintained
under that system.
(b) The contractor’s property control
system shall provide financial accounts
for Government-owned property in the
contractor’s possession or control. The
system shall be subject to internal control standards and be supported by
property records for such property.
(c) Official Government property
records must identify all Government
property and provide a complete, current, auditable record of all transactions. The contractor’s system of
records maintenance shall be sufficient
to adequately control Government
property as required by this section.
The contractor’s system of records
maintenance, as a minimum, shall be
equivalent to and maintained in the
same manner as the contractor’s system for maintaining records of contractor-owned property, but need not
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exceed the requirements of this subpart. The records shall be safeguarded
from
tampering
or
destruction.
Records shall be accessible to authorized Government personnel.
(d) Separate property records for
each contract are desirable, but a consolidated property record may be maintained if it provides the required information.
(e) Special tooling and special test
equipment fabricated from materials
that are the property of the Government shall be recorded as Governmentowned immediately upon fabrication.
Special tooling and special test equipment fabricated from materials that
are the property of the contractor shall
be recorded as Government property at
the time title passes to the Government.
(f) Property records of the type established for components acquired separately shall be used for serviceable
components
permanently
removed
from items of Government property as
a result of modification.
(g) The contractor’s property control
system shall contain a system or technique to locate any item of Government property within a reasonable period of time.
[48 FR 42392, Sept. 19, 1983, as amended at 53
FR 43394, Oct. 26, 1988]
45.505–1
Basic information.
(a) Unless summary records are used
as authorized under paragraph (b) of
this section, the contractor’s property
control records shall provide the following basic information for every
item of Government property in the
contractor’s possession, regardless of
value (other subsections of 45.505 require additional information for specific categories of Government property):
(1) The name, description, and National Stock Number (if furnished by
the Government or available in the
property control system).
(2) Quantity received (or fabricated),
issued, and on hand.
(3) Unit price (and unit of measure).
(4) Contract number or equivalent
code designation.
(5) Location.
(6) Disposition.
(7) Posting reference and date of
transaction.
(b) Summary records are normally
adequate for special tooling, special
test equipment, and plant equipment
costing less than $5,000 per unit, except
where the contract administration office determines that individual item
records are necessary for effective control, calibration, or maintenance. Summary records shall provide the information listed in paragraphs (a)(1)
through (a)(7) of this section, but may
reference a general location, provided
the contractor can locate the property
within a reasonable period of time.
[48 FR 42392, Sept. 19, 1983, as amended at 59
FR 11384, Mar. 10, 1994]
45.505–2 Records of pricing information.
(a) Requirement for unit prices. (1) The
contractor’s property control system
shall contain the unit price for each
item of Government property except as
provided in (b) below. When a contractor records the unit price of property on other than the quantitative inventory records, those supplementary
records shall become part of the official Government property records.
(2) (Note: This subparagraph (2) does
not apply to nonprofit organizations.)
The requirement that unit prices be
contained in the official Government
property records does not apply to
those separate property records located
at a contractor’s secondary sites and
subcontractor plants; provided, that—
(i) Records maintained by the prime
contractor at its primary site include
unit prices; and
(ii) The prime contractor agrees to
furnish actual or estimated unit prices
to the secondary site or subcontractor
as the need arises.
(3) When definite information as to
unit price cannot be obtained, reasonable estimates will be used.
(b) Determining unit price. (1) Contractor-acquired
and
contractor-fabricated property. Except for items fabricated by nonprofit organizations for
research and development purposes,
the unit price of contractor-acquired
and
contractor-fabricated
property
shall be determined in accordance with
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48 CFR Ch. 1 (10–1–03 Edition)
the system established by the contractor in conformance with consistently applied sound accounting principles. Generally, separate unit prices
should be applied to items of special
tooling and special test equipment fabricated or acquired by the contractor.
However, if the contractor’s accounting system is acceptable, and if maintaining detailed cost records results in
excessive accounting cost or is otherwise impracticable, group pricing may
be used for special tooling, special test
equipment, and work-in-process in accordance with the contractor’s acceptable cost accounting system. All processed material, fabricated parts, components, and assemblies charged to the
contractor’s work-in-process inventory, including items in temporary
storage while awaiting processing, may
be considered as work-in-process for
this purpose.
(2) Government-furnished property. The
Government shall determine and furnish to the contractor the unit price of
Government-furnished property. Transportation and installation costs shall
not generally be considered as part of
the unit price for this purpose. Normally, the unit price of Governmentfurnished property will be provided on
the document covering shipment of the
property to the contractor. In the
event the unit price is not provided on
the document, the contractor will take
action to obtain the information.
45.505–3 Records of material.
(a) General. All Government material
furnished to the contractor, as well as
other material to which title has
passed to the Government by reason of
allocation
from
contractor-owned
stores or purchase by the contractor
for direct charge to a Government contract or otherwise, shall be recorded in
accordance with the contractor’s property control system and the requirements of this section.
(b) Consolidated stock record. When a
contractor has more than one Government contract under which Government material is provided, a consolidated record for materials may be authorized by the property administrator, provided, the total quantity of
any item is allocated to each contract
by contract number and each requisi-
tion of material from contractor-owned
stores is charged to the contract on
which the material is to be used. The
supporting document or issue slip shall
show the contract number or equivalent code designation to which the
issue is charged.
(c) Custodial records. The contractor
shall maintain custodial records for
tool crib items, guard force items, protective clothing, and other items
issued to individuals for use in their
work.
(d) Use of receipt and issue documents.
(Note: This paragraph (d) does not apply
to nonprofit organizations.) The property
administrator may authorize the contractor to maintain, in lieu of stock
records, a file of appropriately crossreferenced documents evidencing receipt, issue, and use of Governmentprovided material that is issued for immediate consumption and is not entered in the inventory record as a matter of sound business practice. This
method of control may be authorized
for—
(1) Material charged through overhead;
(2) Material under research and development contracts;
(3) Subcontracted or outside production items;
(4) Nonstock or special items;
(5) Items that are produced for direct
charge to a contract, or are acquired
and issued for installation upon receipt, and involve no spoilage; and
(6) Items issued from contractorowned inventory direct to production
or maintenance, etc.
(e) Material issued directly upon receipt. (Note: This paragraph (e) applies
only to nonprofit organizations.)
(1) Under fixed-price contracts, the
contractor’s documents evidencing receipt and issue will be accepted as
property control records for Government-furnished material issued directly by the contractor upon receipt
so as to be considered consumed under
the contract.
(2) Under cost-reimbursement contracts, Government invoices, contractor’s purchase documents, or other evidence of acquisition and issue will be
accepted as adequate property records
for material furnished to or acquired
by the contractor and issued directly
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so as to be considered consumed under
the contract.
(f) Multicontract cost and material control. (Note: This paragraph (f) does not
apply to nonprofit organizations.)
(1) Description and scope. A multicontract cost and material control system
substitutes a system of financial accounting for the requirements for physical identification of Government material. The system operates as follows:
(i) The contractor may acquire, requisition, receive, store, and issue like
items of material for the total requirements of all contracts involved in the
system without identifying the material to each contract.
(ii) The contractor may commingle,
during any stage of contract performance, Government-owned and contractor-owned material and work-inprocess that was furnished, acquired,
or produced for all Government contracts covered by the system, without
physical segregation or identification
to the individual contracts.
(iii) In lieu of physical segregation
and identification to individual contracts, periodic calculation of requirements and distribution of costs to all
contracts permits the allocation of
costs of material to products delivered.
This system, by reflecting the material
expended to perform each contract at
any stage in production, permits usage
analysis to determine the reasonableness of consumption and expenditure of
Government material.
(iv) The system may include all Government contracts of any type that involve common repetitive operations.
(v) The system does not require commingling of all common materials
under all contracts. For example, items
of Government-furnished material of
high value or in short supply may be
excluded from commingling and reserved for use in performing the contract under which furnished.
(vi) The contractor shall take physical inventories of material in stores
included in the systems (other than
work-in-process) at least annually, extend and reconcile prices to the quantitative balance for each item, and
record adjustments in the stock record
and financial inventory control accounts. Such physical inventories and
adjustments, as well as equitable dis-
tribution to cost accounts of any inventory losses, shall be reviewed by
and are subject to the approval of the
property administrator.
(2) Criteria. A multicontract cost and
material control system may be authorized if—
(i) The contractor demonstrates that
adopting the system will result in savings or improved operations or that it
will otherwise be in the Government’s
interest;
(ii) The system is applied to existing
Government contracts only and excludes materials acquired or costs incurred for non-Government work or in
anticipation of future Government
work; and
(iii) The contractor’s accounting system is adequate to—
(A) Provide on a complete and timely
basis a clear audit trail from costs of
materials acquired for each contract to
materials used or disposed of on each
contract;
(B) Reflect separately for Government-furnished
and
contractor-acquired material in stores (except workin-process) the inventory balances as
affected by receipts, issues, adjustments, and other dispositions;
(C) Determine unit costs for each
identifiable part, component, subassembly, assembly, end item, and contract item;
(D) Calculate amounts for cost reimbursements and progress payments
during the life of the contract by applying or allocating such unit costs developed through each stage of work-inprocess to contract items for the requirements of each contract; and
(E) Assure that when Government
material furnished for use under one
contract is authorized for use on another contract, the initial contract receives credit.
(3) Authorization. The administrative
contracting officer may authorize a
contractor who is performing or will
perform more than one Government
contract to use the multicontract cost
and material control system. The property administrator shall approve whatever detailed operating procedures are
necessary for each system authorized.
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45.505–4
48 CFR Ch. 1 (10–1–03 Edition)
(4) Requirement. Whenever a multicontract cost and material control system is authorized, the contractor’s financial accounts shall include all material in the system acquired or furnished for Government work and shall
satisfy the requirements in subdivision
(f)(2)(iii) of 45.505–3 above.
45.505–4 Records of special tooling
and special test equipment.
(Note: The special tooling requirements
of this subsection 45.505–4 do not apply to
nonprofit organizations except for paragraph (c).)
(a) Unless summary records are used
as authorized under 45.505–1(b), the contractor’s property control system shall
provide the basic information listed in
45.505–1(a) regarding each item of Government-owned special tooling and special test equipment, including any general purpose test equipment incorporated as components in such a manner that removal and reuse may be feasible and economical.
(b) If the contractor uses group pricing of special tooling or special test
equipment, as recognized in 45.505–2(b),
unit prices may be computed when required.
(c) In the case of special tooling acquired or fabricated by nonprofit organizations or furnished by the Government to nonprofit organizations for research and development, the Government invoices, contractor’s purchase
document, or other documents that
evidence acquisition or issue will be accepted as adequate property control
records.
(d) Records identifying special tooling and special test equipment shall include the identification number and
item on which used.
(e) The contractor shall, when specified by the contract, identify and report special tooling and special test
equipment by retention category (e.g.,
assembly tooling or critical tooling for
spares or replacements).
[48 FR 42392, Sept. 19, 1983, as amended at 59
FR 11384, Mar. 10, 1994]
45.505–5
records for each item of plant equipment.
(b) In addition to the information required in 45.505–1, the contractor’s
records of Government-owned plant
equipment, regardless of value, shall
include—
(1) Federal Supply Code for the manufacturer (as listed in Cataloging
Handbook H4–1 and H4–2) (available
from the Superintendent of Documents, Government Printing Office
(GPO), Washington, D.C. 20402);
(2) Federal Supply Classification
(Cataloging Handbooks H2–1, H2–2, and
H2–3) (available from GPO); and
(3) The original manufacturer’s
model or part number.
(c) For each item of Governmentowned plant equipment having a unit
cost of $5,000 or more, the contractor
shall, in addition to the requirements
of (b) above, include—
(1) Serial number and year built
(when available);
(2) Government identification/tag
number; and
(3) Acquisition and disposition document references and dates.
(d) The property administrator may
determine that the information in
(c)(1) and (2) above should be recorded
in the property records for plant equipment costing less than $5,000.
(e) Accessory and auxiliary equipment shall be recorded on the record of
the associated item of plant equipment. If the accessory or auxiliary
item is not attached to, a part of, or
acquired for use with a specific item of
plant equipment, it shall be recorded
either in an individual item record or
in a summary stock record. When accessory and auxiliary items are permanently separated from the basic item of
plant equipment, the unit price of the
basic item shall be appropriately reduced.
[48 FR 42392, Sept. 19, 1983, as amended at 59
FR 11384, Mar. 10, 1994]
45.505–6 Special
equipment.
Records of plant equipment.
(a) Unless summary records are used
as authorized under 45.505–1(b), the contractor shall maintain individual item
reports
of
An agency may set requirements for
any special reports of plant equipment
it determines necessary.
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Federal Acquisition Regulation
45.505–7
45.505–10
Records of real property.
45.505–8
(a) The contractor shall maintain an
itemized record of the description, location, acquisition cost, and disposition of all Government real property
(including unimproved real property);
all alterations, all construction work,
and sites connected with such alteration and construction, acquired by
purchase, lease, or otherwise. These
records, including maps, drawings,
plans,
specifications,
and
supplementary data where necessary, shall (1)
be complete, (2) show the original cost
of the property and improvements and
the cost of any changes and additions,
and (3) be appropriately indexed.
(b) Costs incurred by the contractor
or the Government for new construction, including erection, installation,
or assembly of Government real property in possession of the contractor,
shall be capitalized in the official Government real property records and financial accounts maintained by the
contractor for the Government.
(c) Costs incurred for additions, expansions, extensions, conversions, alterations, and improvements, including
applicable portions of capital maintenance, that increase the value, life,
utility, capability, or serviceability of
Government real property shall be capitalized.
(d) Costs incurred for portable buildings or facilities specifically constructed for tests that involve destruction of the facility shall not be capitalized in the Government real property
records or financial accounts.
(e) Costs incurred for maintenance,
repair, or rearrangement to maintain
the Government real property in good
physical condition, utility, capacity, or
serviceability shall be charged to expense, and the real property records
shall not be affected.
(f) When Government-owned real
property is sold, transferred, donated,
destroyed by fire or other cause, abandoned-in-place, or condemned, the financial accounts shall be reduced by
the presently recorded cost and the
real property records annotated with a
supporting statement, including pertinent facts.
Records of scrap or salvage.
(a) The contractor shall maintain
records of all scrap or salvage generated, except as provided in 45.507.
These records shall conform to the contractor’s established system of scrap
and salvage control approved by the
property administrator.
(b) The contractor’s property control
system shall provide the following information:
(1) Contract number, if practical, or
equivalent code designation from
which the scrap or salvage derived.
(2) Nomenclature or description of
salvable items or classification (material content) of scrap.
(3) Quantity on hand.
(4) Posting reference and date of
transaction.
(5) Disposition.
45.505–9 Records of related data and
information.
The contractor shall maintain property control and accountability, in accordance with sound business practice,
of manufacturing or assembly drawings; installation, operation, repair, or
maintenance instructions; and other
similar information furnished to the
contractor by the Government or generated or acquired by the contractor
under the contract and for which title
vests in the Government. The requirements of this subpart do not otherwise
apply to such property.
45.505–10
ucts.
Records of completed prod-
The contractor shall maintain a
record of all completed products produced under a contract as follows:
(a) When there is no time lapse between Government inspection and acceptance of the completed products and
shipment from the plant site, the
records shall, as a minimum, consist of
a summary of quantities accepted and
shipped. When end items are accepted
by the Government and stored with the
contractor awaiting shipment, the
record shall identify quantities stored,
location, and disposition action.
(b) On contracts that provide for the
contractor to retain completed products for further use under the contract
or other contracts, such items shall be
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45.505–11
48 CFR Ch. 1 (10–1–03 Edition)
considered Government-furnished property upon acceptance and shall be recorded as required by this subpart.
(c) When completed products are returned to a contractor under the terms
of a warranty clause, the contractor
shall maintain, by contract, a record
containing a description of the items
involved, quantities received and returned to the Government, and other
pertinent data necessary to determine
that a proper accounting for all property has been made.
45.505–11 Records of transportation
and installation costs of plant
equipment.
(Note: This subsection 45.505–11 does not
apply to nonprofit organizations.)
(a) Transportation costs. (1) The contractor shall record within the property control system the transportation
and installation costs directly borne by
the Government for each item of Government-owned plant equipment with
an acquisition cost of $5,000 or more.
The administrative contracting officer
may require the contractor to provide
such recorded costs for use in computing rental charges.
(2) If transportation costs are not included in the price of equipment delivered, the contractor shall contact the
property administrator for instructions
for obtaining applicable freight data.
(b) Installation costs. (1) When the
contractor performs installation, the
cost shall be computed in accordance
with the contractor’s accounting system (if the system is acceptable for
other contract cost determination purposes) and recorded in the property
record.
(2) When installation is subcontracted, the contractor shall record the
cost paid to the subcontractor in the
property record.
(3) When installation costs are included in the price of equipment delivered to the using location, the property
records should be so annotated.
45.505–12 Records of misdirected shipments.
The contractor’s property control
system shall provide the following information regarding each misdirected
shipment of Government property received:
(a) Identity of shipment, such as
shipping document or bill of lading.
(b) Origin of shipment.
(c) Content (items in the shipment)
per shipping documents, if available.
(d) Location.
(e) Disposition.
45.505–13 Records of property returned for rework.
(a) The contractor shall maintain
quantitative records of property returned for processing to assure control
from time of receipt through return of
the items to the Government. The contractor shall establish item records
under its property control system and
shall include the information required
in 45.505–1.
(b) The records shall specify the
quantity of units returned to the Government and the quantity otherwise
disposed of with proper authority.
45.505–14 Reports
of
Government
property.
(a) The contractor’s property control
system shall provide annually the total
acquisition cost of Government property for which the contractor is accountable under each contract with
each agency, including Government
property at subcontractor plants and
alternate locations. The following classifications (property classifications
may be varied to meet individual agency needs) shall be reported:
(1) Land and rights therein.
(2) Other real property, including
utility distribution systems, buildings,
structures, and improvements thereto.
(3) Plant equipment.
(4) Special tooling.
(5) Special test equipment.
(6) Material.
(7) Agency peculiar property.
(b) The contractor shall report the
information under paragraph (a) as directed by the contracting officer.
[48 FR 42392, Sept. 19, 1983, as amended at 59
FR 11385, Mar. 10, 1994]
45.506 Identification.
(a) Upon receipt of Government property, the contractor shall promptly—
(1) Identify the property in accordance with agency regulations;
(2) Mark the property in accordance
with this section; and
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Federal Acquisition Regulation
45.508
(3) Record the property in its property control records.
(b)(1) Except for the following, all
Government property shall be marked
with an indication of Government ownership:
(i) Items issued to individuals for use
in their work (e.g., protective clothing
or tool crib tools) where adequate
physical control is maintained over the
items.
(ii) Property of a bulk type, or where
its general nature of packing or handling precludes adequate marking.
(iii) Material that is commingled, as
authorized by 45.507.
(iv) Where the property administrator agrees that marking is impractical.
(2) Exempted items shall be entered
and described on the accountable property records.
(c)(1) In addition to marking with an
indication of Government ownership,
the following property shall be marked
with a serial number in accordance
with procedures approved by the property administrator:
(i) Special tooling.
(ii) Special test equipment.
(iii) Components of special test
equipment that have an acquisition
cost of $5,000 or more and are incorporated in a manner that makes removal and reutilization feasible and economical.
(iv) Plant equipment.
(v) Accessory or auxiliary equipment
associated with a specific item of plant
equipment that is recorded on the
property records, if necessary to assure
return with the associated basic item.
(2) The contractor shall record assigned numbers on all applicable documents pertaining to the property control system.
(3) If the property is located in a
standard agency registration system,
the contractor may use the property’s
registration number as the serial number. The contractor should obtain the
registration number through the property administrator from the owning
agency.
(d) The markings in paragraphs (b)
and (c) of this section shall be—(1) securely affixed to the property, (2) legible, and (3) conspicuous. Examples of
appropriate markings are bar coding,
decals, and stamping. If marking will
damage the property or is otherwise
impractical,
the
contractor
shall
promptly notify the property administrator and ask for the item to be exempted (see paragraph (b) of this section). Markings shall be removed or obliterated when Government property is
sold, scrapped, or donated.
[57 FR 60588, Dec. 21, 1992]
45.507 Segregation
of
Government
property.
Government property shall be kept
physically separate from contractorowned property. However, when advantageous to the Government and consistent with the contractor’s authority
to use such property, the property may
be commingled—
(a) When the Government property is
special tooling, special test equipment,
or plant equipment clearly identified
and recorded as Government property;
(b) When approved by the property
administrator in connection with research and development contracts;
(c) When material is included in a
multicontract cost and material control system (however, see 45.505–3(f));
(d) When (1) scrap of a uniform nature is produced from both Government-owned and contractor-owned material and physical segregation is impracticable, (2) scrap produced from
Government-owned material is insignificant in consideration of the cost of
segregation and control, or (3) Government contracts involved are fixed-price
and provide for the retention of the
scrap by the contractor; or
(e) When otherwise approved by the
property administrator.
45.508 Physical inventories.
The contractor shall periodically
physically inventory all Government
property (except materials issued from
stock for manufacturing, research, design, or other services required by the
contract) in its possession or control
and shall cause subcontractors to do
likewise. The contractor, with the approval of the property administrator,
shall establish the type, frequency, and
procedures. These may include electronic reading, recording and reporting
or other means of reporting the existence and location of the property and
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45.508–1
48 CFR Ch. 1 (10–1–03 Edition)
reconciling the records. Type and frequency of inventory should be based on
the contractor’s established practices,
the type and use of the Government
property involved, or the amount of
Government property involved and its
monetary value, and the reliability of
the contractor’s property control system. Type and frequency of physical inventories normally will not vary between contracts being performed by
the contractor, but may vary with the
types of property being controlled. Personnel who perform the physical inventory shall not be the same individuals
who maintain the property records or
have custody of the property unless the
contractor’s operation is too small to
do otherwise.
[48 FR 42392, Sept. 19, 1983, as amended at 54
FR 25069, June 12, 1989]
45.508–1 Inventories upon termination
or completion.
(a) General. Immediately upon termination or completion of a contract, the
contractor shall perform and cause
each subcontractor to perform a physical inventory, adequate for disposal
purposes, of all Government property
applicable to the contract, unless the
requirement is waived as provided in
paragraph (b) below.
(b) Exception. The requirement for
physical inventory at the completion
of a contract may be waived by the
property administrator when the property is authorized for use on a followon contract; provided, that—
(1) Experience has established the
adequacy of property controls and an
acceptable degree of inventory discrepancies; and
(2) The contractor provides a statement indicating that record balances
have been transferred in lieu of preparing a formal inventory list and that
the contractor accepts responsibility
and accountability for those balances
under the terms of the follow-on contract.
(c) Listings for disposal purposes.
(Note: This paragraph (c) applies only
to nonprofit organizations.)
(1) Standard items that have been
modified may be described on listings
for disposal purposes as standard items
with a general description of the modification.
(2) Items that have been fabricated,
such as test equipment, shall be described in sufficient detail to permit a
potential user to determine whether
they are of sufficient interest to warrant further inspection.
45.508–2 Reporting results of inventories.
The contractor shall, as a minimum,
submit the following to the property
administrator promptly after completing the physical inventory:
(a) A listing that identifies all discrepancies disclosed by a physical inventory.
(b) A signed statement that physical
inventory of all or certain classes of
Government property was completed
on a given date and that the official
property records were found to be in
agreement except for discrepancies reported.
45.508–3 Quantitative and monetary
control.
When requested by the contracting
officer, the contractor’s reports of results of physical inventory shall be prepared on a quantitative and monetary
basis and segregated by categories of
property.
45.509 Care, maintenance, and use.
The contractor shall be responsible
for the proper care, maintenance, and
use of Government property in its possession or control from the time of receipt until properly relieved of responsibility, in accordance with sound industrial practice and the terms of the
contract. The removal of Government
property to storage, or its contemplated transfer, does not relieve the
contractor of these responsibilities.
45.509–1 Contractor’s
maintenance
program.
(a) Consistent with the terms of the
contract, the contractor’s maintenance
program shall provide for—
(1) Disclosure of need for and the performance of preventive maintenance;
(2) Disclosure and reporting of need
for capital rehabilitation; and
(3) Recording of work accomplished
under the program.
(b) Preventive maintenance is maintenance performed on a regularly
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Federal Acquisition Regulation
45.600
scheduled basis to prevent the occurrence of defects and to detect and correct minor defects before they result in
serious consequences. An effective preventive maintenance program shall include at least—
(1) Inspection of buildings at periodic
intervals to assure detection of deterioration and the need for repairs;
(2) Inspection of plant equipment at
periodic intervals to assure detection
of maladjustment, wear, or impending
breakdown;
(3) Regular lubrication of bearings
and moving parts in accordance with a
lubrication plan;
(4) Adjustments for wear, repair, or
replacement of worn or damaged parts
and the elimination of causes of deterioration;
(5) Removal of sludge, chips, and cutting oils from equipment that will not
be used for a period of time;
(6) Taking necessary precautions to
prevent deterioration caused by contamination, corrosion, and other substances; and
(7) Proper storage and preservation of
accessories and special tools furnished
with an item of plant equipment but
not regularly used with it.
(c) The contractor’s maintenance
program shall provide for disclosing
and reporting the need for major repair, replacement, and other capital rehabilitation work for Government
property in its possession or control.
(d) The contractor shall keep records
of maintenance actions performed and
any deficiencies in the Government
property discovered as a result of inspections.
45.509–2 Use of Government property.
(a) The contractor’s procedures shall
be in writing and adequate (1) to assure
that Government property will be used
only for those purposes authorized in
the contract and that any required approvals will be obtained, and (2) to provide a basis for determining and allocating rental charges.
(b) With respect to plant equipment
with an acquisition value of $5,000 or
more, the procedures, as a minimum,
shall—
(1) Establish a minimum level of use
below which an analysis of need shall
be made and retention justified, except
for inactive plants and equipment retained for mobilization (the use level
may be established for individual items
or families of items, depending upon
circumstances of use);
(2) Provide for recording authorized
and actual use consistent with the established use levels;
(3) Require periodic analyses of production needs for plant equipment utilization based upon known requirements; and
(4) Provide for prompt reporting to
the contracting officer of all plant
equipment for which retention is not
justified.
[48 FR 42392, Sept. 19, 1983, as amended at 52
FR 30078, Aug. 12, 1987]
45.510 Property in possession of subcontractors.
The contractor shall require any of
its subcontractors possessing or controlling Government property to adequately care for and maintain that
property and assure that it is used only
as authorized by the contract. The contractor’s approved property control
system shall include procedures necessary for accomplishing this responsibility.
45.511 Audit of property control system.
The Government may audit the contractor’s property control system as
frequently as conditions warrant.
These audits may take place at any
time during contract performance,
upon contract completion or termination, or at any time thereafter during the period the contractor is required to retain such records. The contractor shall make all such records and
related correspondence available to the
auditors.
Subpart 45.6—Reporting, Redistribution, and Disposal of Contractor Inventory
45.600 Scope of subpart.
This subpart establishes policies and
procedures for the reporting, redistribution, and disposal of Government
property excess to contracts and of
property that forms the basis of a
claim against the Government (e.g.,
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45.601
48 CFR Ch. 1 (10–1–03 Edition)
termination inventory under fixedprice contracts). This subpart does not
apply to the disposal of real property
or to property for which the Government has a lien or title solely as a result of advance or progress payments
that have been liquidated.
45.601 Definitions.
Common item, as used in this subpart,
means material that is common to the
applicable Government contract and
the contractor’s other work.
Contractor-acquired
property
(see
45.101).
Contractor inventory, as used in this
subpart, means—
(a) Any property acquired by and in
the possession of a contractor or subcontractor under a contract for which
title is vested in the Government and
which exceeds the amounts needed to
complete full performance under the
entire contract;
(b) Any property that the Government is obligated or has the option to
take over under any type of contract as
a result either of any changes in the
specifications or plans thereunder or of
the termination of the contract (or
subcontract thereunder), before completion of the work, for the convenience or at the option of the Government; and
(c) Government-furnished property
that exceeds the amounts needed to
complete full performance under the
entire contract.
Government-furnished property (see
45.101).
Government property (see 45.101).
Line item, as used in this subpart,
means a single line entry on a reporting form that indicates a quantity of
property having the same description
and condition code from any one contract at any one reporting location.
Personal property, as used in this subpart, means property of any kind or interest in it except real property,
records of the Federal Government,
and naval vessels of the following categories: battleships, cruisers, aircraft
carriers, destroyers, and submarines.
Plant clearance, as used in this subpart, means all actions relating to the
screening, redistribution, and disposal
of contractor inventory from a contractor’s plant or work site. The term
contractor’s plant includes a contractoroperated Government facility.
Plant clearance officer, as used in this
subpart, means an authorized representative of the contracting officer
assigned responsibility for plant clearance.
Plant clearance period, as used in this
subpart, means the period beginning on
the effective date of contract completion or termination and ending 90 days
(or such longer period as may be agreed
to) after receipt by the contracting officer of acceptable inventory schedules
for each property classification. The
final phase of the plant clearance period means that period after receipt of
acceptable inventory schedules.
Plant equipment (see 45.101).
Precious metals, as used in this subpart, means uncommon and highly valuable metals characterized by their superior resistance to corrosion and oxidation. Included are silver, gold, and
the platinum group metals—platinum,
palladium, iridium, osmium, rhodium,
and ruthenium.
Property administrator (see 45.501).
Public body means any State, any
outlying area of the United States, any
political subdivision thereof, the District of Columbia, any agency or instrumentality of any of the foregoing,
any Indian tribe, or any agency of the
Federal Government.
Reportable property, as used in this
subpart, means contractor inventory
that must be reported for screening in
accordance with this subpart before
disposition as surplus.
Reporting activity, as used in this subpart, means the Government activity
that initiates the Standard Form 120,
Report of Excess Personal Property (or
when acceptable to GSA, by data processing output).
Salvage (see 45.501).
Scrap (see 45.501).
Screening completion date, as used in
this subpart, means the date on which
all screening required by this subpart
is to be completed. It includes screening within the Government and the donation screening period.
Serviceable or usable property, as used
in this subpart, means property that
has a reasonable prospect of use or sale
either in its existing form or after
minor repairs or alterations.
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Federal Acquisition Regulation
45.605–1
Special test equipment (see 45.101).
Special tooling (see 45.101).
Surplus property, as used in this subpart, means contractor inventory not
required by any Federal agency.
Surplus Release Date (SRD), as used in
this subpart, means the date on which
screening of personal property for Federal use is completed and the property
is not needed for any Federal use. On
that date, property becomes surplus
and is eligible for donation.
Termination inventory, as used in this
subpart, means any property purchased, supplied, manufactured, furnished, or otherwise acquired for the
performance of a contract subsequently
terminated and properly allocable to
the terminated portion of the contract.
It includes Government-furnished property. It does not include any facilities,
material, special test equipment, or
special tooling that are subject to a
separate contract or to a special contract requirement governing their use
or disposition.
Work-in-process (see 45.501).
[48 FR 42392, Sept. 19, 1983, as amended at 68
FR 28084, May 22, 2003]
45.602
[Reserved]
45.603
Disposal methods.
An agency may exercise its rights to
require delivery of any contractor inventory. This includes transfers of
Government property to another Government contract. If the agency does
not exercise these rights, the contractor inventory shall be disposed of
by one of the following methods in the
priority indicated:
(a) Purchase or retention at cost by
prime contractor or subcontractor of
contractor-acquired
property
(see
45.605–1).
(b) Return of contractor-acquired
property to suppliers (see 45.605–2).
(c) Use within the Government
through the use of prescribed screening
procedures (see 45.608).
(d) Donation to eligible donees (see
45.609).
(e) Sale (including purchase or retention at less than cost by the prime contractor or subcontractor)(see 45.610).
(f) Donation to public bodies in lieu
of abandonment (see 45.611).
(g) Abandonment or destruction (see
45.611).
[48 FR 42392, Sept. 19, 1983, as amended at 59
FR 67054, Dec. 28, 1994]
45.604 Restrictions on purchase or retention of contractor inventory.
A contractor’s or subcontractor’s authority to purchase, retain, or dispose
of contractor inventory is subject to
any contract provisions and to applicable Government restrictions on the disposition of property that is classified
for security reasons, possesses military
offensive or defensive characteristics,
or is dangerous to public health, safety, or welfare.
45.605
Contractor-acquired property.
45.605–1
Purchase or retention at cost.
(a) The plant clearance officer shall
encourage contractors to purchase or
retain contractor-acquired property at
cost. However, the contractor shall not
include any part of the cost of property
purchased or retained in any claim for
reimbursement against the Government. Under cost-reimbursement contracts, appropriate adjustments shall
be made for previously reimbursed
costs. When the property is for use on
a continuing Government contract or
commercial operation, handling and
transportation charges may be considered an allowable cost (included in the
contractor’s settlement proposal as
other costs in the case of a termination), provided that the charges are
reasonable.
(b) If a contractor purchases or retains contractor inventory for use on a
continuing Government contract that
is subsequently terminated, the property shall be allocated to the continuing contract, even though its purchase would otherwise constitute
undue
anticipation
of
production
schedules. If, as a result of the purchase or retention of property from a
terminated contract for use on other
Government contracts, the contractor
terminates subcontracts under the
other Government contracts, reasonable termination charges of the subcontracts may be included as an allocable cost under the contract that generated the excess property.
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45.605–2
45.605–2
48 CFR Ch. 1 (10–1–03 Edition)
Return to suppliers.
The plant clearance officer shall encourage contractors to return allocable
quantities of contractor-acquired property to suppliers for full credit less either the supplier’s normal restocking
charge or 25 percent of the cost, whichever is less. Contractors may be reimbursed for reasonable transportation,
handling, and restocking charges, but
not for the cost of the returned property. Under cost-reimbursement contracts, appropriate adjustments shall
be made for costs previously reimbursed. A contractor’s property control
system shall include procedures to ensure property is returned to the supplier for appropriate credit whenever
feasible.
[48 FR 42392, Sept. 19, 1983, as amended at 55
FR 25530, June 21, 1990]
45.605–3 Cost-reimbursement
tracts.
con-
Under cost-reimbursement contracts,
property purchased or retained by the
contractor or returned to suppliers
shall not be reported on inventory
schedules. The cognizant contract administration office, in coordination
with the cognizant auditor, shall periodically review such transactions to
protect the Government’s interests.
45.606
Inventory schedules.
45.606–1
Submission.
When property is no longer needed to
perform the contract, the contractor
shall prepare inventory schedules in
accordance with the contract and instructions from the plant clearance officer and shall promptly submit the
schedules to the cognizant contract administration office. Detailed instructions and requirements governing preparing and submitting inventory schedules are contained in 45.606–5. Agencies
may use special inventory schedules
for intra-agency screening of particular
categories of contractor inventory
(e.g., plant equipment of $5,000 or
more). Such schedules may also be used
for screening with other Federal agencies after coordination with GSA.
[48 FR 42392, Sept. 19, 1983, as amended at 56
FR 15154, Apr. 15, 1991; 57 FR 60590, Dec. 21,
1992; 62 FR 237, Jan. 2, 1997]
45.606–2 Common items.
The contractor’s inventory schedules
shall not include any items that the
contractor can reasonably use on other
work without financial loss. However,
the schedules shall include common
items specified by the contracting officer for delivery to the Government or
which are Government-furnished property.
45.606–3 Acceptance.
(a) Within l5 days after receipt of inventory schedules, the plant clearance
officer shall review them, determine
their acceptability, and request the
contractor to correct any inadequate
listings. Inventory schedules should
not be rejected if the information is
adequate for disposal purposes, even if
complete cost data on work-in-process
are not available. Rejection shall be
limited, when possible, to specific
items and shall not necessarily render
the entire schedule unacceptable. If
substantial errors are discovered that
were not apparent on termination inventory schedules previously found acceptable, the final phase of a plant
clearance period shall not begin until
corrected schedules have been submitted, unless the plant clearance officer determines otherwise.
(b) The plant clearance officer, with
the assistance of other Government
personnel as necessary, shall verify
that (1) the inventory is present at the
location indicated, (2) the inventory is
allocable to the contract, (3) the quantity and condition are correctly stated,
and (4) the contractor has endeavored
to divert items to other work. The
verification may be recorded on SF
1423, Inventory Verification Survey.
The plant clearance officer shall require the contractor to promptly correct any discrepancies on the inventory
schedule or resubmit the schedule as
necessary.
[48 FR 42392, Sept. 19, 1983, as amended at 55
FR 25530, June 21, 1990]
45.606–4 Withdrawals.
If, before final disposition, the contractor becomes aware that any items
of contractor-acquired property listed
in the inventory schedules are usable
on other work without financial loss,
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Federal Acquisition Regulation
45.606–5
the contractor shall purchase the items
or retain them at cost and amend the
inventory schedules and claim accordingly. Upon notifying the plant clearance officer, the contractor may purchase or retain at cost any other items
of property included in the inventory
schedules. Withdrawal of any Government-furnished property is subject to
the written approval of the plant clearance officer. If withdrawal is requested
after screening has started, the plant
clearance officer shall notify immediately the appropriate screening activity.
45.606–5 Instructions for preparing
and submitting schedules of contractor inventory.
(a) Use of forms. The contractor shall
report contractor inventory on the following forms, as appropriate.
(1) Standard Form 1426, Inventory
Schedule A (Metals in Mill Product Form)
and SF 1427, Inventory Schedule A—Continuation Sheet. These forms are to be
used to list metals in raw or primary
form as furnished by the mill and on
which there has been no subsequent
fabricating operations. They are also
to be used for listing nonmetallic materials, such as plastics, rubber, or
lumber, in mill product form. They are
not to be used for listing castings or
forgings, which shall be reported on SF
1428.
(2) Standard Form 1428, Inventory
Schedule B and SF 1429, Inventory Schedule B—Continuation Sheet. These forms
are to be used to list all contractor inventory (including plant equipment)
for which Standard Forms 1426, 1430,
1432, or 1434 are not appropriate. However, agencies may direct listing of
particular categories of plant equipment on agency forms when standard
forms are not appropriate. (See 45.505–
6 and 45.606–1.)
(3) Standard Form 1430, Inventory
Schedule C (Work in Process) and SF
1431, Inventory Schedule C—Continuation
Sheet. These forms are to be used to list
all work in process.
(4) Standard Form 1432, Inventory
Schedule D (Special Tooling and Special
Test Equipment) and SF 1433, Inventory
Schedule D—Continuation Sheet. These
forms are to be used to list such contractor inventory as dies, jigs, gauges,
fixtures, special tools, and special test
equipment.
(5) Standard Form 1434, Termination
Inventory Schedule E. This is a short
form to be used with SF 1438, Settlement Proposal (Short Form). Applicability is limited to termination settlement proposals under $10,000.
(b) Submission.
(1) Contractors shall report contractor inventory promptly after determining it to be excess, unless a later
date is authorized by the contract or
the plant clearance officer.
(2) Unless contract provisions or
agency regulations prescribe otherwise,
12 copies of inventory schedules listing
serviceable or salvable items and 6 copies of inventory schedules listing scrap
items shall be presented to the plant
clearance officer at the cognizant contract administration office.
(3) The standard inventory schedule
forms may be electronically reproduced by contractors pursuant to
53.105, provided no change is made to
the name, content or sequence of the
data elements. All essential elements
of data must be included and the form
must be signed.
(4) The appropriate continuation
sheet shall be used when more space is
needed.
(5) Partial schedules may be submitted when they cover substantial
portions of a particular property classification of contractor inventory. The
first page of each schedule submitted
shall be identified as partial or final in
the title block of the schedule.
(6) The contractor should consult
with the plant clearance officer when
in doubt as to item descriptions or
other inventory schedule requirements.
(c) Grouping contractor inventory for
reporting purposes. All line items of
contractor inventory shall be grouped
into the following categories in the
order indicated and reported on separate forms (line items may not be divided for the purpose of avoiding
screening requirements):
(1) Classified property. This category
includes all property bearing a security
classification, regardless of acquisition
cost. Classified property should be further subdivided into the same categories as unclassified property (see
paragraph (3) below).
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45.606–5
48 CFR Ch. 1 (10–1–03 Edition)
(2)
Government-furnished
property.
This category should be subdivided
into the same categories as unclassified property (see paragraph (3) below).
(3) Unclassified property. Unclassified
property shall be subdivided as follows:
(i) Special tooling, regardless of acquisition cost.
(ii) Scrap, regardless of acquisition
cost.
(iii) Salvage, regardless of acquisition cost.
(iv) Remaining property having a line
item acquisition cost of less than $1,000
($500 for furniture).
(v) Property having a line item acquisition cost of $1,000 or more ($500 for
furniture), further separated into the
following categories (these categories
may be revised to suit agency needs):
(A) Aeronautical material and equipment.
(B) Electronic material and equipment.
(C) Special test equipment.
(D) Other serviceable or usable property.
(d) General instructions for completing
forms. The inventory schedule forms
are self-explanatory, except for the following general instructions and the
specific instructions in paragraph (e)
below.
(1) If the inventory applies solely to
one contract modification, indicate the
contract modification number in the
same block as the prime contract number. If the inventory results from the
termination of a contract, enter the
termination docket number in the
same block as the prime contract number.
(2) Provide in column b an accurate
and complete commercial description
for each item of serviceable contractor
inventory. Where practical, show the
manufacturer’s name, address, and
catalog number. Describe other items
in sufficient detail to permit the Government to determine appropriate disposition. Include in descriptions for all
line items the National Stock Number
furnished to the contractor with Government-furnished property and the
National Stock Number available in
the contractor’s property control system.
(3) Identify in column b any industrial diamonds, diamond swarf, and
property containing economically recoverable quantities of precious metals
by the type of metal and express the
quantity of the metal in the appropriate weight unit or in the percentage
of total content. In addition, hazardous
material or property contaminated
with hazardous material shall be identified as to the type of hazardous material.
(4) Enter in column c one of the following codes to indicate the condition
of each item of material:
Code 1, Unused-good. Unused property that is
usable without repairs and identical or
interchangeable with new items from normal supply sources.
Code 2, Unused-fair. Unused property that is
usable without repairs, but is deteriorated
or damaged to the extent that utility is
somewhat impaired.
Code 3, Unused-poor. Unused property that is
usable without repairs, but is considerably
deteriorated or damaged. Enough utility
remains to classify the property better
than salvage.
Code 4, Used-good. Used property that is usable without repairs and most of its useful
life remains.
Code 5, Used-fair. Used property that is usable without repairs, but is somewhat worn
or deteriorated and may soon require repairs.
Code 6, Used-poor. Used property that may
be used without repairs, but is considerably worn or deteriorated to the degree
that remaining utility is limited or major
repairs will soon be required.
Code 7, Repairs required-good. Required repairs are minor and should not exceed 15
percent of original acquisition cost.
Code 8, Repairs required-fair. Required repairs are considerable and are estimated to
range from 16 percent to 40 percent of
original acquisition cost.
Code 9, Repairs required-poor. Required repairs are major because property is badly
damaged, worn, or deteriorated, and are estimated to range from 41 percent to 65 percent of original acquisition cost.
Code X, Salvage. Property has some value in
excess of its basic material content, but repair or rehabilitation to use for the originally intended purpose is clearly impractical. Repair for any use would exceed 65
percent of the original acquisition cost.
Code S, Scrap. Material that has no value except for its basic material content.
(5) Enter in columns e and f the
standard or invoiced cost of the material being reported. If such data are not
available, enter the estimated cost,
identified by the symbol ‘‘(e)’’.
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Federal Acquisition Regulation
45.606–5
(6) Enter after the amount of the contractor’s offer in column g the letter
‘‘A’’ if a credit for acquisition has been
authorized or approved by the plant
clearance officer. Enter the letter ‘‘C’’
if the amount represents your offer to
acquire the item. In either case, enter
the quantity on a second line if it is
less than the full quantity shown in
column d.
(e) Instructions for completing specific
forms. The following instructions are in
addition to the general instructions in
paragraph (d) and the self-explanatory
blocks on the inventory forms.
(1) Inventory Schedule A (Metals in
Mill Product Form) (SF 1426).
(i) Classification. List each type of
metal (such as aluminum or carbon
steel) on a separate form, with the
name or alloy shown in the Property
Classification block. List like forms of
the metal or alloy together in sequence. (For example, for carbon steel,
group all the strip, followed by sheets,
followed by the bar stock, etc.)
(ii) Description. Enter in column b the
full commercial description and weight
for all items. Identify the material
specification entered in column b2 as
either a Government specification or
that of a particular industrial society
or manufacturer. Complete columns b3,
b4, and b5 to show the thickness, width,
and length.
(2) Inventory Schedule B (SF 1428).
(i) Classification. Use a separate form
for each classification. Enter the name
of the classification in the Property
Classification block. Items having no
commercial value should be placed in a
single classification designated no commercial value. The term raw materials
(other than metals) means material in
primary form. Examples are plastics,
textiles, lumber, and chemicals. Arrange items in sequence under separate
subheadings. For example, under the
classification chemicals, group separately all acids, all alkalis, all resins,
etc.
(ii) Description. In the inventory description for plant equipment (see
45.101 for definition), include the following as a minimum:
(A) Nomenclature or description of
the item and Federal Supply Classification (see Cataloging Handbooks H2–1,
H2–2, and H2–3).
(B) Federal Supply Code for Manufacturers (see Cataloging Handbooks H4–1
and H4–2) and, if available in the contractor’s property control system, the
name and address of the equipment
manufacturer.
(C) Model/part number.
(3) Inventory Schedule C (Work in Process) (SF 1430).
(i) Classification. No classification of
items is required. Do not list finished
components on this form (use SF 1428).
(ii) Description. Enter in column b a
description in sufficient detail to permit the Government to determine the
appropriate disposition. Estimate percentage of completion for each line
item.
(iii) Condition (column c). Generally,
conditions X (salvage) or S (scrap) are
applicable to work in process (see paragraph (d)(4) above).
(4) Inventory Schedule D (Special Tooling and Special Test Equipment) (SF
1432).
(i) Classification. Use a new form for
each general classification, such as
dies, jigs, gauges, fixtures, special tooling, and special test equipment.
(ii) Description. Furnish a description
which will enable the plant clearance
officer or screener to determine the appropriate disposition. Include tool nomenclature, tool number, related product part number, or function which the
tool performs. Designate special tooling usable for maintenance programs
by placing the letter ‘‘M’’ in the lefthand column, For Use of Contracting
Agency Only.
(i) Classification. Use of a new form
for each general classification of special tooling and special test equipment.
(ii) Description. Furnish a description
which will enable the plant clearance
officer or screener to determine the appropriate disposition, including the potential for reutilization. Include tool
nomenclature, tool number, related
product part number, and function
which the tool performs. Designate special tooling usable for maintenance
programs by placing the letter ‘‘M’’ in
the left-hand column, For Use of Contracting Agency Only. Provide the enditem application and a brief description of the test function for each unit
of special test equipment.
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45.607
48 CFR Ch. 1 (10–1–03 Edition)
(5) Termination Inventory Schedule E
(SF 1434).
(i) Classification. No special classification is required, but similar items
should be grouped together. Several
classifications may be listed on one
form.
(ii) Description. Enter in column b the
full commercial description of all
items which have commercial value.
For other items, furnish a description
in sufficient detail to permit the Government to determine the appropriate
disposition.
[48 FR 42392, Sept. 19, 1983, as amended at 52
FR 30078, Aug. 12, 1987; 54 FR 25069, June 12,
1989; 56 FR 41740, Aug. 22, 1991; 60 FR 34739,
July 3, 1995; 62 FR 237, Jan. 2, 1997]
45.607
Scrap.
45.607–1 General.
(a) The contractor need not itemize
scrap on inventory schedules if (1) the
material is physically segregated in
the contractor’s plant and (2) the contractor submits a statement describing
the material, estimating its cost, and
providing other information necessary
for the plant clearance officer to verify
whether the property is scrap. The contractor shall sort the scrap to the extent economically feasible to assure
the highest sale proceeds.
(b) The plant clearance officer shall
review the schedules of property reported as scrap and, if necessary, physically inspect the property involved. If
the plant clearance officer determines
that any of the property is serviceable,
usable, or salvable, the contractor
shall resubmit it on appropriate inventory schedules.
45.607–2 Recovering precious metals.
(a) GSA is responsible for initiating
the Government-wide precious metals
recovery program (see FPMR 101–42.3
for procedures and requirements in recovering precious metals).
(b) Agencies shall assure that contractors generating contractor inventory containing precious metal-bearing
scrap identify and promptly report
such items. Agencies are also responsible for establishing and maintaining
a program for recovering precious metals. Agencies having no recovery and
disposal facility available may request
information or recovery assistance
from the GSA regional office serving
the area or the DOD Precious Metals
Recovery Program, Defense Logistics
Agency, Attn: DLSC–LC, 8725 John J
Kingman Road, Fort Belvoir VA 22060.
(c) Precious metals shall be packaged
in nonporous, smooth containers in a
manner to prevent loss through leakage or damage to the containers. (Glass
containers
shall
not
be
used.)
Grindings or sweepings shall not be
packaged in paper or wooden containers, because loss occurs by adhesion to the containers. Containers shall
be marked to show the type of precious
metals.
(d) The shipping document shall indicate the net weight of each item to the
nearest ounce (troy or avoirdupois).
Shipment shall be made by the most
economical means available, consistent
with adequate safeguards to prevent
loss or theft.
[48 FR 42392, Sept. 19, 1983, as amended at 62
FR 40237, July 25, 1997; 63 FR 34080, June 22,
1998]
45.608 Screening of contractor inventory.
45.608–1 General.
(a) Serviceable or usable property included in the contractor’s inventory
schedules that is not purchased or retained by the prime contractor or subcontractor or returned to suppliers
shall be screened for use by Government agencies before disposition by donation or sale. Agencies shall assure
the widespread dissemination of information concerning the availability of
contractor inventory.
(b) There are four categories of
screening: standard, agency, limited,
and special items. The plant clearance
officer shall determine the categories
of screening required, initiate prescribed screening, and assure accomplishment of transfer and donation.
Table 45–1 lists the type of property
and screening period for each of these
categories. When circumstances warrant, the plant clearance officer may
extend the period for agency screening
or arrange for more extensive screening than that prescribed. In the event
of a conflict between Table 45–1 and a
specific contract requirement, items
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Federal Acquisition Regulation
45.608–4
shall be screened as provided by the
contract.
TABLE 45–1
Screening Requirements by Type of Property
Screening
Categories
Standard
Type of Property
Period
Line items valued at $1,000
or more ($500 for furniture).
Special tooling, perishables,
property bearing a security
classification, property dangerous to public health and
safety, regardless of acquisition cost, and agency-peculiar property..
Special tooling, scrap and salvage, property in condition
codes 3, 6, 9, X, and S,
work-in-process, inventory
schedules (the total acquisition cost of which is reported as $2,500 or less),
and line items of less than
$1,000 ($500 for furniture)
(except perishables, property bearing a security classification, and property dangerous to public health and
safety)..
Special test equipment with
standard components..
Special test equipment without standard components..
Printing equipment. ................
Agency
Limited
Special
Items
Nuclear materials. ..................
90 days/(see
45.608–2)
30 days/(See
45.608–3)
30 days/(see
45.608–4)
(see 45.608–
5(a))
(see 45.608–
5(b))
(see 45.608–
5(c))
(see 45.608–
5(d))
[48 FR 42392, Sept. 19, 1983, as amended at 56
FR 41740, Aug. 22, 1991; 61 FR 41471, Aug. 8,
1996]
45.608–2
Standard screening.
(a) Standard screening applies to
serviceable property with a line item
value of $1,000 or more ($500 for furniture) that does not meet the criteria
for another screening category.
(b) Standard screening begins on the
date the plant clearance officer receives acceptable contractor inventory
schedules and ends 90 days thereafter.
The period is broken into three phases
as follows:
(1) 1st through 30th day—screening by
the contracting agency. The agency shall
screen the listed items for its use.
When screening is completed, the plant
clearance officer shall delete the retained items from the schedules.
(2) 31st through 75th day—screening by
all Federal agencies. Not later than the
31st day, the plant clearance officer
shall send four copies of the revised
schedules and Standard Form (SF) 120,
Report of Excess Personal Property, to
the General Services Administration
(GSA) regional office that serves the
region in which the property is located.
If the plant clearance officer receives a
request for property transfer after submission of the SF 120, and before receiving a GSA property transfer order,
a prompt request shall be forwarded to
GSA for approval to withdraw the
items from the inventory schedule. The
regional GSA office will prepare and
issue circulars and catalogs to all Federal agencies within the region. GSA
will honor requests for transfer of property on a first-come first-served basis
through the 75th day. The GSA regional office will transmit to the plant
clearance officer the approved orders
and shipping instructions for property
to be transferred. The 75th day is the
surplus release date and will be shown
on the SF 120. The plant clearance officer may not extend this date.
(3) 76th through 90th day—screening by
GSA for possible donation. During this
period, GSA will arrange for screening
of all remaining property for possible
donation to eligible donees. Procedures
for donation are in 45.609. The 90th day
is the screening completion date and
will be shown on the SF 120. The plant
clearance officer shall not extend this
date.
[48 FR 42392, Sept. 19, 1983, as amended at 56
FR 41740, Aug. 22, 1991]
45.608–3 Agency screening.
Agency screening is the procedure for
screening certain types of property (see
Table 45–1) only within the contracting
agency. The screening period begins on
the date the plant clearance officer receives acceptable inventory schedules
and ends 30 days later.
45.608–4 Limited screening.
(a) Items that are scrap or salvage or
that otherwise have a limited potential
for use (except special tooling) are not
ordinarily subject to standard or agency screening. The plant clearance officer shall include listings of such property in a special file, which shall be
made available to GSA for limited
screening. The screening period for
such property begins on the date the
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45.608–5
48 CFR Ch. 1 (10–1–03 Edition)
plant clearance officer receives acceptable inventory schedules and ends 30
days later. This period is apportioned
into two phases, as follows:
(1) 1st through 15th day—GSA selection of items for Federal utilization.
(2) 16th through 30th day—GSA selection of items for donation.
(b) For special tooling, the screening
period described in paragraph (a) above
begins upon completion of agency
screening.
45.608–5 Special items screening.
Special procedures are established
for the following types of property:
(a) Special test equipment with standard components. (1) Contractors reporting special test equipment that contains standard, general, or multipurpose components will describe the composite unit to clearly reflect its capability. Standard components that can
be economically removed and reused
will be listed and described in sufficient detail to permit screening.
(2) If the contractor has a requirement for the standard components to
meet other approved special test equipment or facilities requirements, the
contractor shall annotate the SF 1432,
Inventory Schedule D (Special Tooling
and Special Test Equipment), to reflect
this requirement. Screening shall be
accomplished in accordance with agency procedures for the first 30 days. If
there are no agency requirements for
the composite unit, and if the administrative contracting officer approves
the retention, the contractor shall
have priority for the standard components for which it has indicated a requirement.
(3) Standard components that have
not been retained by the agency or the
contractor shall be screened in accordance with standard requirements for
the 31st through 75th day. Standard
components shall not be removed from
the composite unit until a requirement
has been established. If no requirements exist, the composite units shall
be donated or sold in accordance with
prescribed procedures.
(b) Special test equipment without
standard
components.
Special
test
equipment without standard components shall receive agency screening
for 30 days. Items for which no requirements exist shall receive limited
screening for an additional 30 days.
(c) Printing equipment. Agencies shall
report all printing equipment excess to
their requirements to the Public Printer, Government Printing Office, North
Capitol and H Streets, NW, Washington, DC 20401, after screening within
the agency (see 44 U.S.C. 312). If the
Public Printer indicates no requirements, the reporting activity shall submit the listing of printing equipment
to the General Services Administration
for further use and donation screening.
(d) Nuclear materials. (1) The possession, use, and transfer of certain nuclear materials are subject to the regulatory controls of the Nuclear Regulatory Commission (NRC). The materials are defined as follows:
(i) By-product material—any radioactive material (except special nuclear
material) yielded in or made radioactive by exposure to the radiation incident to producing or using special nuclear material.
(ii) Source material—uranium or thorium, or any combination thereof, in
any physical or chemical form; or ores
which contain by weight one-twentieth
of 1 percent (0.05 percent) or more of
uranium, thorium, or any combination
thereof. Source material does not include special nuclear material.
(iii) Special nuclear material—plutonium, uranium 233, uranium enriched
in the isotope 233 or in the isotope 235,
and any other material that the NRC
determines to be special nuclear material (but not including source material); or any material artificially enriched by any nuclear material.
(2) Plant clearance officers shall submit listings of excess nuclear material
in the categories described above for
screening by the contracting activity.
If there are no requirements, the ultimate method of disposal shall be dependent upon the license issued by the
NRC or the respective states and pertinent Federal and agency regulations.
[48 FR 42392, Sept. 19, 1983, as amended at 54
FR 34756, Aug. 21, 1989; 56 FR 41740, Aug. 22,
1991; 61 FR 41471, Aug. 8, 1996]
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Federal Acquisition Regulation
45.608–8
45.608–6 Waiver of screening requirements.
Agency heads or their designees may
authorize exceptions from screening requirements; provided, (a) there are
compelling circumstances clearly in
the Government’s interest and (b) the
contracting agency prepares a written
notice, including justification, and provides a copy to General Services Administration, Office of Governmentwide Policy, Office of Transportation
and Personal Property (MT), 1800 F
Street NW., Washington, DC 20405, and
the contract administration office 10
days before the effective date of the exception.
[48 FR 42392, Sept. 19, 1983, as amended at 62
FR 40237, July 25, 1997]
45.608–7 Reimbursement of costs for
transfer of contractor inventory.
The contracting agency shall not be
reimbursed for the acquisition cost of
any property selected by another agency or for overhead or administrative
costs associated with such property.
The transferee will pay any transportation costs that are not the contractor’s responsibility. Costs for packing,
crating, preparation for shipment, and
loading of contractor inventory are
chargeable to the contract for assets
subject to the Government property
clauses at 52.245–2, Government Property (Fixed-Price Contracts) and 52.245–
5, Government Property (Cost-Reimbursement,
Time-and-Material,
or
Labor-hour Contracts), and such costs
are ordinarily included in the contractor’s settlement proposal for termination inventory. The transferee will
pay such costs for property subject to
52.245–7, Government Property (Consolidated Facilities), or 52.245–10, Government Property (Facilities Acquisition), or 52.245–11, Government Property (Facilities Use), unless such costs
are otherwise the contractor’s responsibility. The contract administration
office is responsible for obtaining packing, crating, and handling service. To
accelerate plant clearance, the transferee shall include all appropriate data,
including funding data, in the transfer
or shipping document.
[54 FR 34756, Aug. 21, 1989]
45.608–8 Report of excess personal
property (SF 120).
(a) This subsection provides instructions for completing SF 120, Report of
Excess Personal Property, when reporting contractor inventory in accordance
with 45.608–2. (For reporting other
agency excess personal property, see 41
CFR 101–43.4901–120–1, Instructions for
preparing SF 120).
(b) All items on the form are self-explanatory, except as follows:
Item 1, Report number. Enter the serial number of the report and any other
identifying number or symbol required
by the reporting agency. If the report
is a correction or withdrawal (complete
or partial) of a prior report, the original report number shall be entered, followed by the letter a, b, or c, etc., to
identify the number of successive correcting or withdrawing reports.
Item 3, Total cost. Enter the total of
all amounts shown on the inventory
schedules.
Item 4, Type of report.
Box b—Check if necessary to correct
an original report and complete items
1, 2, 3, 4, 5, and 7. Complete the remaining items only to the extent necessary
to show the correction.
Box c—Check for partial withdrawals
of contractor inventory previously reported and complete items 1, 2, 3, 4, 5,
and 7. Re-identify in column 18(b) the
line items or portions of line items
withdrawn. In column 18(e), show the
number of units withdrawn. In column
18(g), show the acquisition cost of the
units withdrawn. In item 3, enter the
total acquisition cost of all items withdrawn.
Box d—Check for total withdrawal of
contractor inventory previously reported and complete items 1, 2, 3, 4, 5,
and 7. Provide explanatory remarks in
column 18(b).
Item 5, To. Enter the name(s) and address(es) of the screening agencies or
the GSA regional office serving the geographic area in which the property is
located.
Item 6, Appropriation or fund to be
reimbursed. No entry shall be made in
this item if the net proceeds are to be
deposited in the Treasury as miscellaneous receipts (see 45.610–3). However,
in exchange/sale transactions an appropriation number is required.
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45.609
48 CFR Ch. 1 (10–1–03 Edition)
Item 8, Report approved by. Enter
signature and title of the Federal official approving report.
Item 12, GSA control number. Not to
be used by reporting activity.
Item 13, FSC group number, if
known. If inventory schedules contain
multiple FSC groups, insert ‘‘See Inventory Schedules.’’
Item 14, Location of property. Enter
the name of contractor holding the
property and the specific address where
the property is located.
Item 15, Reimbursement required.
Enter X in the block designated ‘‘No.’’
Item 16, Agency control number.
Leave blank.
Item 17, Surplus release date (see
45.608–2).
Item 18, Excess property list. Leave
blank.
Column a, Item number. Leave
blank.
Column b, Description. Enter the following information:
(1) Identification of attached inventory schedules and the number of pages
for each schedule.
(2) The screening completion date
(see 45.608–2).
(3) The following notation: ‘‘It is imperative that fund appropriations for
the transportation of the materials be
furnished with the transfer order.’’ If,
pursuant to 45.608–7, the transferee is
responsible for funding, packing, crating, and handling, include this additional notation: ‘‘Fund appropriations
for packing, crating, and handling of
inventory described herein must also
be provided by the transferee.’’
(4) Contract number.
(5) When reporting motor vehicles in
Federal Supply Groups 23, 24, and 38—
(i) In column 18(b), the estimated
one-time cost of repairs (parts and
labor); and
(ii) In column 18(c), a condition code
based on the estimated cost of repairs.
(c) Columns c through h. Leave
blank, except as they are used for 5(ii)
above.
[48 FR 42392, Sept. 19, 1983, as amended at 54
FR 34756, Aug. 21, 1989; 56 FR 41740, Aug. 22,
1991; 56 FR 67136, Dec. 27, 1991]
45.609 Donations.
(a) Property may be donated only
after it has been determined to be sur-
plus following appropriate utilization
screening. The donation of surplus
property to an authorized donee is subordinate to any need for property by a
Federal agency.
(b) The GSA is responsible for making necessary arrangements for donation screening of serviceable property
during the last l5 days of the 90-day
screening period.
(c) Items that have been selected for
donation shall not be retained longer
than 42 calendar days from the surplus
release date. The plant clearance officer shall authorize release to the eligible donees immediately upon receipt of
GSA approval and shipping instructions. If approval and shipping instructions, including provision for payment
of all costs incident to donation, are
not received within the 42-day period,
the property shall be otherwise disposed of as surplus. All costs incident
to donation that are not the responsibility of the contractor shall be borne
by the donee.
(d) Agencies having a current essential requirement may withdraw property undergoing donation screening. In
all other cases, property may be withdrawn only after GSA concurrence.
45.610 Sale of surplus contractor inventory.
45.610–1
Responsibility.
(a) The Administrator, GSA, exercises general supervision and direction
over the disposition of surplus personal
property, including sales of surplus
contractor inventory. Policy and procedures for sales of contractor inventory are contained in the Federal Property Management Regulations (FPMR)
41 CFR part 101–45. Sales of contractor
inventory under the control of the Department of Defense are conducted in
accordance with the DOD Supplement
to the FAR.
(b) Reportable property submitted to
GSA on SF 120 for utilization screening
and not otherwise transferred or donated will automatically be programmed for sale by the GSA regional
office.
(c) All other property requiring sale
shall be reported to GSA on SF 126, Report of Personal Property for Sale, and
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Federal Acquisition Regulation
45.612–3
in accordance with any additional instructions provided by the GSA regional office cognizant of the location
where the property is physically located.
45.610–2 Exemptions
GSA.
from
sale
by
(a) Agency heads may seek exemptions from the Administrator, GSA, by
submitting a letter explaining the impairment or adverse effect of sale by
GSA and justifying the need for the exemption.
(b) GSA regional offices may authorize sale by the reporting activity of
perishable items or small lots of limited-value property at isolated locations.
45.610–3
Proceeds of sale.
Proceeds of any sale are to be credited to the Treasury of the United
States as miscellaneous receipts, except where the contract or any subcontract thereunder authorizes the
proceeds to be credited to the price or
cost of the work (40 U.S.C. 485(a) and
(e)).
45.610–4 Contractor inventory in foreign countries.
Contractor inventory located in foreign countries shall be sold or disposed
of in accordance with agency procedures (see 40 U.S.C. 511–514).
45.611
Destruction or abandonment.
(a) Surplus property may be destroyed or abandoned only after every
effort has been made to dispose of it by
other authorized methods. Before authorizing destruction or abandonment,
the plant clearance officer shall determine in writing that—
(1) The property has no commercial
value and no value to the Government;
(2) The estimated cost of care and
handling is greater than the probable
sale price; or
(3) Because of its nature, the property constitutes a danger to public
health, safety, or welfare.
(b) Unless permitted by the contract,
no contractor inventory shall be abandoned on the contractor’s premises
without the contractor’s written consent.
(c) Surplus property for which a determination has been made under subparagraph (a)(1) or (2) above may, however, be donated to public bodies in lieu
of abandonment or destruction. All
costs incident to donation shall be
borne by the donee.
45.612
Removal and storage.
45.612–1
General.
Contractor inventory shall be removed from the contractor’s premises
as soon as possible to preclude storage
expenses.
45.612–2 Special storage at the contractor’s risk.
When the contractor finds it necessary to remove property from the
premises before expiration of the plant
clearance period, the contractor may,
with the concurrence of the plant
clearance officer, store property in a
warehouse or other storage location on
or off the contractor’s premises. Storage shall in no way modify the contractor’s responsibility for the property.
The expense of storage, including any
cost incident to the transportation to
and from the storage area, shall normally be borne by the contractor and
shall not be charged directly or indirectly to Government contracts unless
the contracting officer determines that
the storage is for the convenience of
the Government.
45.612–3 Special storage at the Government’s expense.
(a) Contractor inventory may be
stored at the Government’s expense
only when the contracting officer determines that it should be retained in
storage for anticipated use.
(b) When the plant clearance officer
recommends that the contracting office execute a storage agreement with
the contractor, the request shall be accompanied with adequate data to justify the agreement (e.g., property to be
stored, storage period, and cost to the
Government).
(c) If the contractor will not agree to
storage on its premises, the plant
clearance officer shall submit adequate
information to permit a decision by the
contracting office for storage on a Government or commercial facility (e.g.,
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45.613
48 CFR Ch. 1 (10–1–03 Edition)
storage space required; necessary packing, crating, and shipping services; and
information as to available Government or commercial storage facilities
in the local area).
45.613 Property disposal determinations.
Written determinations supporting
abandonment, destruction, or other appropriate disposition shall be made by
the plant clearance officer and reviewed by an appropriate reviewing authority within the agency.
45.614 Subcontractor inventory.
(a) The disposal policies and procedures in this subpart are applicable to
contractor inventory in the possession
of subcontractors, except inventory
under terminated subcontracts for
which the termination contracting officer has authorized the prime contractor to conclude settlements (see
49.108–4).
(b) Subcontractors in all tiers shall
prepare inventory schedules in accordance with the requirements of this subpart. Forms prescribed for use by prime
contractors may be used by subcontractors, but their use is not required if substantially equivalent information is provided. Subcontractor
inventory and any disposal recommendations (including scrap recommendations)
shall
be
reported
through the next-higher-tier subcontractor to the contractor, who is responsible for reporting property to the
cognizant plant clearance officer. The
prime contractor and each subcontractor are responsible for review and
approval of inventory schedules submitted by their respective next-lowertier subcontractors. This includes review and, if necessary, physical survey
of subcontractor inventory that is contained in a termination settlement proposal to assure that it is physically,
technically, and quantitatively allocable to the contract, and cannot be
reasonably diverted to other work of
the subcontractor.
(c) Any rights which the prime contractor has or acquires in the inventory of first-tier or lower-tier subcontractors shall, to the extent directed by the contracting officer, be
exercised for the benefit of the Govern-
ment in accordance with the provisions
of the prime contract.
(d) Contract administration offices
shall assure that prime contractors
have performed adequate allocability
reviews of subcontractor inventory and
have determined that materials reasonably usable on other prime or subcontractor work are not included in a termination settlement proposal. The
plant clearance officer for the prime
contractor plant is responsible for determining the adequacy of screening,
allocability reviews, and proper crediting of proceeds for the disposal of
subcontractor inventory by the prime
contractor. Assistance should generally be secured from other officers
for verification, determination of
allocability, local screening, and plant
clearance action when property is located outside the geographic area of
the cognizant contract administration
office.
[48 FR 42392, Sept. 19, 1983, as amended at 54
FR 34756, Aug. 21, 1989]
45.615 Accounting for contractor inventory.
Following disposition of all contractor inventory, and after due application of proceeds, the plant clearance
officer shall prepare SF 1424, Inventory
Disposal Report, accounting for all
property reported by the contractor
and its disposition. The report shall indicate any inventory lost, damaged, destroyed, or otherwise unaccounted for,
as well as any changes in quantity or
value of inventory made by the contractor after submission of the initial
schedules. The report shall be transmitted to the property administrator
or, for termination inventory, to the
termination contracting officer.
PART 46—QUALITY ASSURANCE
Sec.
46.000
Scope of part.
Subpart 46.1—General
46.101 Definitions.
46.102 Policy.
46.103 Contracting office responsibilities.
46.104 Contract administration office responsibilities.
46.105 Contractor responsibilities.
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Federal Acquisition Regulation
46.101
Subpart 46.2—Contract Quality
Requirements
Subpart 46.6—Material Inspection and
Receiving Reports
46.201 General.
46.202 Types of contract quality requirements.
46.202–1 Contracts for commercial items.
46.202–2 Government reliance on inspection
by contractor.
46.202–3 Standard inspection requirements.
46.202–4 Higher-level contract quality requirements.
46.203 Criteria for use of contract quality
requirements.
46.204 [Reserved]
Subpart 46.3—Contract Clauses
46.301 Contractor inspection requirements.
46.302 Fixed-price supply contracts.
46.303 Cost-reimbursement
supply
contracts.
46.304 Fixed-price service contracts.
46.305 Cost-reimbursement
service
contracts.
46.306 Time-and-material and labor-hour
contracts.
46.307 Fixed-price research and development
contracts.
46.308 Cost-reimbursement research and development contracts.
46.309 Research and development contracts
(short form).
46.310 Facilities contracts.
46.311 Higher-level contract quality requirement.
46.312 Construction contracts.
46.313 Contracts for dismantling, demolition, or removal of improvements.
46.314 Transportation contracts.
46.315 Certificate of conformance.
46.316 Responsibility for supplies.
Subpart 46.4—Government Contract
Quality Assurance
46.401 General.
46.402 Government contract quality assurance at source.
46.403 Government contract quality assurance at destination.
46.404 Government contract quality assurance for acquisitions at or below the simplified acquisition threshold.
46.405 Subcontracts.
46.406 Foreign governments.
46.407 Nonconforming supplies or services.
46.408 Single-agency assignments of Government contract quality assurance.
Subpart 46.5—Acceptance
46.501
46.502
46.503
46.504
46.505
General.
Responsibility for acceptance.
Place of acceptance.
Certificate of conformance.
Transfer of title and risk of loss.
46.601
General.
Subpart 46.7—Warranties
46.701 [Reserved]
46.702 General.
46.703 Criteria for use of warranties.
46.704 Authority for use of warranties.
46.705 Limitations.
46.706 Warranty terms and conditions.
46.707 Pricing aspects of fixed-price incentive contract warranties.
46.708 Warranties of data.
46.709 Warranties of commercial items.
46.710 Contract clauses.
Subpart 46.8—Contractor Liability for Loss
of or Damage to Property of the Government
46.800 Scope of subpart.
46.801 Applicability.
46.802 Definition.
46.803 Policy.
46.805 Contract clauses.
46.806 Subcontracts.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42415, Sept. 19, 1983, unless
otherwise noted.
46.000
Scope of part.
This part prescribes policies and procedures to ensure that supplies and
services acquired under Government
contract conform to the contract’s
quality and quantity requirements. Included are inspection, acceptance, warranty, and other measures associated
with quality requirements.
Subpart 46.1—General
46.101
Definitions.
As used in this part—
Acceptance means the act of an authorized representative of the Government by which the Government, for
itself or as agent of another, assumes
ownership of existing identified supplies tendered or approves specific
services rendered as partial or complete performance of the contract.
Conditional acceptance means acceptance of supplies or services that do not
conform to contract quality requirements, or are otherwise incomplete,
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46.102
48 CFR Ch. 1 (10–1–03 Edition)
that the contractor is required to correct or otherwise complete by a specified date.
Contract quality requirements means
the technical requirements in the contract relating to the quality of the
product or service and those contract
clauses prescribing inspection, and
other quality controls incumbent on
the contractor, to assure that the product or service conforms to the contractual requirements.
Critical nonconformance means a nonconformance that is likely to result in
hazardous or unsafe conditions for individuals using, maintaining, or depending upon the supplies or services; or is
likely to prevent performance of a
vital agency mission.
Government contract quality assurance
means the various functions, including
inspection, performed by the Government to determine whether a contractor has fulfilled the contract obligations pertaining to quality and quantity.
Major nonconformance means a nonconformance, other than critical, that
is likely to result in failure of the supplies or services, or to materially reduce the usability of the supplies or
services for their intended purpose.
Minor nonconformance means a nonconformance that is not likely to materially reduce the usability of the supplies or services for their intended purpose, or is a departure from established
standards having little bearing on the
effective use or operation of the supplies or services.
Off-the-shelf item means an item produced and placed in stock by a contractor, or stocked by a distributor, before receiving orders or contracts for
its sale. The item may be commercial
or produced to military or Federal
specifications or description.
Patent defect means any defect which
exists at the time of acceptance and is
not a latent defect.
Subcontractor (see 44.101).
Testing means that element of inspection that determines the properties or
elements, including functional operation of supplies or their components,
by the application of established scientific principles and procedures.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 48249, Sept. 18, 1995; 61 FR 31662, June 20,
1996; 64 FR 51846, Sept. 24, 1999; 66 FR 2133,
Jan. 10, 2001]
46.102 Policy.
Agencies shall ensure that—
(a) Contracts include inspection and
other quality requirements, including
warranty clauses when appropriate,
that are determined necessary to protect the Government’s interest.
(b) Supplies or services tendered by
contractors meet contract requirements;
(c) Government contract quality assurance is conducted before acceptance
(except as otherwise provided in this
part), by or under the direction of Government personnel;
(d) No contract precludes the Government from performing inspection;
(e) Nonconforming supplies or services are rejected, except as otherwise
provided in 46.407;
(f) Contracts for commercial items
shall rely on a contractor’s existing
quality assurance system as a substitute for compliance with Government inspection and testing before tender for acceptance unless customary
market practices for the commercial
item being acquired permit in-process
inspection (Section 8002 of Public Law
103–355). Any in-process inspection by
the Government shall be conducted in
a manner consistent with commercial
practice; and
(g) The quality assurance and acceptance services of other agencies are used
when this will be effective, economical,
or otherwise in the Government’s interest (see subpart 42.1.)
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 48249, Sept. 18, 1995]
46.103 Contracting office responsibilities.
Contracting offices are responsible
for—
(a) Receiving from the activity responsible for technical requirements
any specifications for inspection, testing, and other contract quality requirements essential to ensure the integrity
of the supplies or services (the activity
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Federal Acquisition Regulation
46.105
responsible for technical requirements
is responsible for prescribing contract
quality requirements, such as inspection and testing requirements or, for
service contracts, a quality assurance
surveillance plan);
(b) Including in solicitations and contracts the appropriate requirements for
the contractor’s control of quality for
the supplies or services to be acquired;
(c) Issuing any necessary instructions to the cognizant contract administration office and acting on recommendations submitted by that office
(see 42.301 and 46.104(f);
(d) When contract administration is
retained (see 42.201), verifying that the
contractor fulfills the contract quality
requirements; and
(e) Ensuring that nonconformances
are identified, and establishing the significance of a nonconformance when
considering the acceptability of supplies or services which do not meet
contract requirements.
[48 FR 42415, Sept. 19, 1983, as amended at 61
FR 31663, June 20, 1996; 62 FR 44816, Aug. 22,
1997; 63 FR 9065, Feb. 23, 1998]
46.104 Contract administration office
responsibilities.
When a contract is assigned for administration to the contract administration office cognizant of the contractor’s plant, that office, unless specified
otherwise, shall—
(a) Develop and apply efficient procedures for performing Government contract quality assurance actions under
the contract in accordance with the
written direction of the contracting office:
(b) Perform all actions necessary to
verify whether the supplies or services
conform to contract quality requirements;
(c) Maintain, as part of the performance records of the contract, suitable
records reflecting—
(1) The nature of Government contract quality assurance actions, including, when appropriate, the number of
observations made and the number and
type of defects; and
(2) Decisions regarding the acceptability of the products, the processes,
and the requirements, as well as action
to correct defects.
(d) Implement any specific written
instructions from the contracting office;
(e) Report to the contracting office
any defects observed in design or technical requirements, including contract
quality requirements; and
(f) Recommend any changes necessary to the contract, specifications,
instructions, or other requirements
that will provide more effective operations or eliminate unnecessary costs
(see 46.103(c)).
[48 FR 42415, Sept. 19, 1983, as amended at 63
FR 9065, Feb. 23, 1998]
46.105
Contractor responsibilities.
(a) The contractor is responsible for
carrying out its obligations under the
contract by—
(1) Controlling the quality of supplies
or services;
(2) Tendering to the Government for
acceptance only those supplies or services that conform to contract requirements;
(3) Ensuring that vendors or suppliers
of raw materials, parts, components,
subassemblies, etc., have an acceptable
quality control system; and
(4) Maintaining substantiating evidence, when required by the contract,
that the supplies or services conform
to contract quality requirements, and
furnishing such information to the
Government as required.
(b) The contractor may be required
to provide and maintain an inspection
system or program for the control of
quality that is acceptable to the Government (see 46.202).
(c) The control of quality by the contractor may relate to, but is not limited to—
(1) Manufacturing processes, to ensure that the product is produced to,
and meets, the contract’s technical requirements;
(2) Drawings, specifications, and engineering changes, to ensure that manufacturing methods and operations
meet the contract’s technical requirements;
(3) Testing and examination, to ensure that practices and equipment provide the means for optimum evaluation
of the characteristics subject to inspection;
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46.201
48 CFR Ch. 1 (10–1–03 Edition)
(4) Reliability and maintainability
assessment (life, endurance, and continued readiness);
(5) Fabrication and delivery of products, to ensure that only conforming
products are tendered to the Government;
(6) Technical documentation, including drawings, specifications, handbooks, manuals, and other technical
publications;
(7) Preservation, packaging, packing,
and marking; and
(8) Procedures and processes for services to ensure that services meet contract performance requirements.
(d) The contractor is responsible for
performing all inspections and test required by the contract except those
specifically reserved for performance
by the Government (see 46.201(c).
[48 FR 42415, Sept. 19, 1983, as amended at 55
FR 38517, Sept. 18, 1990]
46.202 Types of contract quality requirements.
Contract quality requirements fall
into four general categories, depending
on the extent of quality assurance
needed by the Government for the acquisition involved.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 48249, Sept. 18, 1995]
Subpart 46.2—Contract Quality
Requirements
46.201
dinarily available in suppliers’ plants
or commercial laboratories (e.g., ballistic testing of ammunition, unusual
environmental tests, and simulated
service tests); and
(2) Contracts that require Government testing for first article approval
(see subpart 9.3).
(d) Except as otherwise specified by
the contract, required contractor testing may be performed in the contractor’s or subcontractor’s laboratory or
testing facility, or in any other laboratory or testing facility acceptable to
the Government.
46.202–1 Contracts
items.
General.
(a) The contracting officer shall include in the solicitation and contract
the appropriate quality requirements.
The type and extent of contract quality requirements needed depends on the
particular acquisition and may range
from inspection at time of acceptance
to a requirement for the contractor’s
implementation of a comprehensive
program for controlling quality.
(b) As feasible, solicitations and contracts may provide for alternative, but
substantially equivalent, inspection
methods to obtain wide competition
and low cost. The contracting officer
may also authorize contractor-recommended alternatives when in the
Government’s interest and approved by
the activity responsible for technical
requirements.
(c) Although contracts generally
make contractors responsible for performing inspection before tendering
supplies to the Government, there are
situations in which contracts will provide for specialized inspections to be
performed solely by the Government.
Among situations of this kind are—
(1) Tests that require use of specialized test equipment or facilities not or-
for
commercial
When acquiring commercial items
(see part 12), the Government shall rely
on contractors’ existing quality assurance systems as a substitute for Government inspection and testing before
tender for acceptance unless customary
market practices for the commercial
item being acquired include in-process
inspection. Any in-process inspection
by the Government shall be conducted
in a manner consistent with commercial practice.
[60 FR 48249, Sept. 18, 1995]
46.202–2 Government reliance on inspection by contractor.
(a) Except as specified in (b) below,
the Government shall rely on the contractor to accomplish all inspection
and testing needed to ensure that supplies or services acquired at or below
the simplified acquisition threshold
conform to contract quality requirements before they are tendered to the
Government (see 46.301).
(b) The Government shall not rely on
inspection by the contractor if the contracting officer determines that the
Government has a need to test the supplies or services in advance of their
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Federal Acquisition Regulation
46.203
tender for acceptance, or to pass judgment upon the adequacy of the contractor’s internal work processes. In
making the determination, the contracting officer shall consider—
(1) The nature of the supplies and
services being purchased and their intended use;
(2) The potential losses in the event
of defects;
(3) The likelihood of uncontested replacement or correction of defective
work; and
(4) The cost of detailed Government
inspection.
(b) When the contracting officer, in
consultation with technical personnel,
finds it is in the Government’s interest
to require that higher-level quality
standards be maintained, the contracting officer shall use the clause
prescribed at 46.311. The contracting
fficer shall indicate in the clause which
higher-level quality standards will satisfy the Government’s requirement.
Examples of higher-level quality standards are ISO 9001, 9002, or 9003; ANSI/
ISO/ASQ Q9001–2000; ANSI/ASQC Q9001,
Q9002, or Q9003; QS–9000; AS–9000; ANSI/
ASQC E4; and ANSI/ASME NQA–1.
[48 FR 42415, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 60 FR 34760, July 3,
1995. Redesignated and amended at 60 FR
48249, Sept. 18, 1995]
[63 FR 70289, Dec. 18, 1998, as amended at 67
FR 6120, Feb. 8, 2002]
46.202–3 Standard inspection requirements.
(a) Standard inspection requirements
are contained in the clauses prescribed
in 46.302 through 46.308, and 46.310, and
in the product and service specifications that are included in solicitations
and contracts.
(b) The clauses referred to in (a)
above—
(1) Require the contractor to provide
and maintain an inspection system
that is acceptable to the Government;
(2) Give the Government the right to
make inspections and tests while work
is in process; and
(3) Require the contractor to keep
complete, and make available to the
Government, records of its inspection
work.
[48 FR 42415, Sept. 19, 1983. Redesignated at
60 FR 48249, Sept. 18, 1995.
46.202–4 Higher-level contract quality
requirements.
(a) Requiring compliance with higher-level quality standards is appropriate in solicitations and contracts for
complex or critical items (see 46.203(b)
and (c)) or when the technical requirements of the contract require—
(1) Control of such things as work operations, in-process controls, and inspection; or
(2) Attention to such factors as organization, planning, work instructions,
documentation control, and advanced
metrology.
46.203 Criteria for use of contract
quality requirements.
The extent of contract quality requirements, including contractor inspection, required under a contract
shall usually be based upon the classification of the contract item (supply or
service) as determined by its technical
description, its complexity, and the
criticality of its application.
(a) Technical description. Contract
items may be technically classified
as—
(1) Commercial (described in commercial catalogs, drawings, or industrial standards; see part 2); or
(2) Military-Federal (described in
Government drawings and specifications).
(b) Complexity. (1) Complex items
have quality characteristics, not wholly visible in the end item, for which
contractual conformance must be established progressively through precise
measurements, tests, and controls applied during purchasing, manufacturing, performance, assembly, and
functional operation either as an individual item or in conjunction with
other items.
(2) Noncomplex items have quality
characteristics for which simple measurement and test of the end item are
sufficient to determine conformance to
contract requirements.
(c) Criticality. (1) A critical application of an item is one in which the failure of the item could injure personnel
or jeopardize a vital agency mission. A
critical item may be either peculiar,
meaning it has only one application, or
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46.204
48 CFR Ch. 1 (10–1–03 Edition)
common, meaning it has multiple applications.
(2) A noncritical application is any
other application. Noncritical items
may also be either peculiar or common.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 48249, Sept. 18, 1995]
46.204
[Reserved]
Subpart 46.3—Contract Clauses
46.301 Contractor inspection requirements.
The contracting officer shall insert
the clause at 52.246–1, Contractor Inspection Requirements, in solicitations
and contracts for supplies or services
when the contract amount is expected
to be at or below the simplified acquisition threshold and (a) inclusion of the
clause is necessary to ensure an explicit understanding of the contractor’s
inspection responsibilities, or (b) inclusion of the clause is required under
agency procedures. The clause shall
not be used if the contracting officer
has made the determination specified
in 46.202–2(b).
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995; 60 FR 48250, Sept. 18,
1995]
46.302
Fixed-price supply contracts.
The contracting officer shall insert
the clause at 52.246–2, Inspection of
Supplies—Fixed-Price, in solicitations
and contracts for supplies, or services
that involve the furnishing of supplies,
when a fixed-price contract is contemplated and the contract amount is
expected to exceed the simplified acquisition threshold. The contracting
officer may insert the clause in such
solicitations and contracts when the
contract amount is expected to be at or
below
the
simplified
acquisition
threshold and inclusion of the clause is
in the Government’s interest. If a
fixed-price incentive contract is contemplated, the contracting officer shall
use the clause with its Alternate I. If a
fixed-ceiling-price contract with retroactive price redetermination is con-
templated, the contracting officer shall
use the clause with its Alternate II.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995]
46.303 Cost-reimbursement
supply
contracts.
The contracting officer shall insert
the clause at 52.246–3, Inspection of
Supplies—Cost-Reimbursement, in solicitations and contracts for supplies,
or services that involve the furnishing
of supplies, when a cost-reimbursement
contract is contemplated.
46.304 Fixed-price service contracts.
The contracting officer shall insert
the clause at 52.246–4, Inspection of
Services—Fixed-Price, in solicitations
and contracts for services, or supplies
that involve the furnishing of services,
when a fixed-price contract is contemplated and the contract amount is
expected to exceed the simplified acquisition threshold. The contracting
officer may insert the clause in such
solicitations and contracts when the
contract amount is expected to be at or
below
the
simplified
acquisition
threshold and inclusion is in the Government’s interest.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995]
46.305 Cost-reimbursement
service
contracts.
The contracting officer shall insert
the clause at 52.246–5, Inspection of
Services—Cost Reimbursement, in solicitations and contracts for services,
or supplies that involve the furnishing
of services, when a cost-reimbursement
contract is contemplated.
46.306 Time-and-material and laborhour contracts.
The contracting officer shall insert
the clause at 52.246–6, Inspection—
Time-and-Material and Labor-Hour, in
solicitations and contracts when a
time-and-material contract or a laborhour contract is contemplated. If Government inspection and acceptance are
to be performed at the contractor’s
plant, the contracting officer shall use
the clause with its Alternate I.
[48 FR 42415, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986]
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Federal Acquisition Regulation
46.314
46.307 Fixed-price research and development contracts.
(a) The contracting officer shall insert the clause at 52.246–7, Inspection of
Research and Development—FixedPrice, in solicitations and contracts for
research and development when (1) the
primary objective of the contract is the
delivery of end items other than designs, drawings, or reports, (2) a fixedprice contract is contemplated, and (3)
the contract amount is expected to exceed the simplified acquisition threshold; unless use of the clause is impractical and the clause prescribed in 46.309
is considered to be more appropriate.
(b) The contracting officer may insert the clause in such solicitations
and contracts when the contract
amount is expected to be at or below
the simplified acquisition threshold,
and its use is in the Government’s interest.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995]
46.308 Cost-reimbursement
research
and development contracts.
The contracting officer shall insert
the clause at 52.246–8, Inspection of Research and Development—Cost-Reimbursement, in solicitations and contracts for research and development
when (a) the primary objective of the
contract is the delivery of end items
other than designs, drawings, or reports, and (b) a cost-reimbursement
contract is contemplated; unless use of
the clause is impractical and the
clause prescribed in 46.309 is considered
to be more appropriate. If it is contemplated that the contract will be on
a no-fee basis, the contracting officer
shall use the clause with its Alternate
I.
46.309 Research and development contracts (short form).
The contracting officer shall insert
the clause at 52.246–9, Inspection of Research and Development (Short Form),
in solicitations and contracts for research and development when the
clause prescribed in 46.307 or the clause
prescribed in 46.308 is not used.
[51 FR 27120, July 29, 1986]
46.310 Facilities contracts.
The contracting officer shall insert
the clause at 52.246–10, Inspection of
Facilities, in solicitations and contracts when a facilities contract is contemplated.
46.311 Higher-level contract quality
requirement.
The contracting officer shall insert
the clause at 52.246–11, Higher-Level
Contract Quality Requirement, in solicitations and contracts when the inclusion of a higher-level contract quality requirement is appropriate (see
46.202–4).
[63 FR 70289, Dec. 18, 1998]
46.312 Construction contracts.
The contracting officer shall insert
the clause at 52.246–12, Inspection of
Construction, in solicitations and contracts for construction when a fixedprice contract is contemplated and the
contract amount is expected to exceed
the simplified acquisition threshold.
The contracting officer may insert the
clause in such solicitations and contracts when the contract amount is expected to be at or below the simplified
acquisition threshold, and its use is in
the Government’s interest.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995]
46.313 Contracts for dismantling, demolition, or removal of improvements.
The contracting officer shall insert
the clause at 52.246–13, Inspection—Dismantling, Demolition, or Removal of
Improvements, in solicitations and
contracts for dismantling, demolition,
or removal of improvements.
46.314 Transportation contracts.
The contracting officer shall insert
the clause at 52.246–14, Inspection of
Transportation, in solicitations and
contracts for freight transportation
services (including local drayage) by
rail, motor (including bus), domestic
freight forwarder, and domestic water
carriers (including inland, coastwise,
and intercoastal). The contracting officer shall not use the clause for the acquisition of transportation services by
domestic or international air carriers
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46.315
48 CFR Ch. 1 (10–1–03 Edition)
or by international ocean carriers, or
to freight services provided under bills
of lading or to those negotiated for reduced rates under 49 U.S.C. 10721(b)(1).
(See part 47, Transportation.)
46.315 Certificate of conformance.
The contracting officer shall insert
the clause at 52.246–15, Certificate of
Conformance, in solicitations and contracts for supplies or services when the
conditions in 46.504 apply.
46.316 Responsibility for supplies.
The contracting officer shall insert
the clause at 52.246–16, Responsibility
for Supplies, in solicitations and contracts for (a) supplies, (b) services involving the furnishing of supplies, or
(c) research and development, when a
fixed-price contract is contemplated
and the contract amount is expected to
exceed
the
simplified
acquisition
threshold. The contracting officer may
insert the clause in such solicitations
and contracts when the contract
amount is not expected to exceed the
simplified acquisition threshold and inclusion of the clause is authorized
under agency procedures.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995]
Subpart 46.4—Government
Contract Quality Assurance
46.401 General.
(a) Government contract quality assurance shall be performed at such
times (including any stage of manufacture or performance of services) and
places
(including
subcontractors’
plants) as may be necessary to determine that the supplies or services conform to contract requirements. Quality
assurance surveillance plans should be
prepared in conjunction with the preparation of the statement of work. The
plans should specify—
(1) All work requiring surveillance;
and
(2) The method of surveillance.
(b) Each contract shall designate the
place or places where the Government
reserves the right to perform quality
assurance.
(c) If the contract provides for performance of Government quality assur-
ance at source, the place or places of
performance may not be changed without the authorization of the contracting officer.
(d) If a contract provides for delivery
and acceptance at destination and the
Government inspects the supplies at a
place other than destination, the supplies shall not ordinarily be reinspected at destination, but should be
examined for quantity, damage in transit, and possible substitution or fraud.
(e) Government inspection shall be
performed by or under the direction or
supervision of Government personnel.
(f) Government inspection shall be
documented on an inspection or receiving report form or commercial shipping
document/packing list, under agency
procedures (see subpart 46.6).
(g) Agencies may prescribe the use of
inspection approval or disapproval
stamps to identify and control supplies
and material that have been inspected
for conformance with contract quality
requirements.
[48 FR 42415, Sept. 19, 1983, as amended at 62
FR 44816, Aug. 22, 1997]
46.402 Government contract
assurance at source.
Agencies shall perform contract quality assurance, including inspection, at
source if—
(a) Performance at any other place
would
require
uneconomical
disassembly or destructive testing;
(b) Considerable loss would result
from the manufacture and shipment of
unacceptable supplies, or from the
delay in making necessary corrections;
(c) Special required instruments,
gauges, or facilities are available only
at source;
(d) Performance at any other place
would destroy or require the replacement of costly special packing and
packaging;
(e) Government inspection during
contract performance is essential; or
(f) It is determined for other reasons
to be in the Government’s interest.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 48250, Sept. 18, 1995; 63 FR 70290, Dec. 18,
1998]
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Federal Acquisition Regulation
46.405
46.403 Government contract quality
assurance at destination.
(a) Government contract quality assurance that can be performed at destination is normally limited to inspection of the supplies or services. Inspection shall be performed at destination
under the following circumstances—
(1) Supplies are purchased off-theshelf and require no technical inspection;
(2) Necessary testing equipment is located only at destination;
(3) Perishable subsistence supplies
purchased within the United States,
except that those supplies destined for
overseas shipment will normally be inspected for condition and quantity at
points of embarkation;
(4) Brand name products purchased
for authorized resale through commissaries or similar facilities (however, supplies destined for direct overseas shipment may be accepted by the
contracting officer or an authorized
representative on the basis of a tally
sheet evidencing receipt of shipment
signed by the port transportation officer or other designated official at the
transshipment point);
(5) The products being purchased are
processed under direct control of the
National Institutes of Health or the
Food and Drug Administration of the
Department of Health and Human
Services;
(6) The contract is for services performed at destination; or
(7) It is determined for other reasons
to be in the Government’s interest.
(b) Overseas inspection of supplies
shipped from the United States shall
not be required except in unusual circumstances, and then only when the
contracting officer determines in advance that inspection can be performed
or makes necessary arrangements for
its performance.
46.404 Government contract quality
assurance for acquisitions at or
below the simplified acquisition
threshold.
(a) In determining the type and extent of Government contract quality
assurance to be required for contracts
at or below the simplified acquisition
threshold, the contracting officer shall
consider the criticality of application
of the supplies or services, the amount
of possible losses, and the likelihood of
uncontested replacement of defective
work (see 46.202–2).
(b) When the conditions in 46.202–2(b)
apply, the following policies shall govern:
(1) Unless a special situation exists,
the Government shall inspect contracts
at or below the simplified acquisition
threshold at destination and only for
type and kind; quantity; damage; operability (if readily determinable); and
preservation, packaging, packing, and
marking, if applicable.
(2) Special situations may require
more detailed quality assurance and
the use of a standard inspection or
higher-level contract quality requirement. These situations include those
listed in 46.402 and contracts for items
having critical applications.
(3) Detailed Government inspection
may be limited to those characteristics
that are special or likely to cause harm
to personnel or property. When repetitive purchases of the same item are
made from the same manufacturer
with a history of defect-free work, Government inspection may be reduced to
a periodic check of occasional purchases.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995; 60 FR 48250, Sept. 18,
1995]
46.405
Subcontracts.
(a) Government contract quality assurance on subcontracted supplies or
services shall be performed only when
required in the Government’s interest.
The primary purpose is to assist the
contract administration office cognizant of the prime contractor’s plant
in determining the conformance of subcontracted supplies or services with
contract requirements or to satisfy one
or more of the factors included in (b)
below. It does not relieve the prime
contractor of any responsibilities
under the contract. When appropriate,
the prime contractor shall be requested
to arrange for timely Government access to the subcontractor facility.
(b) The Government shall perform
quality assurance at the subcontract
level when—
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46.406
48 CFR Ch. 1 (10–1–03 Edition)
(1) The item is to be shipped from the
subcontractor’s plant to the using activity and inspection at source is required;
(2) The conditions for quality assurance at source are applicable (see
46.402);
(3) The contract specifies that certain quality assurance functions, which
can be performed only at the subcontractor’s plant, are to be performed
by the Government; or
(4) It is otherwise required by the
contract or determined to be in the
Government’s interest.
(c) Supplies or services for which certificates, records, reports, or similar
evidence of quality are available at the
prime contractor’s plant shall not be
inspected at the subcontractor’s plant,
except occasionally to verify this evidence or when required under (b) above.
(d) All oral and written statements
and contract terms and conditions relating to Government quality assurance actions at the subcontract level
shall be worded so as not to—
(1) Affect the contractual relationship between the prime contractor and
the Government, or between the prime
contractor and the subcontractor;
(2) Establish a contractual relationship between the Government and the
subcontractor; or
(3) Constitute a waiver of the Government’s right to accept or reject the
supplies or services.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995]
46.406 Foreign governments.
Government contract quality assurance performed for foreign governments or international agencies shall
be administered according to the foreign policy and security objectives of
the United States. Such support shall
be furnished only when consistent with
or required by legislation, executive
orders, or agency policies concerning
mutual international programs.
46.407 Nonconforming
supplies
or
services.
(a) The contracting officer should reject supplies or services not conforming in all respects to contract requirements (see 46.102). In those instances where deviation from this pol-
icy is found to be in the Government’s
interest, such supplies or services may
be accepted only as authorized in this
section.
(b) The contracting officer ordinarily
must give the contractor an opportunity to correct or replace nonconforming supplies or services when this
can be accomplished within the required delivery schedule. Unless the
contract specifies otherwise (as may be
the case in some cost-reimbursement
contracts), correction or replacement
must be without additional cost to the
Government. Subparagraph (e)(2) of the
clause at 52.246–2, Inspection of Supplies—Fixed-Price, reserves to the Government the right to charge the contractor the cost of Government reinspection and retests because of prior
rejection.
(c)(1) In situations not covered by
paragraph (b) of this section, the contracting officer ordinarily must reject
supplies or services when the nonconformance is critical or major or the
supplies or services are otherwise incomplete. However, there may be circumstances (e.g., reasons of economy
or urgency) when the contracting officer determines acceptance or conditional acceptance of supplies or services is in the best interest of the Government. The contracting officer must
make this determination based upon—
(i) Advice of the technical activity
that the item is safe to use and will
perform its intended purpose;
(ii) Information regarding the nature
and extent of the nonconformance or
otherwise incomplete supplies or services;
(iii) A request from the contractor
for acceptance of the nonconforming or
otherwise incomplete supplies or services (if feasible);
(iv) A recommendation for acceptance, conditional acceptance, or rejection, with supporting rationale; and
(v) The contract adjustment considered appropriate, including any adjustment offered by the contractor.
(2) The cognizant contract administration office, or other Government activity directly involved, must, furnish
this data to the contracting officer in
writing, except that in urgent cases it
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Federal Acquisition Regulation
46.501
may be furnished orally and later confirmed in writing. Before making a decision to accept, the contracting officer must, obtain the concurrence of the
activity responsible for the technical
requirements of the contract and,
where health factors are involved, of
the responsible health official of the
agency concerned.
(d) If the nonconformance is minor,
the cognizant contract administration
office may make the determination to
accept or reject, except where this authority is withheld by the contracting
office of the contracting activity. To
assist in making this determination,
the contract administration office may
establish a joint contractor-contract
administrative office review group. Acceptance of supplies and services with
critical or major nonconformances is
outside the scope of the review group.
(e) The contracting officer must discourage the repeated tender of nonconforming supplies or services, including
those
with
only
minor
nonconformances, by appropriate action, such as rejection and documenting the contractor’s performance
record.
(f) When supplies or services are accepted
with
critical
or
major
nonconformances as authorized in
paragraph (c) of this section, the contracting officer must modify the contract to provide for an equitable price
reduction or other consideration. In
the case of conditional acceptance,
amounts withheld from payments generally should be at least sufficient to
cover the estimated cost and related
profit to correct deficiencies and complete unfinished work. The contracting
officer must document in the contract
file the basis for the amounts withheld.
For services, the contracting officer
can consider identifying the value of
the individual work requirements or
tasks (subdivisions) that may be subject to price or fee reduction. This
value may be used to determine an equitable adjustment for nonconforming
services. However, when supplies or
services
involving
minor
nonconformances are accepted, the
contract need not be modified unless it
appears that the savings to the contractor in fabricating the nonconforming supplies or performing the
nonconforming services will exceed the
cost to the Government of processing
the modification.
(g) Notices of rejection must include
the reasons for rejection and be furnished promptly to the contractor.
Promptness in giving this notice is essential because, if timely nature of rejection is not furnished, acceptance
may in certain cases be implied as a
matter of law. The notice must, be in
writing if—
(1) The supplies or services have been
rejected at a place other than the contractor’s plant;
(2) The contractor persists in offering
nonconforming supplies or services for
acceptance; or
(3) Delivery or performance was late
without excusable cause.
[48 FR 42415, Sept. 19, 1983, as amended at 61
FR 31663, June 20, 1996; 62 FR 44816, Aug. 22,
1997; 64 FR 51846, Sept. 24, 1999]
46.408 Single-agency assignments of
Government contract quality assurance.
(a) Government-wide responsibility
for quality assurance support for acquisitions of certain commodities is assigned as follows:
(1) For drugs, biologics, and other
medical supplies—the Food and Drug
Administration;
(2) For food, except seafood—the Department of Agriculture.
(3) For seafood—the National Marine
Fisheries Service of the Department of
Commerce.
(b) Agencies requiring quality assurance support for acquiring these supplies should request the support directly from the cognizant office.
Subpart 46.5—Acceptance
46.501
General.
Acceptance constitutes acknowledgment that the supplies or services conform with applicable contract quality
and quantity requirements, except as
provided in this subpart and subject to
other terms and conditions of the contract. Acceptance may take place before delivery, at the time of delivery,
or after delivery, depending on the provisions of the terms and conditions of
the contract. Supplies or services shall
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46.502
48 CFR Ch. 1 (10–1–03 Edition)
ordinarily not be accepted before completion of Government contract quality
assurance actions (however, see 46.504).
Acceptance shall ordinarily be evidenced by execution of an acceptance
certificate on an inspection or receiving report form or commercial shipping
document/packing list.
46.502 Responsibility for acceptance.
Acceptance of supplies or services is
the responsibility of the contracting
officer. When this responsibility is assigned to a cognizant contract administration office or to another agency (see
42.202(g)), acceptance by that office or
agency is binding on the Government.
[48 FR 42415, Sept. 19, 1983, as amended at 63
FR 9065, Feb. 23, 1998]
46.503 Place of acceptance.
Each contract shall specify the place
of acceptance. Contracts that provide
for Government contract quality assurance at source shall ordinarily provide
for acceptance at source. Contracts
that provide for Government contract
quality assurance at destination shall
ordinarily provide for acceptance at
destination. (For transportation terms,
see subpart 47.3). Supplies accepted at a
place other than destination shall not
be reinspected at destination for acceptance purposes, but should be examined at destination for quantity, damage in transit, and possible substitution or fraud.
46.504 Certificate of conformance.
A certificate of conformance (see
46.315) may be used in certain instances
instead of source inspection (whether
the contract calls for acceptance at
source or destination) at the discretion
of the contracting officer if the following conditions apply:
(a) Acceptance on the basis of a contractor’s certificate of conformance is
in the Government’s interest.
(b)(1) Small losses would be incurred
in the event of a defect; or
(2) Because of the contractor’s reputation or past performance, it is likely that the supplies or services furnished will be acceptable and any defective work would be replaced, corrected, or repaired without contest. In
no case shall the Government’s right to
inspect supplies under the inspection
provisions of the contract be prejudiced.
46.505 Transfer of title and risk of
loss.
(a) Title to supplies shall pass to the
Government upon formal acceptance,
regardless of when or where the Government takes physical possession, unless the contract specifically provides
for earlier passage of title.
(b) Unless the contract specifically
provides otherwise, risk of loss of or
damage to supplies shall remain with
the contractor until, and shall pass to
the Government upon—
(1) Delivery of the supplies to a carrier if transportation is f.o.b. origin; or
(2) Acceptance by the Government or
delivery of the supplies to the Government at the destination specified in the
contract, whichever is later, if transportation is f.o.b. destination.
(c) Paragraph (b) above shall not
apply to supplies that so fail to conform to contract requirements as to
give a right of rejection. The risk of
loss of or damage to such nonconforming supplies remains with the contractor until cure or acceptance. After
cure or acceptance, paragraph (b) above
shall apply.
(d) Under paragraph (b) above, the
contractor shall not be liable for loss of
or damage to supplies caused by the
negligence of officers, agents, or employees of the Government acting within the scope of their employment.
(e) The policy expressed in (a)
through (d) above is specified in the
clause at 52.246–16, Responsibility for
Supplies, which is prescribed in 46.316.
Subpart 46.6—Material Inspection
and Receiving Reports
46.601
General.
Agencies shall prescribe procedures
and instructions for the use, preparation, and distribution of material inspection and receiving reports and
commercial shipping document/packing lists to evidence Government inspection(see 46.401) and acceptance (see
46.501).
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Federal Acquisition Regulation
46.705
Subpart 46.7—Warranties
46.701
[Reserved]
46.702
General.
(a) The principal purposes of a warranty in a Government contract are (1)
to delineate the rights and obligations
of the contractor and the Government
for defective items and services and (2)
to foster quality performance.
(b) Generally, a warranty should provide—
(1) A contractual right for the correction of defects notwithstanding any
other requirement f the contract pertaining to acceptance of the supplies or
services by the Government; and
(2) A stated period of time or use, or
the occurrence of a specified event,
after acceptance by the Government to
assert a contractual right for the correction of defects.
(c) The benefits to be derived from a
warranty must be commensurate with
the cost of the warranty to the Government.
46.703
Criteria for use of warranties.
The use of warranties is not mandatory. In determining whether a warranty is appropriate for a specific acquisition, the contracting officer shall
consider the following factors:
(a) Nature and use of the supplies or
services. This includes such factors as—
(1) Complexity and function;
(2) Degree of development;
(3) State of the art;
(4) End use;
(5) Difficulty in detecting defects before acceptance; and
(6) Potential harm to the Government if the item is defective.
(b) Cost. Warranty costs arise from—
(1) The contractor’s charge for accepting the deferred liability created
by the warranty; and
(2) Government administration and
enforcement of the warranty (see paragraph (c) below).
(c) Administration and enforcement.
The Government’s ability to enforce
the warranty is essential to the effectiveness of any warranty. There must
be some assurance that an adequate administrative system for reporting defects exists or can be established. The
adequacy of a reporting system may
depend upon such factors as the—
(1) Nature and complexity of the
item;
(2) Location and proposed use of the
item;
(3) Storage time for the item;
(4) Distance of the using activity
from the source of the item;
(5) Difficulty in establishing existence of defects; and
(6) Difficulty in tracing responsibility for defects.
(d) Trade practice. In many instances
an item is customarily warranted in
the trade, and, as a result of that practice, the cost of an item to the Government will be the same whether or not
a warranty is included. In those instances, it would be in the Government’s interest to include such a warranty.
(e) Reduced requirements. The contractor’s charge for assumption of added liability may be partially or completely
offset by reducing the Government’s
contract quality assurance requirements where the warranty provides
adequate assurance of a satisfactory
product.
46.704
Authority for use of warranties.
The use of a warranty in an acquisition shall be approved in accordance
with agency procedures.
46.705
Limitations.
(a) Except for the warranties in the
clauses at 52.246–3, Inspection of Supplies—Cost-Reimbursement, and 52.246–
8, Inspection of Research and Development—Cost-Reimbursement, the contracting officer shall not include warranties in cost-reimbursement contracts, unless authorized in accordance
with agency regulations (see 46.708).
(b) Warranty clauses shall not limit
the Government’s rights under an inspection clause (see subpart 46.3) in relation to latent defects, fraud, or gross
mistakes that amount to fraud.
(c) Except for warranty clauses in
construction
contracts,
warranty
clauses shall provide that the warranty
applies notwithstanding inspection and
acceptance or other clauses or terms of
the contract.
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46.706
48 CFR Ch. 1 (10–1–03 Edition)
46.706 Warranty terms and conditions.
(a) To facilitate the pricing and enforcement of warranties, the contracting officer shall ensure that warranties clearly state the—
(1) Exact nature of the item and its
components and characteristics that
the contractor warrants;
(2) Extent of the contractor’s warranty including all of the contractor’s
obligations to the Government for
breach of warranty;
(3) Specific remedies available to the
Government; and
(4) Scope and duration of the warranty.
(b) The contracting officer shall consider the following guidelines when
preparing warranty terms and conditions:
(1) Extent of contractor obligations (i)
Generally, the contractor’s obligations
under warranties extend to all defects
discovered during the warranty period,
but do not include damage caused by
the Government. When a warranty for
the entire item is not advisable, a warranty may be required for a particular
aspect of the item that may require
special protection (e.g., installation,
components, accessories, subassemblies, preservation, packaging, and
packing, etc.).
(ii) If the Government specifies the
design of the end item and its measurements, tolerances, materials, tests, or
inspection requirements, the contractor’s obligations for correction of defects shall usually be limited to defects
in material and workmanship or failure
to conform to specifications. If the
Government does not specify the design, the warranty extends also to the
usefulness of the design.
(iii) If express warranties are included in a contract (except contracts
for commercial items), all implied warranties of merchantability and fitness
for a particular purpose shall be negated by the use of specific language in
the clause (see clauses 52.246–17, Warranty of Supplies of a Noncomplex Nature; 52.246–18, Warranty of Supplies of
a Complex Nature; and 52.246–19, Warranty of Systems and Equipment under
Performance Specifications or Design
Criteria).
(2) Remedies (i) Normally, a warranty
shall provide as a minimum that the
Government may (A) obtain an equitable adjustment of the contract, or (B)
direct the contractor to repair or replace the defective items at the contractor’s expense.
(ii) If it is not practical to direct the
contractor to make the repair or replacement, or, because of the nature of
the item, the repair or replacement
does not afford an appropriate remedy
to the Government, the warranty
should provide alternate remedies,
such as authorizing the Government
to—
(A) Retain the defective item and reduce the contract price by an amount
equitable under the circumstances; or
(B) Arrange for the repair or replacement of the defective item, by the Government or by another source, at the
contractor’s expense.
(iii) If it can be foreseen that it will
not be practical to return an item to
the contractor for repair, to remove it
to an alternate source for repair, or to
replace the defective item, the warranty should provide that the Government may repair, or require the contractor to repair, the item in place at
the contractor’s expense. The contract
shall provide that in the circumstance
where the Government is to accomplish
the repair, the contractor will furnish
at the place of delivery the material or
parts, and the installation instructions
required to successfully accomplish the
repair.
(iv) Unless provided otherwise in the
warranty, the contractor’s obligation
to repair or replace the defective item,
or to agree to an equitable adjustment
of the contract, shall include responsibility for the costs of furnishing all
labor and material to (A) reinspect
items that the Government reasonably
expected to be defective, (B) accomplish the required repair or replacement of defective items, and (C) test,
inspect, package, pack, and mark repaired or replaced items.
(v) If repair or replacement of defective items is required, the contractor
shall generally be required by the warranty to bear the expense of transportation for returning the defective item
from the place of delivery specified in
the contract (irrespective of the f.o.b.
point or the point of acceptance) to the
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Federal Acquisition Regulation
46.710
contractor’s plant and subsequent return. When defective items are returned to the contractor from other
than the place of delivery specified in
the contract, or when the Government
exercises alternate remedies, the contractor’s liability for transportation
charges incurred shall not exceed an
amount equal to the cost of transportation by the usual commercial method
of shipment between the place of delivery specified in the contract and the
contractor’s plant and subsequent return.
(3) Duration of the warranty. The time
period or duration of the warranty
must be clearly specified and shall be
established after consideration of such
factors as (i) the estimated useful life
of the item, (ii) the nature of the item
including storage or shelf-life, and (iii)
trade practice. The period specified
shall not extend the contractor’s liability for patent defects beyond a reasonable time after acceptance by the Government.
(4) Notice. The warranty shall specify
a reasonable time for furnishing notice
to the contractor regarding the discovery of defects. This notice period,
which shall apply to all defects discovered during the warranty period, shall
be long enough to assure that the Government has adequate time to give notice to the contractor. The contracting
officer shall consider the following factors when establishing the notice period:
(i) The time necessary for the Government to discover the defects.
(ii) The time reasonably required for
the Government to take necessary administrative steps and make a timely
report of discovery of the defects to the
contractor.
(iii) The time required to discover
and report defective replacements.
(5) Markings. The packaging and preservation requirements of the contract
shall require the contractor to stamp
or mark the supplies delivered or otherwise furnish notice with the supplies
of the existence of the warranty. The
purpose of the markings or notice is to
inform Government personnel who
store, stock, or use the supplies that
the supplies are under warranty. Markings may be brief but should include (i)
a brief statement that a warranty ex-
ists, (ii) the substance of the warranty,
(iii) its duration, and (iv) who to notify
if the supplies are found to be defective. For commercial items (see 46.709),
the contractor’s trade practice in warranty marking is acceptable if sufficient information is presented for supply personnel and users to identify
warranted supplies.
(6) Consistency. Contracting officers
shall ensure that the warranty clause
and any other warranty conditions in
the contract (e.g., in the specifications
or an inspection clause) are consistent.
To the extent practicable, all of the
warranties to be contained in the contract should be expressed in the warranty clause.
46.707 Pricing aspects of fixed-price
incentive contract warranties.
If a fixed-price incentive contract
contains a warranty (see 46.708), the estimated cost of the warranty to the
contractor should be considered in establishing the incentive target price
and the ceiling price of the contract.
All costs incurred, or estimated to be
incurred, by the contractor in complying with the warranty shall be considered when establishing the total
final price. Contractor compliance with
the warranty after the establishment
of the total final price shall be at no
additional cost to the Government.
46.708
Warranties of data.
Warranties of data shall be developed
and used in accordance with agency
regulations.
46.709 Warranties
items.
of
commercial
The contracting officer should take
advantage of commercial warranties,
including extended warranties, where
appropriate and in the Government’s
best interests, offered by the contractor for the repair and replacement
of commercial items (see part 12).
[60 FR 48250, Sept. 18, 1995]
46.710
Contract clauses.
The clauses and alternates prescribed
in this section may be used in solicitations and contracts in which inclusion
of a warranty is appropriate (see 46.709
for warranties for commercial items).
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46.710
48 CFR Ch. 1 (10–1–03 Edition)
However, because of the many situations that may influence the warranty
terms and conditions appropriate to a
particular acquisition, the contracting
officer may vary the terms and conditions of the clauses and alternates to
the extent necessary. The alternates
prescribed in this section address the
clauses; however, the conditions pertaining to each alternate must be considered if the terms and conditions are
varied to meet a particular need.
(a)(1) The contracting officer may insert a clause substantially the same as
the clause at 52.246–17, Warranty of
Supplies of a Noncomplex Nature, in
solicitations and contracts for noncomplex items when a fixed-price supply
contract is contemplated and the use of
a warranty clause has been approved
under agency procedures. If the contractor’s design rather than the Government’s design will be used, insert
the word ‘‘design’’ before ‘‘material’’ in
paragraph (b)(1)(i).
(2) If it is desirable to specify that
necessary transportation incident to
correction or replacement will be at
the Government’s expense (as might be
the case if, for example, the cost of a
warranty would otherwise be prohibitive), the contracting officer may use
the clause with its Alternate II.
(3) If the supplies cannot be obtained
from another source, the contracting
officer may use the clause with its Alternate III.
(4) If a fixed-price incentive contract
is contemplated, the contracting officer may use the clause with its Alternate IV.
(5) If it is anticipated that recovery
of the warranted item will involve considerable Government expense for disassembly and/or reassembly of larger
items, the contracting officer may use
the clause with its Alternate V.
(b)(1) The contracting officer may insert a clause substantially the same as
the clause at 52.246–18, Warranty of
Supplies of a Complex Nature, in solicitations and contracts for deliverable
complex items when a fixed-price supply or research and development contract is contemplated and the use of a
warranty clause has been approved
under agency procedures. If the contractor’s design rather than the Government’s design will be used, insert
the word ‘‘design’’ before ‘‘material’’ in
paragraph (b)(1).
(2) If it is desirable to specify that
necessary transportation incident to
correction or replacement will be at
the Government’s expense (as might be
the case if, for example, the cost of a
warranty would otherwise be prohibitive), the contracting officer may use
the clause with its Alternate II.
(3) If a fixed-price incentive contract
is contemplated, the contracting officer may use the clause with its Alternate III.
(4) If it is anticipated that recovery
of the warranted item will involve considerable Government expense for disassembly and/or reassembly of larger
items, the contracting officer may use
the clause with its Alternate IV.
(c)(1) The contracting officer may insert a clause substantially the same as
the clause at 52.246–19, Warranty of
Systems and Equipment under Performance Specifications or Design Criteria, in solicitations and contracts
when performance specifications or design are of major importance; a fixedprice supply, service, or research and
development contract for systems and
equipment is contemplated; and the
use of a warranty clause has been approved under agency procedures.
(2) If it is desirable to specify that
necessary transportation incident to
correction or replacement will be at
the Government’s expense (as might be
the case if, for example, the cost of a
warranty would otherwise be prohibitive), the contracting officer may use
the clause with its Alternate I.
(3) If a fixed-price incentive contract
is contemplated, the contracting officer may use the clause with its Alternate II.
(4) If it is anticipated that recovery
of the warranted item will involve considerable Government expense for disassembly and/or reassembly of larger
items, the contracting officer may use
the clause with its Alternate III.
(d) The contracting officer may insert a clause substantially the same as
the clause at 52.246–20, Warranty of
Services, in solicitations and contracts
for services when a fixed-price contract
for services is contemplated and the
use of a warranty clause has been approved under agency procedures; unless
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Federal Acquisition Regulation
46.803
a clause substantially the same as the
clause at 52.246–19, Warranty of Systems and Equipment under Performance Specifications or Design Criteria,
has been used.
(e)(1) The contracting officer may insert a clause substantially the same as
the clause at 52.246–21, Warranty of
Construction, in solicitations and contracts when a fixed-price construction
contract (see 46.705(c)) is contemplated
and the use of a warranty clause has
been approved under agency procedures.
(2) If the Government specifies in the
contract the use of any equipment by
brand name and model, the contracting
officer may use the clause with its Alternate I.
[48 FR 42415, Sept. 19, 1983, as amended at 60
FR 48250, Sept. 18, 1995; 66 FR 2133, Jan. 10,
2001]
Subpart 46.8—Contractor Liability
for Loss of or Damage to
Property of the Government
46.800 Scope of subpart.
This subpart prescribes policies and
procedures for limiting contractor liability for loss of or damage to property of the Government that (a) occurs
after acceptance and (b) results from
defects or deficiencies in the supplies
delivered or services performed.
46.801 Applicability.
(a) This subpart applies to contracts
other than those for (1) information
technology, including telecommunications, (2) construction, (3) architectengineer services, and (4) maintenance
and rehabilitation of real property.
This subpart does not apply to commercial items.
(b) See subpart 46.7, Warranties, for
policies and procedures concerning
contractor liability caused by nonconforming technical data.
[48 FR 42415, Sept. 19, 1983, as amended at 61
FR 41471, Aug. 8, 1996; 66 FR 53484, Oct. 22,
2001]
46.802 Definition.
High-value item, as used in this subpart, means a contract end item that
(a) has a high unit cost (normally exceeding $100,000 per unit), such as an
aircraft, an aircraft engine, a communication system, a computer system, a
missile, or a ship, and (b) is designated
by the contracting officer as a highvalue item.
46.803 Policy.
(a) General. The Government will
generally act as a self-insurer by relieving contractors, as specified in this
subpart, of liability for loss of or damage to property of the Government
that (1) occurs after acceptance of supplies delivered or services performed
under a contract and (2) results from
defects or deficiencies in the supplies
or services. However, the Government
will not relieve the contractor of liability for loss of or damage to the contract end item itself, except for highvalue items.
(b) High-value items. In contracts requiring delivery of high-value items,
the Government will relieve contractors of contractual liability for loss of
or damage to those items. However,
this relief shall not limit the Government’s rights arising under the contract to—
(1) Have any defective item or its
components corrected, repaired, or replaced when the defect or deficiency is
discovered before the loss of or damage
to a high-value item occurs; or
(2) Obtain equitable relief when the
defect or deficiency is discovered after
such loss or damage occurs.
(c) Exception. The Government will
not provide contractual relief under
paragraphs (a) and (b) above when contractor liability can be preserved without increasing the contract price.
(d) Limitations. Subject to the specific
terms of the limitation of liability
clause included in the contract, the relief provided under paragraphs (a) and
(b) above does not apply—
(1) To the extent that contractor liability is expressly provided under a
contract clause authorized by this regulation;
(2) When a defect or deficiency in, or
the Government’s acceptance of, the
supplies or services results from willful
misconduct or lack of good faith on the
part of the contractor’s managerial
personnel; or
(3) To the extent that any contractor
insurance, or self-insurance reserve,
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46.805
48 CFR Ch. 1 (10–1–03 Edition)
covers liability for loss or damage suffered by the Government through purchase or use of the supplies delivered or
services performed under the contract.
46.805
Contract clauses.
(a) Contracts that exceed the simplified
acquisition threshold. The contracting
officer shall insert the appropriate
clause or combination of clauses specified in subparagraphs (a)(1) through
(a)(5) of this section in solicitations
and contracts when the contract
amount is expected to be in excess of
the simplified acquisition threshold
and the contract is subject to the requirements of this subpart as indicated
in 46.801:
(1) In contracts requiring delivery of
end items that are not high-value
items, insert the clause at 52.246–23,
Limitation of Liability.
(2) In contracts requiring delivery of
high-value items, insert the clause at
52.246–24, Limitation of Liability—
High-Value Items.
(3) In contracts requiring delivery of
both high-value items and other end
items, insert both clauses prescribed in
(1) and (2) above, Alternate I of the
clause at 52.246–24, and identify clearly
in the contract schedule the line items
designated as high-value items.
(4) In contracts requiring the performance of services, insert the clause
at 52.246–25, Limitation of Liability—
Services.
(5) In contracts requiring both the
performance of services and the delivery of end items, insert the clause prescribed in subparagraph (4) above and
the appropriate clause or clauses prescribed in subparagraph (1), (2), or (3)
above, and identify clearly in the contract schedule any high-value line
items.
(b) Acquisitions at or below the simplified acquisition threshold. The clauses
prescribed by paragraph (a) of this section are not required for contracts at
or below the simplified acquisition
threshold. However, in response to a
contractor’s specific request, the contracting officer may insert the clauses
prescribed in paragraph (a)(1) or (a)(4)
of this section in a contract at or below
the simplified acquisition threshold
and may obtain any price reduction
that is appropriate.
[48 FR 42415, Sept. 19, 1983, as amended at 55
FR 3886, Feb. 5, 1990; 60 FR 34760, July 3, 1995;
61 FR 39190, July 26, 1996]
46.806 Subcontracts.
(a) The clause at 52.246–23, Limitation of Liability, and the clause at
52.246–25, Limitation of Liability—
Services, each require the contractor
to insert the same clause in all subcontracts.
(b) The clause at 52.246–24, Limitation of Liability—High-Value Items,
and its Alternate I require the contractor to insert that clause, the clause
at 52.246–23, Limitation of Liability, or
both, as appropriate, in all subcontracts. However, they require the
contractor to obtain the contracting
officer’s written approval before including the clause at 52.246–24, Limitation of Liability—High-Value Items.
The contracting officer shall approve
the use of this clause in a subcontract
only if the clause would have been used
had the subcontract been a prime contract with the Government.
PART 47—TRANSPORTATION
Sec.
47.000
47.001
47.002
Scope of subpart.
Definitions.
Applicability.
Subpart 47.1—General
47.101 Policies.
47.102 Transportation insurance.
47.103 Transportation Documentation and
Audit Regulation (TDA).
47.104 Government rate tenders under section 10721 of the Interstate Commerce
Act.
47.104–1 Government freight.
47.104–2 Fixed-price contracts.
47.104–3 Cost-reimbursement contracts.
47.104–4 Contract clauses.
47.104–5 Citation
of
Government
rate
tenders.
47.105 Transportation assistance.
Subpart 47.2—Contracts for Transportation
or for Transportation-Related Services
47.200
47.201
47.202
47.203
47.204
Scope of subpart.
Definitions.
Presolicitation planning.
Transportation term contracts.
Single-movement contracts.
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Federal Acquisition Regulation
Pt. 47
47.205 Availability of term contracts and
basic ordering agreements for transportation or for transportation-related services.
47.206 Preparation of solicitations and contracts.
47.207 Solicitation
provisions,
contract
clauses, and special requirements.
47.207–1 Qualifications of offerors.
47.207–2 Duration of contract and time of
performance.
47.207–3 Description of shipment, origin, and
destination.
47.207–4 Determination of weights.
47.207–5 Contractor responsibilities.
47.207–6 Rates and charges.
47.207–7 Liability and insurance.
47.207–8 Government responsibilities.
47.207–9 Annotation and distribution of
shipping and billing documents.
Subpart 47.3—Transportation in Supply
Contracts
47.300 Scope of subpart.
47.301 General.
47.301–1 Responsibilities of contracting officers.
47.301–2 Participation of transportation officers.
47.301–3 Using the Defense Transportation
System (DTS).
47.302 Place of delivery—f.o.b. point.
47.303 Standard delivery terms and contract
clauses.
47.303–1 F.o.b. origin.
47.303–2 F.o.b. origin, contractor’s facility.
47.303–3 F.o.b. origin, freight allowed.
47.303–4 F.o.b. origin, freight prepaid.
47.303–5 F.o.b. origin, with differentials.
47.303–6 F.o.b. destination.
47.303–7 F.o.b. destination, within consignee’s premises.
47.303–8 F.a.s. vessel, port of shipment.
47.303–9 F.o.b. vessel, port of shipment.
47.303–10 F.o.b. inland carrier, point of exportation.
47.303–11 F.o.b. inland point, country of importation.
47.303–12 Ex dock, pier, or warehouse, port
of importation.
47.303–13 C.& f. destination.
47.303–14 C.i.f. destination.
47.303–15 F.o.b. designated air carrier’s terminal, point of exportation.
47.303–16 F.o.b. designated air carrier’s terminal, point of importation.
47.303–17 Contractor-prepaid
commercial
bills of lading, small package shipments.
47.304 Determination of delivery terms.
47.304–1 General.
47.304–2 Shipments within CONUS.
47.304–3 Shipments from CONUS for overseas delivery.
47.304–4 Shipments
originating
outside
CONUS.
47.304–5 Exceptions.
47.305 Solicitation
provisions,
contract
clauses, and transportation factors.
47.305–1 Solicitation requirements.
47.305–2 Solicitations f.o.b. origin and f.o.b.
destination—lowest overall cost.
47.305–3 F.o.b. origin solicitations.
47.305–4 F.o.b. destination solicitations.
47.305–5 Destination unknown.
47.305–6 Shipments to ports and air terminals.
47.305–7 Quantity analysis, direct delivery,
and reduction of crosshauling and
backhauling.
47.305–8 Consolidation of small shipments
and the use of stopoff privileges.
47.305–9 Commodity description and freight
classification.
47.305–10 Packing, marking, and consignment instructions.
47.305–11 Options in shipment and delivery.
47.305–12 Delivery of Government-furnished
property.
47.305–13 Transit arrangements.
47.305–14 Mode of transportation.
47.305–15 Loading responsibilities of contractors.
47.305–16 Shipping characteristics.
47.305–17 Returnable cylinders.
47.306 Transportation factors in the evaluation of offers.
47.306–1 Transportation
cost
determinations.
47.306–2 Lowest
overall
transportation
costs.
47.306–3 Adequacy of loading and unloading
facilities.
Subpart 47.4—Air Transportation by U.S.Flag Carriers
47.401 Definitions.
47.402 Policy.
47.403 Guidelines for implementation of the
Fly America Act.
47.403–1 Availability and unavailability of
U.S.-flag air carrier service.
47.403–2 Air transport agreements between
the United States and foreign governments.
47.403–3 Disallowance of expenditures.
47.404 Air freight forwarders.
47.405 Contract clause.
Subpart 47.5—Ocean Transportation by
U.S.-Flag Vessels
47.500 Scope of subpart.
47.501 Definitions.
47.502 Policy.
47.503 Applicability.
47.504 Exceptions.
47.505 Construction contracts.
47.506 Procedures.
47.507 Contract clauses.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
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47.000
48 CFR Ch. 1 (10–1–03 Edition)
SOURCE: 48 FR 42424, Sept. 19, 1983, unless
otherwise noted.
47.000
Scope of subpart.
(a) This part prescribes policies and
procedures for—
(1) Applying transportation and traffic management considerations in the
acquisition of supplies; and
(2) Acquiring transportation or transportation-related services by contract
methods other than bills of lading,
transportation
requests,
transportation warrants, and similar transportation forms. Even though the FAR
does not regulate the acquisition of
transportation or transportation-related services when the bill of lading is
the contract, this contract method is
widely used and, therefore, relevant
guidance on the use of the bill of lading, particularly the Government bill
of lading (GBL), is provided in this
part.
(b) The definitions in this part have
been condensed from statutory definitions. In case of inconsistency between
the language of this part and the statutory requirements, the statute shall
prevail.
47.001
Definitions.
As used in this part—
Carrier or commercial carrier means a
common carrier or a contract carrier.
Common carrier means a person holding itself out to the general public to
provide transportation for compensation.
Contract carrier means a person providing transportation for compensation
under continuing agreements with one
person or a limited number of persons.
[48 FR 42424, Sept. 19, 1983, as amended at 66
FR 2133, Jan. 10, 2001; 68 FR 28084, May 22,
2003]
47.002
Applicability.
(a) All Government personnel concerned with the activities listed in subparagraphs (1) through (4) below shall
follow the regulations in part 47 as applicable:
(1) Acquisition of supplies.
(2) Acquisition of transportation and
transportation-related services.
(3) Transportation assistance and
traffic management.
(4) The making and administration of
contracts under which payments are
made from Government funds for (i)
the transportation of supplies, (ii)
transportation-related services, or (iii)
transportation of contractor personnel
and their personal belongings.
(b) Subpart 42.14, Traffic and Transportation Management, shall be used
for administering transportation contracts,
transportation-related
contracts, and those portions of supply
and other contracts that involve transportation.
Subpart 47.1—General
47.101
Policies.
(a) The contracting officer shall obtain traffic management advice and assistance (see 47.105) in the consideration of transportation factors required for—
(1) Solicitations and awards;
(2) Contract administration, modification, and termination; and
(3) Transportation of property by the
Government to and from contractors’
plants.
(b)(1) The preferred method of transporting supplies for the Government is
by commercial carriers. However, Government-owned, leased, or chartered
vehicles, aircraft, and vessels may be
used if (i) they are available and not
fully utilized, (ii) their use will result
in substantial economies, and (iii)
their use is in accordance with all applicable statutes, agency policies and
regulations.
(2) If the three circumstances listed
in subparagraph (b)(1) above apply,
Government vehicles may be used for
purposes such as—
(i) Local transportation of supplies
between Government installations;
(ii) Pickup and delivery services that
commercial carriers do not perform in
connection with line-haul transportation;
(iii) Transportation of supplies to
meet emergencies; and
(iv) Accomplishment of program objectives that cannot be attained by
using commercial carriers.
(c) Agencies shall not accord preferential treatment to any mode of
transportation or to any particular
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Federal Acquisition Regulation
47.104–1
carrier either in awarding or administering contracts for the acquisition of
supplies or in awarding contracts for
the acquisition of transportation. (See
subparts 47.2 and 47.3 for situations in
which the contracting officer is permitted to use specific modes of transportation.)
(d) Agencies shall place with small
business concerns purchases and contracts for transportation and transportation-related services as prescribed in
part 19.
(e) Agencies shall comply with the
Fly America Act, the Cargo Preference
Act, and related statutes as prescribed
in subparts 47.4, Air Transportation by
U.S.-Flag Carriers, and 47.5, Ocean
Transportation by U.S.-Flag Vessels.
47.102 Transportation insurance.
(a) The Government generally (1) retains the risk of loss of and/or damage
to its property that is not the legal liability of commercial carriers and (2)
does not buy insurance coverage for its
property in the possession of commercial carriers (40 U.S.C. 726). (See part
28, Bonds and Insurance.)
(b) Under special circumstances the
Government may, if such action is considered necessary and in the Government’s interest, (1) buy insurance coverage for Government property or (2)
require the carrier to (i) assume full responsibility for loss of or damage to
the Government property in its possession and (ii) buy insurance to cover the
carrier’s assumed responsibility. The
cost of this insurance to the carrier
shall be part of the transportation
cost. (The Secretary of the Treasury
prescribes regulations regarding shipments of valuables in 31 CFR parts 261
and 262.)
(c)(1) If special circumstances dictate
the need for the Government to buy insurance coverage, the contracting officer shall ascertain that (i) there is no
statutory prohibition and (ii) funds for
insurance are available.
(2) The contracting officer shall document the need and authorization for
insurance coverage in the contract file.
47.103 Transportation Documentation
and Audit Regulation (TDA).
(a) The United States Government
bill of lading (GBL) generally shall be
used for the transportation of property
of the United States for which the Government
pays
the
transportation
charges directly to commercial carriers.
(b)(1) Regulations and procedures
governing the GBL, documentation,
payment, and audit of transportation
services acquired by the United States
Government are prescribed in 41 CFR
101–41, Transportation Documentation
and Audit. Included in this regulation,
among others, is the limited authority
for the use of commercial forms and
procedures to acquire freight or express
transportation for small shipments of a
recurring nature when transportation
costs do not exceed $100.
(2)
For
DOD
shipments,
corresponding guidance is in Chapter 32 of
the Defense Traffic Management Regulation (DTMR).
(c) Subsection 42.1403–2 prescribes
regulations and procedures for the occasional use of contractor-prepaid commercial bills of lading for the transportation of supplies weighing not more
than 1,000 pounds that are acquired by
the Government on f.o.b. origin terms.
[48 FR 42424, Sept. 19, 1983, as amended at 59
FR 11383, Mar. 10, 1994]
47.104 Government rate tenders under
section 10721 of the Interstate Commerce Act.
47.104–1 Government freight.
(a) Common carriers subject to the
jurisdiction of the Interstate Commerce Commission may under the provisions of 49 U.S.C. 10721 offer to transport persons or property for the account of the United States without
charge or at reduced rates.
(b) Section 10721 rates are published
in Government rate tenders and apply
to shipments moving for the account of
the Government; i.e., on—
(1) Government bills of lading;
(2) Commercial bills of lading endorsed to show that such bills of lading
are to be exchanged for, or converted
to, Government bills of lading at destination after delivery to the consignees; or
(3) Commercial bills of lading endorsed to show that total transportation charges are assignable to, and
will be reimbursed by, the Government
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47.104–2
48 CFR Ch. 1 (10–1–03 Edition)
(see the clause at 52.247–1, Commercial
Bill of Lading Notations).
(c) Government agencies may negotiate with carriers for additional or revised section 10721 rates in appropriate
situations. Only qualified transportation officers shall carry out these negotiations. (See 47.105 for transportation assistance.) The following are
examples of situations in which negotiations for additional or revised section 10721 rates may be appropriate:
(1) Volume movements are expected.
(2) Shipments will be made on a recurring
basis
between
designated
places, and substantial savings in
transportation costs appear possible
even though a volume movement is not
involved.
(3) Transit arrangements are feasible
and advantageous to the Government.
47.104–2 Fixed-price contracts.
(a) F.o.b. destination. Section 10721
quotations do not apply to shipments
under fixed-price f.o.b. destination contracts (delivered price).
(b) F.o.b. origin. Under fixed-price
f.o.b. origin contracts, shipments normally shall be made on GBL’s. However, if it is advantageous to the Government, the contracting officer may
occasionally require the contractor to
prepay the freight charges to a specific
destination. In such cases, the contractor shall use a commercial bill of
lading and be reimbursed for the direct
and actual transportation cost as a
separate item in the invoice. The
clause at 52.247–1, Commercial Bill of
Lading Notations, will ensure that the
Government in this type of arrangement obtains the benefit of section
10721 rates.
47.104–3 Cost-reimbursement
contracts.
(a) The Interstate Commerce Commission has ruled that section 10721
rates may be applied to shipments
other than those made by the Government if the total benefit accrues to the
Government; i.e., the Government
must pay the charges or directly and
completely reimburse the party that
initially bears the freight charges.
Therefore, section 10721 rates may be
used for shipments moving on commercial bills of lading in cost-reimburse-
ment contracts under which the transportation costs are direct and allowable costs under the cost principles of
part 31.
(b) Section 10721 rates may be applied
to the movement of household goods
and personal effects of contractor employees who are relocated for the convenience and at the direction of the
Government and whose total transportation costs are reimbursed by the
Government.
(c) The clause at 52.247–1, Commercial
Bill of Lading Notations, will ensure
that the Government receives the benefit of lower section 10721 rates in costreimbursement contracts as described
in paragraphs (a) and (b) above.
(d) Contracting officers shall—
(1) Include in contracts a statement
requiring the contractor to use carriers
that offer acceptable service at reduced
rates if available; and
(2) Ensure that contractors receive
the name and location of the transportation officer designated to furnish
support and guidance when using Government rate tenders under 47.104–5(b).
(e) Transportation officers shall—
(1) Advise and assist contracting officers and contractors; and
(2) Make available to contractors the
names of carriers that provide service
under section 10721 quotations, cite applicable rate tenders, and advise contractors of the statement that must be
shown on the carrier’s commercial bill
of lading (see the clause at 52.247–1,
Commercial Bill of Lading Notations).
47.104–4 Contract clauses.
(a) The contracting officer, in order
to ensure the application of section
10721 rates, shall insert the clause at
52.247–1, Commercial Bill of Lading Notations, in solicitations and contracts
when the contracts will be—
(1) Cost-reimbursement contracts, including those that may involve the
movement of household goods (see
47.104–3(b)); or
(2) Fixed-price f.o.b. origin contracts
(other than contracts at or below the
simplified acquisition threshold) (see
47.104–2(b) and 47.104–3).
(b) The contracting officer may insert the clause at 52.247–1, Commercial
Bill of Lading Notations, in solicitations and contracts made at or below
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Federal Acquisition Regulation
47.200
the simplified acquisition threshold
when it is contemplated that the delivery terms will be f.o.b. origin.
(c) The contracting officer shall insert the clause at 52.247–67, Submission
of Commercial Transportation Bills to
the General Services Administration
for Audit, in solicitations and contracts when a cost-reimbursement contract is contemplated and the contract
or a first-tier cost-reimbursement subcontract thereunder will authorize reimbursement of transportation as a direct charge to the contract or subcontract.
[48 FR 42424, Sept. 19, 1983, as amended at 54
FR 48990, Nov. 28, 1989; 59 FR 67055, Dec. 28,
1994; 60 FR 34760, July 3, 1995; 61 FR 39190,
July 26, 1996]
47.104–5 Citation of Government rate
tenders.
When section 10721 rates apply, transportation officers or contractors, as appropriate, shall identify the applicable
Government rate tender by endorsement on bills of lading, including—
(a) GBL’s or commercial bills of lading to be converted to GBL’s (see 41
CFR 101–41.303, Conversion of commercial bills of lading to GBL’s); and
(b) Properly endorsed commercial
bills of lading when transportation
charges are reimbursable (see 47.104–
2(b) and 47.104–3).
47.105
Transportation assistance.
(a) Civilian Government activities
that do not have transportation officers, or otherwise need assistance on
transportation matters, shall obtain
assistance from (1) the GSA Regional
Federal Supply Service Bureau that
provides support to the activity or (2)
the transportation element of the contract administration office designated
in the contract.
(b) Military installations shall obtain
transportation assistance from the
transportation office of the contracting
activity, unless another military activity has been designated as responsible
for furnishing assistance, guidance, or
data. Military transportation offices
shall request needed additional aid
from the appropriate area headquarters
of the Military Traffic Management
Command (MTMC).
[48 FR 42424, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989]
Subpart 47.2—Contracts for Transportation or for TransportationRelated Services
47.200
Scope of subpart.
(a) This subpart prescribes procedures for the acquisition by sealed bid
or negotiated contracts of—
(1) Freight transportation (including
local drayage) from rail, motor (including bus), domestic water (including inland, coastwise, and intercoastal) carriers, and from freight forwarders; and
(2) Transportation-related services
including but not limited to stevedoring, storage, packing, marking, and
ocean freight forwarding.
(b) Except as provided in paragraph
(c) below, this subpart does not apply
to—
(1) The acquisition of freight transportation from (i) domestic or international air carriers and (ii) international ocean carriers (see subparts
47.4 and 47.5);
(2) Freight transportation acquired
by bills of lading;
(3) Freight transportation for which
rates are negotiated under 49 U.S.C.
10721(b)(1); or
(4) Contracts at or below the simplified acquisition threshold.
(c) With appropriate modifications,
the procedures in this subpart may be
applied to the acquisition of freight
transportation from the carriers listed
in paragraph (b)(1) above and passenger
transportation from any carrier or
mode.
(d) The procedures in this subpart are
applicable to the transportation of
household goods and personal effects of
persons being relocated at Government
expense except when acquired—
(1) Under the commuted rate schedules as required in the Federal Travel
Regulation (41 CFR part 101–7);
(2) By U.S. Government bill of lading
(GBL); or
(3) By DoD under the Personal Property Management Regulation (DoD
4500.34R).
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47.201
48 CFR Ch. 1 (10–1–03 Edition)
(e) Additional guidance for DoD acquisition of freight and passenger
transportation is in the Defense Traffic
Management Regulation.
[48 FR 42424, Sept. 19, 1983, as amended at 50
FR 1745, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 59 FR 11383, Mar. 10, 1994; 60 FR 34760,
July 3, 1995; 61 FR 39190, July 26, 1996]
47.201
Definitions.
As used in this subpart—
General freight means supplies, goods,
and transportable property not encompassed in the definitions of household
goods or office furniture.
Household goods means personal property that belongs to a person and that
person’s immediate family and includes, but is not limited to household
furnishings, equipment and appliances,
furniture, clothing, books, and similar
property (see 41 CFR 101–7).
Office furniture means furniture,
equipment, fixtures, records, and other
equipment and materials used in Government offices, hospitals, and similar
establishments.
[48 FR 42424, Sept. 19, 1983, as amended at 66
FR 2133, Jan. 10, 2001]
47.202
Presolicitation planning.
Contracting officers shall inform activities that plan to acquire transportation or transportation-related services of the applicable lead-time requirements, that is—
(a) The Service Contract Act of 1965
(SCA) requirement for submission of
Standard Form 98, Notice of Intention
to Make a Service Contract and Response to Notice, to the Department of
Labor not less than the number of days
prescribed by the Department of Labor
before the issuance of an invitation for
bid, request for proposal, or commencement of negotiations for any contract
exceeding $2,500 that may be subject to
the SCA (see subpart 22.10);
(b) The possible requirement to provide, during the solicitation period,
time for prospective offerors or contractors to inspect origin and destination locations; or
(c) The possible requirement for inspection by agency personnel of prospective contractor facilities and
equipment.
47.203
Transportation term contracts.
(a) Transportation term contracts
are indefinite delivery requirements
contracts for transportation or for
transportation-related services. They
are particularly useful for local
drayage and office relocations within a
metropolitan area.
(b) Transportation term contracts
shall contain descriptions of the services to be performed; rates and charges
for these services; the geographical
area of coverage; the term of the contract; and minimum or maximum order
limitations by dollar amount, shipment size, or other criteria.
(c) If appropriate, the transportation
term contract shall require the contractor to provide the services covered
to any Government agency that issues
an order for these services under the
contract. If so—
(1) Agencies may place orders for
transportation or for transportationrelated services under existing term
contracts without further consideration of competition, as these term
contracts are awarded on a price-competitive basis; and
(2) Agency personnel shall ensure
that the orders they place conform to
the contract, including any minimum
or maximum order limitations.
(d) Policies and procedures regarding
the use of GSA term contracts for
transportation or for transportationrelated services by civilian executive
agencies are prescribed in 41 CFR 101–
40.109.
47.204
Single-movement contracts.
Single-movement contracts may be
awarded for unique transportation
services that are not otherwise available under carrier tariffs or covered by
DOD or GSA contracts; e.g., special requirements at origin and/or destination.
47.205 Availability of term contracts
and basic ordering agreements for
transportation or for transportation-related services.
(a) All Government agencies may
contract for transportation or for
transportation-related services and
execute basic ordering agreements
(BOA’s) (see subpart 16.7) unless agency
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47.207–2
regulations prescribe otherwise. However, it is generally more economical
and efficient for most agencies to make
use of term contracts and basic ordering agreements that have been executed by agencies that employ personnel experienced in contracting for
transportation or for transportationrelated services. The Department of
Defense (DOD) and the General Services Administration (GSA) contract for
transportation or for transportationrelated services on behalf of other activities and agencies. For instance,
GSA awards term contracts for services such as local drayage, office
moves, and ocean-freight forwarding
(see 47.105 for assistance).
(b) Agencies may obtain transportation or transportation-related services for which the cost does not exceed
the simplified acquisition threshold, if
term contracts or basic ordering agreements are not available.
47.207 Solicitation provisions, contract
clauses, and special requirements.
47.207–1 Qualifications of offerors.
(a) Operating authorities. The contracting officer shall insert the clause
at 52.247–2, Permits, Authorities, or
Franchises, when regulated transportation is involved. The clause need not
be used when a Federal office move is
intrastate and the contracting officer
determines that it is in the Government’s interest not to apply the requirement for holding or obtaining
State authority to operate within the
State.
(b) Performance capability for Federal
office moving contracts. (1) The contracting officer shall insert the clause
at 52.247–3, Capability to Perform a
Contract for the Relocation of a Federal Office, when a Federal office is relocated, to ensure that offerors are capable to perform interstate or intrastate moving contracts involving the
relocation of Federal offices.
(2) If a Federal office move is intrastate and the contracting officer determines that it is in the Government’s
interest not to apply the requirements
for holding or obtaining State authority to operate within the State, and to
maintain a facility within the State or
commercial zone, the contracting officer shall use the clause with its Alternate I.
(c) Inspection of shipping and receiving
facilities. The contracting officer shall
insert the provision at 52.247–4, Inspection of Shipping and Receiving Facilities, when it is desired for offerors to
inspect the shipping, receiving, or
other sites to ensure realistic bids.
(d) Familiarization with conditions.
The contracting officer shall insert the
clause at 52.247–5, Familiarization with
Conditions, to ensure that offerors become familiar with conditions under
which and where the services will be
performed.
(e) Financial statement. The contracting officer shall insert the provision at 52.247–6, Financial Statement,
to ensure that offerors are prepared to
furnish financial statements.
The contracting officer shall include
provisions, clauses, and special requirements in solicitations and contracts
for transportation or for transportation-related services as prescribed in
47.207–1 through 47.207–9.
47.207–2 Duration of contract and time
of performance.
The contracting officer shall—
(a) Establish a specific expiration
date (month, day, and year) for the
contract or state the length of time
[48 FR 42424, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995; 61 FR 39198, July 26,
1996]
47.206 Preparation of solicitations and
contracts.
(a) Contracting officers shall prepare
solicitations and contracts for transportation or for transportation-related
services as prescribed elsewhere in the
FAR for fixed-price service contracts
to the extent that those requirements
are applicable and not inconsistent
with the requirements in subpart 47.2.
(b) In addition, the contracting officer shall include in solicitations and
contracts for transportation or for
transportation-related services provisions, clauses, and instructions as prescribed in section 47.207.
[48 FR 42424, Sept. 19, 1983. Redesignated at
50 FR 1745, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
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47.207–3
48 CFR Ch. 1 (10–1–03 Edition)
that the contract will remain in effect;
e.g., 6 months commencing from the
date of award; and
(b) Include the following items as appropriate:
(1) A statement of the time period
during which the service is required
when the service is a one-time job; e.g.,
a routine office relocation.
(2) A time schedule for the performance of segments of a major job; e.g.,
an office relocation for which the work
phases must be coordinated to meet
other needs of the agency.
(3) Statements of performance times
for particular services; e.g., pickup and
delivery services. Specify—
(i) On which days of the week and
during which hours of the day pickup
and delivery services may be required;
(ii) The maximum time allowable to
the contractor for accomplishing delivery under regular or priority service;
and
(iii) How much advance notice the
contractor will be given for regular
pickup services and, if applicable, priority pickup services.
47.207–3 Description of shipment, origin, and destination.
(a) Origin of shipments. The contracting officer shall include in solicitations full details regarding the location from which the freight is to be
shipped. For example, if a single location is shown, furnish the shipper’s
name, street address, city, State, and
ZIP code. If several or indefinite locations are involved, as in the case of
multiple shippers or drayage contracts,
describe the area of origin including
boundaries and ZIP codes.
(b) Destination of shipments. The contracting officer shall include full details regarding delivery points. For example, if a single delivery point is
shown, furnish the consignee’s name,
street address, city, State, and ZIP
code. If several or indefinite delivery
points are involved, describe the delivery area, including boundaries and ZIP
codes.
(c) Description of the freight. The contracting officer shall include in solicitations—
(1) An inventory if the freight consists of nonbulk items; and
(2) The freight classification description, which should be obtained from
the transportation office. If a freight
classification description is not available, use a clear nontechnical description. Include additional details necessary to ensure that the prospective
offerors have complete information
about the freight; e.g., size, weight,
hazardous material, whether packed
for export, or unusual value.
(d) Exclusion of freight. The contracting officer shall (1) clearly identify any freight or types of shipments
that are subject to exclusion; e.g., bulk
freight, hazardous commodities, or
shipments under or over specified
weights; and (2) insert a clause substantially the same as the clause at
52.247–7, Freight Excluded, when any
commodities or types of shipments
have been identified for exclusion.
(e) Quantity. (1) The contracting officer shall state the actual weight of the
freight or a reasonably accurate estimate. The following are examples:
(i) If the contract covers transportation services required over an extended period of time, include a schedule of actual or estimated tonnage or
number of items to be transported per
week, month, or other time period.
(ii) If the contract covers a group
movement of household goods, give an
estimate of the aggregate weights and
the basis for determining the aggregate
weight.
(2) The contracting officer shall insert the clause at 52.247–8, Estimated
Weights or Quantities Not Guaranteed,
when weights or quantities are estimates.
47.207–4
Determination of weights.
The contracting officer shall specify
in the contract the method of determining the weights of shipments as appropriate for the kind of freight involved and the type of service required.
(a) Shipments of freight other than
household goods and office furniture.
(1) The contracting officer shall insert the clause at 52.247–9, Agreed
Weight—General Freight, when the
shipping
activity
determines
the
weight of shipments of freight other
than household goods or office furniture.
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(2) The contracting officer shall insert the clause at 52.247–10, Net
Weight—General Freight, when the
weight of shipments of freight other
than household goods or office furniture is not known at the time of
shipment and the contractor is responsible for determining the net weight of
the shipments.
(b) Shipments of household goods or office furniture. The contracting officer
shall insert the clause at 52.247–11, Net
Weight—Household Goods or Office
Furniture, when movements of Government employees’ household goods or
relocations of Government offices are
involved.
47.207–5
Contractor responsibilities.
Contractor responsibilities vary with
the kinds of freight to be shipped and
services required. The contracting officer shall specify clearly those service
requirements that are not considered
normal transportation or transportation-related requirements.
(a) Type of equipment. If appropriate,
the contracting officer shall specify
the type and size of equipment to be
furnished by the contractor. Otherwise,
state that the contractor shall furnish
clean and sound closed-type equipment
of sufficient size to accommodate the
shipment.
(b) Supervision, labor, or materials. The
contracting officer shall insert a clause
substantially the same as the clause at
52.247–12, Supervision, Labor, or Materials, when the contractor is required
to furnish supervision, labor, or materials.
(c) Accessorial services—moving contracts. The contracting officer shall insert a clause substantially the same as
the clause at 52.247–13, Accessorial
Services—Moving Contracts, in contracts for the transportation of household goods or office furniture.
(d) Receipt of shipment. The contracting officer shall insert the clause
at 52.247–14, Contractor Responsibility
for Receipt of Shipment.
(e) Loading and unloading. The contracting officer shall insert the clause
at 52.247–15, Contractor Responsibility
for Loading and Unloading, when the
contractor is responsible for loading
and unloading shipments.
(f) Return of undelivered freight. The
contracting officer shall insert the
clause at 52.247–16, Contractor Responsibility for Returning Undelivered
Freight, when the contractor is responsible for returning undelivered freight.
47.207–6 Rates and charges.
(a)(1) The contracting officer shall
include in the solicitation a statement
that the charges in the contract shall
not exceed the contractor’s charges for
the same service that is—
(i) Available to the general public; or
(ii) Otherwise tendered to the Government.
(2) The contracting officer shall insert the clause at 52.247–17, Charges.
(b) The contracting officer shall include in the solicitation a tabulation
listing each required service and the
basis for the rate (price); e.g., unit of
weight or per work-hour, leaving sufficient space for offerors to insert the
rates offered for each service.
(c) The following guidelines apply to
the composition of a tabulation of
transportation or of transportation-related services and their rate (price)
bases:
(1) Combination of pricing bases. If various types of services with different
bases for assessing charges are required
under the same contract, show each
service separately and the applicable
basis for that service.
(2) Hourly rate basis. If charges are
based on an hourly rate, state the
method for charging for fractions of an
hour; e.g., (i) a period of 30 minutes or
less is charged at one-half the hourly
rate and (ii) the hourly rate applies to
any portion of an hour that exceeds 30
minutes.
(3) Shipments of varying weights. If
charges are based on weight and shipments will vary in weight, request
rates on a graduated weight basis. Include a table of graduated weights for
offerors to insert rates.
(4) Multiple origins and/or destinations.
Specify whether rates are requested for
each origin and/or each destination or
for specific groups of origins and/or
destinations.
(5) Multiple shipments from one origin.
If multiple shipments will be tendered
at one time to the contractor for delivery to two or more consignees at the
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47.207–7
48 CFR Ch. 1 (10–1–03 Edition)
same destination, request the rate applicable to the aggregate weight. If
such shipments are for delivery to various destinations along the route between origin and last destination, request the rate applicable to the aggregate weight and a stopoff charge for
each intermediate destination.
(i) The contracting officer shall insert the clause at 52.247–18, Multiple
Shipments, when multiple shipments
are tendered at one time to the contractor for transportation from one origin to two or more consignees at the
same destination.
(ii) The contracting officer shall insert the clause at 52.247–19, Stopping in
Transit for Partial Unloading, when
multiple shipments are tendered at one
time to the contractor for transportation from one origin to two or more
consignees along the route between origin and last destination.
(6) Estimated quantities or weights. The
contracting officer shall insert in solicitations the provision at 52.247–20,
Estimated Quantities or Weights for
Evaluation of Offers, when quantities
or weights of shipments between each
origin and destination are not known,
stating estimated quantity or weight
for each origin/destination pair.
(7) Additional services. If services in
addition to those covered in the basic
rate are anticipated; e.g., inside delivery, state the conditions under which
payment will be made for those services.
47.207–7 Liability and insurance.
(a) The contracting officer shall
specify—
(1) The contractor’s liability for injury to persons or damage to property
other than the freight being transported;
(2) The contractor’s liability for loss
of and/or damage to the freight being
transported; and
(3) The amount of insurance the contractor is required to maintain.
(b) When the contractor’s liability
for loss of and/or damage to the freight
being transported is not specified, the
usual measure of liability as prescribed
in section 11707 of the Interstate Commerce Act (49 U.S.C. 11707) applies.
(c) The contracting officer shall insert the clause at 52.247–21, Contractor
Liability for Personal Injury and/or
Property Damage.
(d) The contracting officer shall insert the clause at 52.247–22, Contractor
Liability for Loss of and/or Damage to
Freight other than Household Goods,
in solicitations and contracts for the
transportation of freight other than
household goods.
(e) The contracting officer shall insert the clause at 52.247–23, Contractor
Liability for Loss of and/or Damage to
Household Goods, in solicitations and
contracts for the transportation of
household goods, including the rate per
pound appropriate to the situation.
(f) When freight is not shipped under
rates subject to released or declared
value, see 28.313(a) and the clause at
52.228–9, Cargo Insurance.
(g) When the contracting officer determines that vehicular liability and/or
general public liability insurance required by law are not sufficient for a
contract, see 28.313(b) and the clause at
52.228–10, Vehicular and General Public
Liability Insurance.
47.207–8 Government responsibilities.
(a) The contracting officer shall state
clearly the Government’s responsibilities that have a direct bearing on the
contractor’s performance under the
contract; e.g., the Government’s responsibility to notify the contractor in
advance when hazardous materials are
included in a shipment.
(1) Advance notification. The contracting officer shall insert the clause
at 52.247–24, Advance Notification by
the Government, when the Government
is responsible for notifying the contractor of specific service times or unusual shipments.
(2) Government equipment with or without operators (i) The contracting officer
shall insert the clause at 52.247–25, Government-Furnished Equipment with or
without Operators, when the Government furnishes equipment with or
without operators.
(ii) Insert the kind of equipment and
the locations where the equipment will
be furnished.
(3) Direction and marking. The contracting officer shall insert the clause
at 52.247–26, Government Direction and
Marking, when office relocations are
involved.
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Federal Acquisition Regulation
47.301–2
(b) The contracting officer shall insert the clause at 52.247–27, Contract
Not Affected by Oral Agreement.
47.207–9 Annotation and distribution
of shipping and billing documents.
(a) The contracting officer shall state
in detail the responsibilities of the contractor, the contracting agency, and, if
appropriate, the consignee for the annotation and distribution of shipping
and billing documents. See 41 CFR part
101–41, Transportation Documentation
and Audit (TDA).
(b) In instances of mass movements
of freight made available to the contractor at one time, it is particularly
important that the contracting officer
specifies that bills of lading be crossreferenced so that the Government
benefits from applicable volume rates.
(c) The contracting officer shall insert the clause at 52.247–28, Contractor’s Invoices, in drayage or other term
contracts.
Subpart 47.3—Transportation in
Supply Contracts
47.300
Scope of subpart.
(a) This subpart prescribes policies
and procedures for the application of
transportation and traffic management
considerations in the acquisition of
supplies. The terms and conditions contained in this subpart are applicable to
fixed-price contracts.
(b) If a special requirement exists for
application of any of these terms and
conditions to other types of contracts;
e.g., cost-reimbursement contracts, for
which transportation arrangements are
normally the responsibility of the contractor and transportation costs are allowable, the contracting officer shall
use the terms and conditions prescribed in this subpart as a guide for (1)
contract coverage of transportation
and (2) instructions to the contractor
to minimize the ultimate transportation costs to the Government.
[48 FR 42424, Sept. 19, 1983, as amended at 68
FR 28092, May 22, 2003]
47.301 General.
(a) Transportation and traffic management factors are important in
awarding and administering contracts
to ensure that (1) acquisitions are
made on the basis most advantageous
to the Government and (2) supplies arrive in good order and condition and on
time at the required place. (See 47.104
for possible reduced transportation
rates for Government shipments).
(b) The requiring activity shall—
(1) Consider all transportation factors including present and future requirements, positioning of supplies,
and subsequent distribution to the extent known or ascertainable; and
(2) Provide the contracting office
with information and instructions reflecting transportation factors applicable to the particular acquisition.
47.301–1 Responsibilities
tracting officers.
of
(a) Contracting officers shall obtain
from traffic management offices transportation factors required for (1) solicitations and awards and (2) contract administration, modification, and termination, including the movement of
property by the Government to and
from contractors’ plants.
(b) Contracting officers shall request
transportation office participation especially before making an initial acquisition of supplies that are unusually
large, heavy, high, wide, or long; have
sensitive or dangerous characteristics;
or lend themselves to containerized
movements from the source. In determining total transportation charges,
contracting officers shall also consider
additional costs arising from factors
such as the use of special equipment,
excess blocking and bracing material,
or circuitous routing.
47.301–2 Participation
tation officers.
of
transpor-
Agencies’
transportation
officers
shall participate in the solicitation and
evaluation of offers to ensure that all
necessary transportation factors, such
as transportation costs, transit arrangements, time in transit, and port
capabilities, are considered and result
in solicitations and contracts advantageous to the Government. Transportation officers shall provide traffic
management assistance throughout the
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47.301–3
48 CFR Ch. 1 (10–1–03 Edition)
acquisition cycle (see 47.105 Transportation assistance).
[48 FR 42424, Sept. 19, 1983, as amended at 50
FR 1745, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
47.301–3 Using the Defense Transportation System (DTS).
(a) All military and civilian agencies
shipping, or arranging for the acquisition and shipment by Government contractors, through the use of militarycontrolled transport or through military transshipment facilities shall follow Department of Defense (DOD) Regulation 4500.32–R, Military Standard
Transportation and Movement Procedures (MILSTAMP). MILSTAMP establishes uniform procedures and documents for the generation, documentation, communication, and use of transportation information, thus providing
the capability for control of shipments
moving in the DTS. MILSTAMP has
been implemented on a world-wide
basis.
(b) Contracting activities are responsible for (1) ensuring that the requirements of the MILSTAMP regulation
are included in appropriate contracts
for all applicable shipments and (2) enforcing these requirements with regard
to shipments under their control. This
includes requirements relating to documentation, marking, advance notification of shipment dates, and terminal
clearances.
(c) Contractual documents shall designate a contract administration office
(see 42.202(a)) as the contact point to
which the contractor will provide necessary information to (1) effect
MILSTAMP documentation and movement control, including air or water
terminal shipment clearances, and (2)
obtain data necessary for shipment
marking and freight routing. Contractual documents shall specify that the
contractor shall not ship directly to a
military air or water port terminal
without authorization from the designated contract administration office
(see 47.305–6(f)).
[48 FR 42424, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 55 FR 38517, Sept. 18,
1990; 63 FR 9065, Feb. 23, 1998]
47.302
Place of delivery—f.o.b. point.
(a) The policies and procedures in
47.304–1, –2, and –3 govern the transportation of supplies from sources in the
Contiguous United States (CONUS), except when identifiable costs, nature of
the supplies (security, safety, or value),
delivery requirements (premium modes
of transport, escorts, transit arrangements, and tentative conditions), or
other advantages, limitations, or requirements dictate otherwise. The policies and procedures in 47.304–4 govern
the transportation of supplies from
sources outside CONUS.
(b) Generally, the contracting officer
shall solicit offers, and award contracts, with delivery terms on the basis
prescribed in 47.304. The contracting officer shall document the contract file
(see 4.801) with justifications for solicitations that do not specify delivery on
the basis prescribed in 47.304.
(c)(1) The place of performance of
Government acquisition quality assurance actions and the place of acceptance shall not control the delivery
term, except that if acceptance is at
destination, transportation shall be
f.o.b. destination (see 47.304–1(f)).
(2) The fact that transportation is
f.o.b. destination does not alone necessitate changing the place of acceptance
from origin to destination; and the fact
that acceptance is at origin does not
necessitate an f.o.b. origin delivery
term. Providing for inspection and acceptance at origin (if appropriate under
46.402), in conjunction with an f.o.b.
destination term, may be advantageous
to both the Government and the contractor. Acceptance of title at origin
by the Government permits payment of
the contractor, provided the invoice is
supported either by a copy of the
signed commercial bill of lading (indicating the carrier’s receipt of the supplies covered by the invoice for transportation to the particular destination
specified in the contract) or by other
appropriate evidence of shipment to
the particular destination for the contractor’s account.
[48 FR 42424, Sept. 19, 1983, as amended at 68
FR 28084, May 22, 2003]
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Federal Acquisition Regulation
47.303–1
47.303 Standard delivery terms and
contract clauses.
Standard delivery terms are listed in
47.303–1 through 47.303–16 (but see 47.300
regarding applicability to cost reimbursement contracts).
[53 FR 34228, Sept. 2, 1988]
47.303–1
F.o.b. origin.
(a) Explanation of delivery term. F.o.b.
origin means free of expense to the Government delivered—
(1) On board the indicated type of
conveyance of the carrier (or of the
Government, if specified) at a designated point in the city, county, and
State from which the shipment will be
made and from which line-haul transportation service (as distinguished
from switching, local drayage, or other
terminal service) will begin;
(2) To, and placed on, the carrier’s
wharf (at shipside, within reach of the
ship’s loading tackle, when the shipping point is within a port area having
water transportation service) or the
carrier’s freight station;
(3) To a U.S. Postal Service facility;
or
(4) If stated in the solicitation, to
any Government-designated point located within the same city or commercial zone as the f.o.b. origin point specified in the contract (commercial zones
are prescribed by the Interstate Commerce Commission at 49 CFR part
1048).
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment in conformance
with carrier requirements to protect
the goods and to ensure assessment of
the lowest applicable transportation
charge;
(2)(i) Order specified carrier equipment when requested by the Government; or
(ii) If not specified, order appropriate
carrier equipment not in excess of capacity to accommodate shipment;
(3) Deliver the shipment in good
order and condition to the carrier, and
load, stow, trim, block, and/or brace
carload or truckload shipment (when
loaded by the contractor) on or in the
carrier’s conveyance as required by
carrier rules and regulations;
(4) Be responsible for any loss of and/
or damage to the goods—
(i) Occurring before delivery to the
carrier;
(ii) Resulting from improper packing
and marking; or
(iii) Resulting from improper loading, stowing, trimming, blocking, and/
or bracing of the shipment, if loaded by
the contractor on or in the carrier’s
conveyance;
(5) Complete the Government bill of
lading supplied by the ordering agency
or, when a Government bill of lading is
not supplied, prepare a commercial bill
of lading or other transportation receipt. The bill of lading shall show—
(i) A description of the shipment in
terms of the governing freight classification or tariff (or Government rate
tender) under which lowest freight
rates are applicable;
(ii) The seals affixed to the conveyance with their serial numbers or other
identification;
(iii) Lengths and capacities of cars or
trucks ordered and furnished;
(iv) Other pertinent information required to effect prompt delivery to the
consignee, including name, delivery address, postal address and ZIP code of
consignee, routing, etc.;
(v) Special instructions or annotations requested by the ordering agency
for commercial bills of lading; e.g., (A)
to be converted to a Government bill of
lading, or (B) this shipment is the property of, and the freight charges paid to
the carrier(s) will be reimbursed by, the
Government; and
(vi) The signature of the carrier’s
agent and the date the shipment is received by the carrier; and
(6) Distribute the copies of the bill of
lading, or other transportation receipts, as directed by the ordering
agency.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–29, F.o.b.
Origin, when the delivery term is f.o.b.
origin.
[48 FR 42424, Sept. 19, 1983, as amended at 53
FR 17859, May 18, 1988]
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47.303–2
48 CFR Ch. 1 (10–1–03 Edition)
47.303–2 F.o.b. origin, contractor’s facility.
(a) Explanation of delivery term. F.o.b.
origin, contractor’s facility means free of
expense to the Government delivered
on board the indicated type of conveyance of the carrier (or of the Government if specified) at the designated facility, on the named street or highway,
in the city, county, and State from
which the shipment will be made.
(b) Contractor responsibilities. The contractor’s responsibilities are the same
as those listed in 47.303–1(b).
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–30, F.o.b.
Origin, Contractor’s Facility, when the
delivery term is f.o.b. origin, contractor’s facility.
47.303–3
F.o.b. origin, freight allowed.
(a) Explanation of delivery term. F.o.b.
origin, freight allowed means—
(1) Free of expense to the Government delivered—
(i) On board the indicated type or
conveyance of the carrier (or of the
Government, if specified) at a designated point in the city, county, and
State from which the shipments will be
made and from which line-haul transportation service (as distinguished
from switching, local drayage, or other
terminal service) will begin;
(ii) To, and placed on, the carrier’s
wharf (at shipside, within reach of the
ship’s loading tackle, when the shipping point is within a port area having
water transportation service) or the
carrier’s freight station;
(iii) To a U.S. Postal Service facility;
or
(iv) If stated in the solicitation, to
any Government-designated point located within the same city or commercial zone as the f.o.b. origin point specified in the contract (commercial zones
are prescribed by the Interstate Commerce Commission at 49 CFR part
1048); and
(2) An allowance for freight, based on
applicable published tariff rates (or
Government rate tenders) between the
points specified in the contract, is deducted from the contract price.
(b) Contractor responsibilities. The contractor’s responsibilities are the same
as those listed in 47.303–1(b).
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–31, F.o.b.
Origin, Freight Allowed, when the delivery term is f.o.b. origin, freight allowed.
[48 FR 42424, Sept. 19, 1983, as amended at 53
FR 17859, May 18, 1988]
47.303–4
F.o.b. origin, freight prepaid.
(a) Explanation of delivery term. F.o.b.
origin, freight prepaid means—
(1) Free of expense to the Government delivered—
(i) On board the indicated type of
conveyance of the carrier (or of the
Government, if specified) at a designated point in the city, county, and
State from which the shipments will be
made and from which line-haul transportation service (as distinguished
from switching, local drayage, or other
terminal service) will begin;
(ii) To, and placed on, the carrier’s
wharf (at shipside, within reach of the
ship’s loading tackle, when the shipping point is within a port area having
water transportation service) or the
carrier’s freight station;
(iii) To a U.S. Postal Service facility;
or
(iv) If stated in the solicitation, to
any Government-designated point located within the same city or commercial zone as the f.o.b. origin point specified in the contract (commercial zones
are prescribed by the Interstate Commerce Commission at 49 CFR part
1048); and
(2) The cost of transportation, ultimately the Government’s obligation, is
prepaid by the contractor to the point
specified in the contract.
(b) Contractor responsibilities. The contractor’s responsibilities are the same
as those listed in 47.303–1(b), except
that the contractor shall prepare commercial bills of lading or other transportation receipts and shall prepay all
freight charges to the extent specified
in the contract.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–32, F.o.b.
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Federal Acquisition Regulation
47.303–6
Origin, Freight Prepaid, when the delivery term is f.o.b. origin, freight prepaid.
[48 FR 42424, Sept. 19, 1983, as amended at 53
FR 17859, May 18, 1988]
47.303–5 F.o.b. origin, with differentials.
(a) Explanation of delivery term. F.o.b.
origin, with differentials means—
(1) Free of expense to the Government delivered—
(i) On board the indicated type of
conveyance of the carrier (or of the
Government, if specified) at a designated point in the city, county, and
State from which the shipments will be
made and from which line-haul transportation service (as distinguished
from switching, local drayage, or other
terminal service) will begin;
(ii) To, and placed on, the carrier’s
wharf (at shipside, within reach of the
ship’s loading tackle, when the shipping point is within a port area having
water transportation service) or the
carrier’s freight station;
(iii) To a U.S. Postal Service facility;
or
(iv) If stated in the solicitation, to
any Government-designated point located within the same city or commercial zone as the f.o.b. origin point specified in the contract (commercial zones
are prescribed by the Interstate Commerce Commission at 49 CFR part
1048); and
(2) Differentials for mode of transportation, type of vehicle, or place of delivery as indicated in contractor’s offer
may be added to the contract price.
(b) Contractor responsibilities. The contractor’s responsibilities are the same
as those listed in 47.303–1(b).
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–33, F.o.b.
Origin, with Differentials, when it is
likely that offerors may include in
f.o.b. origin offers a contingency to
compensate for unfavorable routing
conditions by the Government at the
time of shipment.
[48 FR 42424, Sept. 19, 1983, as amended at 53
FR 17859, May 18, 1988]
47.303–6 F.o.b. destination.
(a) Explanation of delivery term. F.o.b.
destination means—
(1) Free of expense to the Government delivered, on board the carrier’s
conveyance, at a specified delivery
point where the consignee’s facility
(plant, warehouse, store, lot, or other
location to which shipment can be
made) is located; and
(2) Supplies shall be delivered to the
destination consignee’s wharf (if destination is a port city and supplies are
for export), warehouse unloading platform, or receiving dock, at the expense
of the contractor. The Government
shall not be liable for any delivery,
storage, demurrage, accessorial, or
other charges involved before the actual delivery (or constructive placement
as defined in carrier tariffs) of the supplies to the destination, unless such
charges are caused by an act or order
of the Government acting in its contractual capacity. If rail carrier is
used, supplies shall be delivered to the
specified unloading platform of the
consignee. If motor carrier (including
‘‘piggyback’’) is used, supplies shall be
delivered to truck tailgate at the unloading platform of the consignee, except when the supplies delivered meet
the requirements of Item 568 of the National Motor Freight Classification for
‘‘heavy or bulky freight.’’ When supplies meeting the requirements of the
referenced Item 568 are delivered, unloading (including movement to the
tailgate) shall be performed by the consignee, with assistance from the truck
driver, if requested. If the contractor
uses rail carrier or freight forwarder
for less than carload shipments, the
contractor shall ensure that the carrier
will furnish tailgate delivery when required, if transfer to truck is required
to complete delivery to consignee.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment in conformance
with carrier requirements;
(2) Prepare and distribute commercial bills of lading;
(3) Deliver the shipment in good
order and condition to the point of delivery specified in the contract;
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47.303–7
48 CFR Ch. 1 (10–1–03 Edition)
(4) Be responsible for any loss of and/
or damage to the goods occurring before receipt of the shipment by the consignee at the delivery point specified in
the contract;
(5) Furnish a delivery schedule and
designate the mode of delivering carrier; and
(6) Pay and bear all charges to the
specified point of delivery.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–34, F.o.b.
Destination, when the delivery term is
f.o.b. destination.
[48 FR 42424 Sept. 19, 1983, as amended at 55
FR 52796, Dec. 21, 1990]
47.303–7 F.o.b. destination, within consignee’s premises.
(a) Explanation of delivery term. F.o.b.
destination, within consignee’s premises
means free of expense to the Government delivered and laid down within
the doors of the consignee’s premises,
including delivery to specific rooms
within a building if so specified.
(b) Contractor responsibilities. The contractor’s responsibilities are the same
as those listed in 47.303–6(b).
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–35, F.o.b.
Destination, within Consignee’s Premises, when the delivery term is f.o.b.
destination, within consignee’s premises.
47.303–8 F.a.s. vessel, port of shipment.
(a) Explanation of delivery term. F.a.s.
vessel, port of shipment means free of expense to the Government delivered
alongside the ocean vessel and within
reach of its loading tackle at the specified port of shipment.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for ocean transportation in conformance with carrier
requirements to protect the goods and
to ensure assessment of the lowest applicable transportation charge;
(2)(i) Deliver the shipment in good
order and condition alongside the
ocean vessel and within reach of its
loading tackle, at the point of delivery
and on the date or within the period
specified in the contract; and
(ii) Pay and bear all applicable
charges,
including
transportation
costs, wharfage, handling, and heavy
lift charges, if necessary, up to this
point;
(3) Provide a clean dock or ship’s receipt;
(4) Be responsible for any loss of and/
or damage to the goods occurring before delivery of the shipment to the
point specified in the contract; and
(5) At the Government’s request and
expense, assist in obtaining the documents required for (i) exportation or
(ii) importation at destination.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–36, F.a.s.
Vessel, Port of Shipment, when the delivery term is f.a.s. vessel, port of shipment.
47.303–9 F.o.b. vessel, port of shipment.
(a) Explanation of delivery term. F.o.b.
vessel, port shipment means free of expense to the Government loaded,
stowed, and trimmed on board the
ocean vessel at the specified port of
shipment.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for ocean transportation in conformance with carrier
requirements to protect the goods and
to ensure assessment of the lowest applicable transportation charge;
(2)(i) Deliver the shipment on board
the ocean vessel in good order and condition on the date or within the period
fixed; and
(ii) Pay and bear all charges incurred
in placing the shipment actually on
board;
(3) Provide a clean ship’s receipt or
on-board ocean bill of lading;
(4) Be responsible for any loss of and/
or damage to the goods occurring before delivery of the shipment on board
the ocean vessel; and
(5) At the Government’s request and
expense, assist in obtaining the documents required for (i) exportation or
(ii) importation at destination.
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Federal Acquisition Regulation
47.303–12
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–37, F.o.b.
Vessel, Port of Shipment, when the delivery term is f.o.b. vessel, port of shipment.
47.303–10 F.o.b. inland carrier, point
of exportation.
(a) Explanation of delivery term. F.o.b.
inland carrier, point of exportation
means free of expense to the Government, on board the conveyance of the
inland carrier, delivered to the specified point of exportation.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for ocean transportation in conformance with carrier
requirements to protect the goods and
to ensure assessment of the lowest applicable transportation charge;
(2) Prepare and distribute commercial bills of lading;
(3)(i) Deliver the shipment in good
order and condition in or on the conveyance of the carrier on the date or
within the period specified; and
(ii) Pay and bear all applicable
charges,
including
transportation
costs, to the point of delivery specified
in the contract;
(4) Be responsible for any loss of and/
or damage to the goods occurring before delivery of the shipment to the
point of delivery specified in the contract; and
(5) At the Government’s request and
expense, assist in obtaining the documents required for (i) exportation or
(ii) importation at destination.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–38, F.o.b.
Inland Carrier, Point of Exportation,
when the delivery term is f.o.b. inland
carrier, point of exportation.
47.303–11 F.o.b. inland point, country
of importation.
(a) Explanation of delivery term. F.o.b.
inland point, country of importation
means free of expense to the Government, on board the indicated type of
conveyance of the carrier, delivered to
the specified inland point where the
consignee’s facility is located.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for ocean transportation in conformance with carrier
requirements to protect the goods;
(2)(i) Deliver, in or on the inland carrier’s conveyance, the shipment in
good order and condition to the specified inland point where the consignee’s
facility is located;
(ii) Pay and bear all applicable
charges incurred up to the point of delivery, including transportation costs;
export, import, or other fees or taxes;
costs of landing; wharfage costs; customs duties and costs of certificates of
origin; consular invoices; and other
documents that may be required for
importation; and
(3) Be responsible for any loss of and/
or damage to the goods until their arrival on or in the carrier’s conveyance
at the specified inland point.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–39, F.o.b.
Inland Point, Country of Importation,
when the delivery term is f.o.b. inland
point, country of importation.
47.303–12 Ex dock, pier, or warehouse,
port of importation.
(a) Explanation of delivery term. Ex
dock, pier, or warehouse, port of importation means free of expense to the Government delivered on the designated
dock or pier or in the warehouse at the
specified port of importation.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for ocean transportation in conformance with carrier
requirements to protect the goods;
(2)(i) Deliver shipment in good order
and condition; and
(ii) Pay and bear all charges up to
the point of delivery specified in the
contract,
including
transportation
costs; export, import, or other fees or
taxes; costs of wharfage and landing, if
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47.303–13
48 CFR Ch. 1 (10–1–03 Edition)
any; customs duties; and costs of certificates of origin, consular invoices, or
other documents that may be required
for exportation or importation; and
(3) Be responsible for any loss of and/
or damage to the goods occurring before delivery of the shipment to the
point of delivery specified in the contract.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–40, Ex
Dock, Pier, or Warehouse, Port of Importation, when the delivery term is ex
dock, pier, or warehouse, port of importation.
47.303–13 C.& f. destination.
(a) Explanation of delivery term. C.& f.
destination means free of expense to the
Government delivered on board the
ocean vessel to the specified point of
destination, with the cost of transportation paid by the contractor.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for ocean transportation in conformance with carrier
requirements;
(2)(i) Deliver the shipment in good
order and condition; and
(ii) Pay and bear all applicable
charges to the point of destination
specified in the contract, including
transportation costs and export taxes
or other fees or charges levied because
of exportation;
(3) Obtain and dispatch promptly to
the Government clean on-board ocean
bills of lading to the specified point of
destination;
(4) Be responsible for any loss of and/
or damage to the goods occurring before delivery; and
(5) At the Government’s request and
expense, provide certificates of origin,
consular invoices, or any other documents issued in the country of origin
or of shipment, or both, that may be
required for importation into the country of destination.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–41, C.&f.
Destination, when the delivery term is
c.& f. destination.
47.303–14 C.i.f. destination.
(a) Explanation of delivery term. C.i.f.
destination means free of expense to the
Government delivered on board the
ocean vessel to the specified point of
destination, with the cost of transportation and marine insurance paid by
the contractor.
(b) Contractor responsibilities. The contractor’s responsibilities are the same
as those listed in 47.303–13(b), except
that, in addition, the contractor shall
obtain and dispatch to the Government
an insurance policy or certificate providing the amount and extent of marine insurance coverage specified in the
contract or agreed upon by the Government contracting officer.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–42, C.i.f.
Destination, when the delivery term is
c.i.f. destination.
47.303–15 F.o.b. designated air carrier’s terminal, point of exportation.
(a) Explanation of delivery term. F.o.b.
designated air carrier’s terminal, point of
exportation means free of expense to the
Government loaded aboard the aircraft,
or delivered to the custody of the air
carrier (if only the air carrier performs
the loading), at the air carrier’s terminal specified in the contract.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for air transportation in conformance with carrier requirements to protect the goods and to
ensure assessment of the lowest applicable transportation charge;
(2)(i) Deliver the shipment in good
order and condition into the conveyance of the carrier, or to the custody of
the carrier (if only the carrier performs
the loading), at the point of delivery
and on the date or within the period
specified in the contract; and
(ii) Pay and bear all applicable
charges up to this point;
(3) Provide a clean Government bill
of lading and/or air waybill;
(4) Be responsible for any loss of and/
or damage to the goods occurring before delivery of the goods to the point
specified in the contract; and
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Federal Acquisition Regulation
47.303–17
(5) At the Government’s request and
expense, assist in obtaining the documents required for the purpose of exportation.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–43, F.o.b.
Designated Air Carrier’s Terminal,
Point of Exportation, when the delivery term is f.o.b. designated air carrier’s terminal, point of exportation.
47.303–16 F.o.b. designated air carrier’s terminal, point of importation.
(a) Explanation of delivery term. F.o.b.
designated air carrier’s terminal, point of
importation means free of expense to
the Government delivered to the air
carrier’s terminal at the point of importation specified in the contract.
(b) Contractor responsibilities. The contractor shall—
(1)(i) Pack and mark the shipment to
comply with contract specifications; or
(ii) In the absence of specifications,
prepare the shipment for air transportation in conformance with carrier requirements to protect the goods;
(2) Prepare and distribute bills of lading or air waybills;
(3)(i) Deliver the shipment in good
order and condition to the point of delivery specified in the contract; and
(ii) Pay and bear all charges incurred
up to the point of delivery specified in
the contract, including transportation
costs; export, import, or other fees or
taxes; cost of landing, if any; customs
duties; and costs of certificates of origin, consular invoices, or other documents that may be required for exportation or importation; and
(4) Be responsible for any loss of and/
or damage to the goods until delivery
of the goods to the Government at the
designated air carrier’s terminal.
(c) Contract clause. The contracting
officer shall insert in solicitations and
contracts the clause at 52.247–44, F.o.b.
Designated Air Carrier’s Terminal,
Point of Importation, when the delivery term is f.o.b. designated air carrier’s terminal, point of importation.
47.303–17 Contractor-prepaid commercial bills of lading, small package
shipments.
(a) If it is advantageous to the Government, the contracting officer may
authorize the contractor to ship supplies, which have been acquired f.o.b.
origin, to domestic destinations, including DOD air and water terminals,
by common carriers on commercial
bills of lading. Such shipments shall
not exceed 150 pounds by commercial
air or 1,000 pounds by other commercial
carriers and shall not have a security
classification.
(b) The contracting officer may authorize the shipments under paragraph
(a) of this subsection to be consolidated
with the contractor’s own prepaid shipments for delivery to one or more destinations, if all appropriate f.o.b. origin
shipments under one or more Government contracts have been consolidated
initially. The contractor may be authorized to consolidate less-than-carload or less-than-truckload Government shipments with its own shipments so that the Government can
take advantage of lower carload or
truckload freight costs. The Government shall assume its pro rata share of
the combined shipment cost. Agency
transportation personnel shall evaluate
overall transportation costs before authorizing any movement to ensure savings to the Government consistent
with other contract and traffic management considerations. When consolidation is authorized, a copy of the commercial bill of lading shall be mailed
promptly to each consignee.
(c) Shipments under prepaid commercial bills of lading, as authorized in
paragraph (a) of this subsection, do not
require a contract modification. Unless
otherwise provided in the contract, the
supplies move for the account of, and
at the risk of, the Government. The
supplies become Government property
when loaded on the carrier’s equipment
and the contractor has obtained the
carrier’s receipt. The contractor pays
the transportation charges and is reimbursed by the Government. Loss or
damage claims shall be processed in accordance with agency regulations.
(d) The contractor’s invoice for reimbursement by the Government shall
show
the
prepaid
transportation
charges as agreed (see paragraph (b) of
this subsection), as a separate item for
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47.304
48 CFR Ch. 1 (10–1–03 Edition)
each individual shipment. The contractor shall support the transportation charges with a copy of the carrier’s receipted freight bill or other
evidence of receipt, except as follows:
(1) A Government agency may determine that receipted freight bills or
other evidence of receipt are not required for transportation charges of
$100 or less.
(2) A Government agency may pay an
invoiced but unsupported transportation charge of $250 or less per transaction (i.e., purchase, invoice, or aggregate billing or payment for multiple
purchases), if—
(i) The contractor cannot reasonably
provide a receipted freight bill; and
(ii) The agency has determined that
the charges are reasonable. Determination of reasonableness may be based
on—
(A) Past experience (authenticated
transportation charges for similar
shipments);
(B) Rate checks;
(C) Copies of previous freight bills
submitted by the contractor; or
(D) Other information submitted by
the contractor to substantiate the
amount claimed.
(3) Receipted freight bills in support
of invoiced transportation charges of
$100 or less are not required for reimbursement by the Government, if—
(i) The underlying contract specifies
retention by the contractor of all
records for at least 3 years after final
payment under the contract; and
(ii) The contractor agrees to furnish
evidence of payment when requested by
the Government.
(e) Shipments and invoices shall not
be split to reduce transportation
charges to $100 or less per transaction
as a means of avoiding the required
documented support for the charges.
See paragraph (d)(2) of this subsection
for unsupported transportation charges
of $250 or less.
(f) The contracting officer shall insert the clause at 52.247–65, F.o.b. Origin, Prepaid Freight-Small Package
Shipments, in solicitations and contracts when f.o.b. origin shipments are
to be made.
[55 FR 52796, Dec. 21, 1990, as amended at 62
FR 237, Jan. 2, 1997; 62 FR 64936, Dec. 9, 1997]
47.304 Determination
terms.
47.304–1
of
General.
(a) The contracting officer shall determine f.o.b. terms generally on the
basis of overall costs, giving due consideration to the criteria given in
47.304.
(b) Solicitations shall specify whether offerors must submit offers f.o.b. origin, f.o.b. destination, or both; or
whether offerors may choose the basis
on which they make an offer. The contracting officer shall consider the most
advantageous delivery point, such as
(1) f.o.b. origin, carrier’s equipment,
wharf, or specified freight station near
contractor’s plant; or (2) f.o.b. destination.
(c) In determining whether f.o.b. origin or f.o.b. destination is more advantageous to the Government, the contracting officer shall consider the
availability of lower freight rates (Government rate tenders) to the Government for f.o.b. origin acquisitions.
F.o.b. origin contracts also present
other desirable traffic management
features, in that they—
(1) Permit use of transit privileges
(see 47.305–13);
(2) Permit diversions to new destinations without price adjustment for
transportation (see 47.305–11);
(3) Facilitate use of special routings
or types of equipment (e.g., circuitous
routing or oversize shipments) (see
47.305–14);
(4) Facilitate, if necessary, use of premium cost transportation and permit
Government-controlled transportation;
(5) Permit negotiations for reduced
freight rates (see 47.104–1(b)); and
(6) Permit use of small shipment consolidation stations.
(d) When destinations are tentative
or unknown, the solicitation shall be
f.o.b. origin only (see 47.305–5).
(e) When the size or quantity of supplies with confidential or higher security classification requires commercial
transportation
services,
the
contracting officer shall generally specify
f.o.b. origin acquisitions.
(f) When acceptance must be at destination, solicitation shall be on an
f.o.b. destination only basis.
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Federal Acquisition Regulation
47.304–5
(g) Following are examples of situations when solicitations shall normally
be on an f.o.b. destination only basis
because it is advantageous to the Government (see 47.305–4):
(1) Bulk supplies, such as coal, that
require other than Government-owned
or operated handling, storage, and
loading facilities, are destined for shipment outside CONUS.
(2) Steel or other bulk construction
products are destined for shipment outside CONUS.
(3) Supplies consist of forest products
such as lumber.
(4) Perishable or medical supplies are
subject to in-transit deterioration.
(5) Evaluation of f.o.b. origin offers is
anticipated to result in increased administrative lead time or administrative cost that would outweigh the potential advantages of an f.o.b. origin
determination.
[48 FR 42424, Sept. 19, 1983, as amended at 68
FR 28084, May 22, 2003]
47.304–2 Shipments within CONUS.
(a) Solicitations shall provide that
offers may be submitted on the basis of
either or both f.o.b origin and f.o.b.
destination and that they will be evaluated on the basis of the lowest overall
cost to the Government.
(b) When sufficient reasons exist not
to follow this policy, the contract file
shall be documented to include the reasons.
47.304–3 Shipments from CONUS for
overseas delivery.
(a) When Government acquisitions
involve shipments from CONUS to
overseas destinations, delivery f.o.b.
origin may afford not only the economies of lower freight rates available to
the Government within CONUS, but
also flexibility for selection of (1) the
port of export and (2) the ocean transportation providing the lowest overall
cost to the Government.
(b)(1) Unless there are valid reasons
to the contrary (see 47.304–5), acquisition of supplies originating within
CONUS for ultimate delivery to destinations outside CONUS shall be made
on the basis of f.o.b. origin. This policy
applies to supplies and equipment to be
shipped either directly to a port area
for export or to a storage or holding
area for subsequent forwarding to a
port area for export.
(2) Justification for the solicitation
of offers on other than an f.o.b. origin
basis shall be recorded and the contract file documented accordingly.
(c) Export cargo involves considerations of operational and cost factors
from the point of origin within CONUS
to the overseas port destination. The
lowest cost of shipping can be determined only by evaluating and comparing the various prospective landed
costs (including inland, terminal, and
ocean costs). Also, agencies may have
export licensing privileges for shipments to foreign destinations. The contracting officer shall obtain advice
from the transportation officer to ensure full use of these privileges.
[48 FR 42424, Sept. 19, 1983, as amended at 68
FR 28084, May 22, 2003]
47.304–4 Shipments
side CONUS.
originating
(a) Unless there are valid reasons to
the contrary (see 47.304–5), acquisition
of supplies originating outside CONUS
for ultimate delivery to destinations
within CONUS or elsewhere, regardless
of the quantity of the shipments, shall
be on the basis of f.o.b. origin or f.o.b.
destination, whichever is more advantageous to the Government.
(b) The contracting officer shall request the advice of the transportation
officer to determine the most appropriate place of delivery to be specified
in acquisition documents, giving full
consideration to the possible use of
Government transportation facilities,
reduced rates available, special licensing or custom requirements, and availability of U.S.-flag shipping services
between the points involved (see subpart 47.5).
47.304–5
Exceptions.
(a) Unusual conditions or circumstances may require the use of
terms other than f.o.b. origin or f.o.b.
destination. Such conditions or circumstances include, but are not limited to—
(1) Transportation disabilities at origin or destination;
(2) Mode of transportation required;
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47.305
48 CFR Ch. 1 (10–1–03 Edition)
(3) Availability of Government or
commercial loading, unloading, or
transshipment facilities;
(4) Characteristics of the supplies;
(5) Trade customs related to certain
supplies;
(6) Origins or destinations in Alaska
and Hawaii; and
(7) Program requirements.
(b) Contracting officers shall obtain
assistance from transportation officers
before issuing solicitations when unusual conditions or circumstances exist
that relate to f.o.b. terms.
other conveyance of the size normally
used (specify type and size) for the
commodity.
(h) Description of material in terms
of the governing freight classification
or tariff (or Government rate tender)
under which lowest freight rates are
applicable.
(i) Benefits available to the Government under transit arrangements made
by the offeror.
(j) Other requirements as stated
under specific section headings.
47.305 Solicitation provisions, contract
clauses, and transportation factors.
(a) The contracting officer shall coordinate transportation factors with
the transportation office during the
planning, solicitation, and award
phases of the acquisition process (see
47.105).
(b) To the extent feasible, activities
shall schedule deliveries to effect savings in transportation costs, and concomitant reductions in energy consumption by carriers (see 47.305–7 and
47.305–8 for specific possibilities).
47.305–2 Solicitations f.o.b. origin and
f.o.b. destination—lowest overall
cost.
(a) Solicitations, when appropriate,
shall specify that offers may be f.o.b.
origin, f.o.b. destination, or both; and
that they will be evaluated on the basis
of the lowest overall cost to the Government.
(b) When offers are solicited on the
basis of both f.o.b. origin and f.o.b. destination, the contracting officer shall
insert in solicitations the provision at
52.247–45, F.o.b. Origin and/or F.o.b.
Destination Evaluation.
47.305–1 Solicitation requirements.
When the acquisition of supplies is on
f.o.b. origin or f.o.b. destination delivery terms, the contracting officer shall
include in solicitations a requirement
that the offeror furnish the Government as much of the following data as
is applicable to the particular acquisition:
(a) Modes of transportation and, if
rail transportation is used, names of
rail carriers serving the offeror’s facility.
(b) The number of railroad cars,
motor trucks, or other conveyances
that can be loaded per day.
(c) Type of packaging; e.g., box, carton, crate, drum, bundle, skids, and
when applicable, package number from
the governing freight classification.
(d) Number of units packed in one
container.
(e) Guaranteed maximum shipping
weight;
cubic
measurement;
and
length, width, and height of each container.
(f) Minimum size of each shipment.
(g) Number of containers or units
that can be loaded in a car, truck, or
47.305–3 F.o.b. origin solicitations.
When preparing f.o.b. origin solicitations, the contracting officer shall
refer to 47.303, where f.o.b. origin
clauses relating to standard delivery
terms are prescribed, and to 42.1404–2,
where the use of bills of lading, parcel
post, and indicia mail is prescribed.
Supply solicitations that will or may
result in f.o.b. origin contracts shall
also contain requirements, information, provisions, and clauses concerning the following items:
(a) Delivery in carload or truckload
lots f.o.b. carrier’s equipment, wharf,
or freight station.
(b) The requirement that the offeror
furnish the following information with
the offer:
(1) Location of the offeror’s actual
shipping point(s) (street address, city,
State, and ZIP code) from which supplies will be delivered to the Government.
(2) Whether the offeror’s shipping
point has a private railroad siding, and
the name of the rail carrier serving it.
(3) When the offeror’s shipping point
does not have a private siding, the
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Federal Acquisition Regulation
47.305–4
names and addresses of the nearest
public rail siding and of the carrier
serving it. (This will enable transportation officers, when issuing routing
instructions, to select the mode of
transportation that will provide the required service at the lowest possible
overall cost.)
(4)(i) The quantity of supplies to be
shipped from each shipping point.
(ii) The contracting officer shall insert in f.o.b. origin solicitations the
provision at 52.247–46, Shipping Point(s)
Used in Evaluation of F.o.b. Origin Offers, when price evaluation for shipments from various shipping points is
contemplated.
(c) When delivery is f.o.b. origin, contractor’s facility, and the designated facility is not covered by the line-haul
transportation rate, the charges required to deliver the shipment to the
point where the line-haul rate is applicable.
(d) When delivery is f.o.b. origin,
freight allowed, the basis on which
transportation charges will be allowed,
including the origin and destination
from and to which transportation
charges will be allowed.
(e) If f.o.b. origin offers only are desired, a statement that offers submitted on any other basis will be rejected as nonresponsive.
(f)(1) The methods of transportation
used in evaluating offers. The Government normally uses land transportation by regulated common carriers
between points in the 48 contiguous
United States and the District of Columbia.
(2) The contracting officer shall insert the provision at 52.247–47, Evaluation—F.o.b. Origin, in solicitations
that require prices f.o.b. origin for the
purpose of establishing the basis on
which offers will be evaluated.
(g)(1) When it is believed that prospective contractors are likely to include in f.o.b. origin offers a contingency to compensate for what may be
an unfavorable routing condition by
the Government at the time of shipment, the contracting officer may permit prospective contractors to state in
offers a reimbursable differential that
represents the cost of bringing the supplies to any f.o.b. origin place of delivery specified by the Government at the
time of shipment (see the clause at
52.247–33, F.o.b. Origin, with Differentials).
(2) Following are situations that
might impose on the contractor a substantial cost above at plant or commercial shipping point prices because of
Government-required routings:
(i) The loading nature of the supplies;
e.g., wheeled vehicles.
(ii) The different methods of shipment specified by the Government;
e.g., towaway, driveaway, tri-level vehicle, or rail car, that may increase the
contractor’s cost in varying amounts
for bringing the supplies to, or loading
and bracing the supplies at, the specified place of delivery.
(iii) The contractor’s f.o.b. origin
shipping point is a port city served by
United States inland, coastwise, or
intercoastal water transportation, and
the contractor would incur additional
costs to make delivery f.o.b. a wharf in
that city to accommodate water routing specified by the Government.
(iv) The contractor’s plant does not
have a private rail siding and in order
to ship by Government-specified rail
routing, the contractor would be required to deliver the supplies to a public siding or freight terminal and to
load, brace, and install dunnage in rail
cars.
[48 FR 42424, Sept. 19, 1986, as amended at 51
FR 31426, Sept. 3, 1986]
47.305–4 F.o.b.
tions.
destination
(a) When preparing f.o.b destination
solicitations, the contracting officer
shall refer to 47.303 for the prescription
of f.o.b. destination clauses relating to
standard delivery terms.
(b) If f.o.b. destination only offers are
desired, the solicitation shall state
that offers submitted on a basis other
than f.o.b. destination will be rejected
as nonresponsive.
(c) When supplies will or may be purchased f.o.b. destination but inspection
and acceptance will be at origin, the
contracting officer shall insert in solicitations and contracts the clause at
52.247–48, F.o.b. Destination—Evidence
of Shipment.
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47.305–5
47.305–5
48 CFR Ch. 1 (10–1–03 Edition)
Destination unknown.
(a)(1) When destinations are unknown, solicitations shall be f.o.b. origin only.
(2) The contracting officer shall include in the contract file justifications
for such solicitations.
(b)(1) When the exact destination of
the supplies to be acquired is not
known, but the general location of the
users can be reasonably established,
the acquiring activity shall designate
tentative destinations for the purpose
of computing transportation costs,
showing estimated quantities for each
tentative destination.
(2) The contracting officer shall insert in solicitations the provision at
52.247–49, Destination Unknown, when
destinations are tentative and only for
the purpose of evaluating offers.
(3) If it is necessary to control subsequent shipping weights, the solicitation shall state that subsequent shipments shall be made in carloads or
truckloads (see the clause at 52.247–59,
F.o.b. Origin—Carload and Truckload
Shipments).
(c)(1) When exact destinations are
not known and it is impracticable to
establish tentative or general delivery
places for the purpose of evaluating
transportation costs, the contracting
officer shall insert in solicitations the
provision at 52.247–50, No Evaluation of
Transportation Costs.
(2) The solicitation shall also state
that the transportation costs of subsequent shipments must be controlled
(see, for example, the clause at 52.247–
61, F.o.b. Origin—Minimum Size of
Shipments).
47.305–6 Shipments to ports and air
terminals.
(a) When supplies are acquired on the
basis of the delivery terms in 47.303–8
through 47.303–16, the solicitation shall
include a requirement that the offeror
furnish the Government the following
information:
(1) When the delivery term is f.a.s.
vessel, port of shipment, f.o.b. vessel, port
of shipment, or f.o.b. inland carrier, point
of exportation, the required data shall
include—
(i) A delivery schedule in number of
units and/or long or short tons;
(ii) Maximum quantities available
per shipment;
(iii) The quantity that can be made
available for loading to vessel per running day of 24 hours (if acquisition involves a commodity to be shipped in
bulk);
(iv) The minimum leadtime required
to make supplies available for loading
to vessel; and
(v) The port and pier or other designation and, when applicable, the
maximum draft of vessel (in feet) that
can be accommodated.
(2) When the delivery term is f.o.b. inland point, country of importation or
f.o.b. designated air carrier’s terminal,
point of importation, the required data
shall include—
(i) A delivery schedule in number of
units and/or long or short tons;
(ii) Maximum quantities available
per shipment; and
(iii) Other data appropriate to shipment by air carrier.
(3) When the delivery term is ex dock,
pier, or warehouse, port of importation or
c.& f. destination, the required data
shall include—
(i) A delivery schedule in number of
units and/or long or short tons;
(ii) Maximum quantities available
per shipment; and
(iii) The number of containers or
units that can be loaded in a car,
truck, or other conveyance of the size
normally used (specify type and size)
for the commodity.
(4) When the delivery term is c.i.f.
destination, the required data shall include—
(i) The same as specified in 47.305–
6(a)(3); and
(ii) The amount and type of marine
insurance coverage; e.g., whether the
coverage is With Average or Free of Particular Average and whether it covers
any special risks or excludes any of the
usual risks associated with the specific
commodity involved.
(5) When the delivery term is f.o.b.
designated air carrier’s terminal, point of
exportation, the required data shall include—
(i) A delivery schedule in number of
units, type of package, and individual
weight and dimensions of each package;
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(ii) Minimum leadtime required to
make supplies available for loading
into aircraft;
(iii) Name of airport and location to
which shipment will be delivered; and
(iv) Other data appropriate to shipment by air carrier.
(b) When supplies are acquired for
known destinations outside CONUS
and originate within CONUS, the contracting officer shall, for transportation evaluation purposes, note in the
solicitation the CONUS port of loading
or point of exit (aerial or water) and
the water port of debarkation that
serves the overseas destination.
(c) The contracting officer may also,
for evaluation purposes, list in the solicitation other CONUS ports that
meet the eligibility criteria compatible
with the nature and quantity of the
supplies, their destination, type of carrier required, and specified overseas delivery dates. This permits offerors that
are geographically remote from the
port that normally serves the overseas
destination to be competitive as far as
transportation costs are concerned.
(d) Unless logistics requirements
limit the ports of loading to the ports
listed in the solicitation, the solicitation shall state that—
(1) Offerors may nominate additional
ports (including ports in Alaska and
Hawaii) more favorably located to
their shipping points; and
(2) These ports will be considered in
the evaluation of offers if they possess
all requisite capabilities of the listed
ports in relation to the supplies being
acquired.
(e) When supplies are to be exported
through CONUS ports and offers are solicited on an f.o.b. origin or f.o.b. destination basis, the contracting officer
shall insert in solicitations the provision at 52.247–51, Evaluation of Export
Offers. The contracting officer shall
use the provision with its—
(1) Alternate I, when the CONUS
ports of export are DOD water terminals;
(2) Alternate II, when offers are solicited on an f.o.b. origin only basis; or
(3) Alternate III, when offers are solicited on an f.o.b. destination only
basis.
(f)(1) When the supplies are to move
in the Defense Transportation System
(DTS) (see 47.301–3), the contract shall
specify that—
(i) A Transportation Control Movement Document (TCMD) must be dispatched to the appropriate DOD air or
water clearance authority in accordance with MILSTAMP procedures for
all shipments consigned to DOD air or
water terminal transshipment points;
and
(ii) An Export Release must be obtained for supplies to be transshipped
via a water port of loading to overseas
destinations, except for shipments for
which an Export Release is not required, generally shipments of less
than 10,000 pounds, (see paragraph
202024 of the Defense Traffic Management Regulation (AR 55–355, NAVSUP
4600.70, MCO 4600.14A, AFM 75–2, DLAR
4500.3).
(2) When shipments will be consigned
to DOD air or water terminal transshipment points, the contracting officer shall insert in solicitations and
contracts the clause at 52.247–52, Clearance and Documentation Requirements—Shipments to DOD Air or
Water Terminal Transshipment Points.
(g) When a contract will not generate
any shipments that require an Export
Release, only the DOD CONUS ports
that serve the overseas destination
shall be listed in the solicitation (see
MILSTAMP at 47.301–3), except that
the responsible contracting officer may
limit the water ports listed when such
limitation is considered necessary to
meet delivery or other requirements.
(h) The award shall specify the
United States ports of loading that afford the lowest overall cost to the overseas destination.
(i) When supplies will be from origins
outside CONUS to destinations either
within or outside CONUS, the contracting officer shall use the appropriate f.o.b. term and include evaluation-of-offers information.
(j) In furtherance of the Cargo Preference Act of 1954 (46 U.S.C. 1241(b)), to
encourage and foster the American
Merchant Marine, the port of delivery
of supplies originating outside the
United States and shipped by ocean
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47.305–7
48 CFR Ch. 1 (10–1–03 Edition)
vessel shall be based on the availability of United States-flag vessels between the ports involved, unless the acquiring activity has given other specific instructions. (See subpart 47.5—
Ocean Transportation by U.S.-Flag
Vessels.)
(k) For application of the Fly America Act to the transportation of supplies and personnel when the Government is responsible for the transportation costs, see subpart 47.4—Air
Transportation by U.S.-Flag Carriers.
(l) Military and civilian agencies
shall obtain assistance from transportation offices in connection with all export shipments (see 47.105).
[48 FR 42424, Sept. 19, 1983, as amended at 59
FR 11383, Mar. 10, 1994]
47.305–7 Quantity analysis, direct delivery,
and
reduction
of
crosshauling and backhauling.
(a) Quantity analysis. (1) The requiring activity shall consider the acquisition of carload or truckload quantities.
(2) When additional quantities of the
supplies being acquired can be transported at lower unit transportation
costs or with a relatively small increase in total transportation costs,
with no impairment to the program
schedule, the contracting officer shall
ascertain from the requiring activity
whether there is a known requirement
for additional quantities. This may be
the case, for example, when the additional quantity could profitably be
stored by the activity for future use, or
could be distributed advantageously to
several using activities on the same
transportation route or in the same
geographical area.
(b) Direct delivery. When it is the
usual practice of a requiring activity
to acquire supplies in large quantities
for shipment to a central point and
subsequent distribution to using activities, as needed, consideration shall be
given, if sufficient quantities are involved to warrant scheduling direct delivery, to the feasibility of providing
for direct delivery from the contractor
to the using activity, thereby reducing
the cost of transportation and handling.
(c) Crosshauling and backhauling. The
contracting officer shall select distribution and transshipment facilities
intermediate to origins and ultimate
destinations to reduce crosshauling
and backhauling; i.e., the transportation of personal property of the same
kind in opposite directions or the return of the property to or through
areas previously traversed in shipment.
47.305–8 Consolidation of small shipments and the use of stopoff privileges.
(a) Consolidation of small shipments.
Consolidation of small shipments into
larger lots frequently results in lower
transportation costs. Therefore, the
contracting officer, after consultation
with the transportation office and the
activity requiring the supplies, may revise the delivery schedules to provide
for deliveries in larger quantities.
(b) Stopping for partial unloading.
When feasible, schedules for delivery of
supplies to multiple destinations shall
be consolidated and the stopoff privileges permitted under carrier tariffs
shall be used for partial unloading at
one or more points directly en route
between the point of origin and the last
destination.
47.305–9 Commodity description and
freight classification.
(a) Generally, the freight rate for
supplies is based on the rating applicable to the freight classification description published in tariffs filed with Federal and State regulatory bodies.
Therefore, the contracting officer shall
show in the solicitation a complete description of the commodity to be acquired and of packing requirements to
determine
proper
transportation
charges for the evaluation of offers. If
supplies cannot be properly classified
through reference to freight classification tariffs or if doubt exists, the contracting officer shall obtain the applicable freight classification from the
transportation office. In some situations prospective contractors have established an official freight classification description that can be applied.
(b)(1) When the supplies being acquired are new to the supply system,
nonstandard, or modifications of previously shipped items, and different
freight classifications may apply, the
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47.305–13
contracting officer shall insert in solicitations the provision at 52.247–53,
Freight Classification Description.
(2) The contracting officer shall alert
the transportation officer to the possibility of negotiations for appropriate
freight classification ratings and reasonable transportation rates.
(c) The solicitation shall contain adequate descriptions of explosives and
other dangerous supplies according to
(1) the regular freight classification
and (2) the hazardous material description and hazard class as shown in 49
CFR 172.101.
(d) The contracting officer shall furnish the freight classification information developed in 47.305–9(a), (b), and (c)
above to the contract administration
office.
47.305–10 Packing, marking, and consignment instructions.
(a) Acquisition documents shall include packing and marking requirements necessary to prevent deterioration of supplies and damages due to the
hazards of shipping, handling, and storage, and, when appropriate, marking in
accordance with the requirements of 49
CFR 172.300.
(b) Contracts shall include complete
consignment and marking instructions
at the time the contract is awarded to
ensure that supplies are delivered to
proper destinations without delay. If
complete consignment information is
not initially known, the contracting
officer shall issue amended delivery instructions under the Changes clause of
the contract (see 43.205) as soon as the
information becomes known.
(c) If necessary to meet required delivery schedules, the contracting officer may issue instructions by telephone, teletype, or telegram. The contracting officer shall confirm these instructions in writing.
(d) Marking and consignment instructions for military shipments shall
conform to the current issue of MIL–
STD–129 (Military Standard Marking
for Shipment and Storage) and other
applicable DOD regulations. Shipments
for civilian agencies shall be marked as
specified in Federal Standard 123,
Marking for Domestic Shipment (Civil
Agencies).
47.305–11 Options in shipment and delivery.
Although the clauses prescribed in
subpart 43.2 allow certain changes to be
made in regard to shipment and delivery, it may be desirable to provide specifically for certain options in the solicitation. The Government may reserve the right to—
(a) Direct deliveries of all or part of
the contract quantity to destinations
or to consignees other than those specified in the solicitation and in the contract;
(b) Direct shipments in quantities
that may require transportation rates
different from those on which the contract price is based; and
(c) Direct shipments by a mode of
transportation other than that stipulated in the solicitation and in the contract.
[48 FR 42424, Sept. 19, 1983, as amended at 62
FR 237, Jan. 2, 1997]
47.305–12 Delivery of Government-furnished property.
(a)(1) When Government property is
furnished to a contractor and transportation costs to the Government are a
factor in the evaluation of offers, the
contracting officer shall include in the
solicitation a clear description of the
property, its location, and other information necessary for the preparation
of cost estimates.
(2) The contracting officer shall insert in solicitations and contracts the
clause at 52.247–55, F.o.b. Point for Delivery of Government-Furnished Property, when Government property is to
be furnished under a contract and the
Government will be responsible for
transportation
arrangements
and
costs.
(b) The contracting officer shall describe explosive and dangerous material according to (1) the regular freight
classification and (2) the hazardous material description and hazard class as
shown in 49 CFR 172.101.
47.305–13
Transit arrangements.
(a) Transit privileges. (1) Transit arrangements permit the stopping of a
carload or truckload shipment at a specific intermediate point en route to the
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47.305–14
48 CFR Ch. 1 (10–1–03 Edition)
final destination for storage, processing, or other purposes, as specified
in carrier tariffs or rate tenders. A single through rate is charged from origin
to final destination plus a transit or
other related charge, rather than a
more expensive combination of rates to
and from the transit point.
(2) The contracting officer shall consider possible benefits available to the
Government through the use of existing transit arrangements or through
efforts to obtain additional transit
privileges from the carriers. Solicitations incorporating transit arrangements shall be restricted to f.o.b. origin offers, as f.o.b. destination offers
can only quote fixed overall delivered
prices at first destination.
(3)(i) Traffic management personnel
shall furnish information and analyses
of situations in which transit arrangements may be beneficial. The quantity
to be awarded must be of sufficient
tonnage to ensure that carload/truckload shipments can be made by the
contractor, and there should be reasonable certainty that shipments out of
the transit point will be requested in
carload/truckload quantities.
(ii) The contracting officer shall insert in solicitations the provision at
52.247–56, Transit Arrangements, when
benefits may accrue to the Government
because transit arrangements may
apply.
(b) Transit credits. (1) In evaluations
of f.o.b. origin offers for large quantities of supplies that contractors normally have in process or storage at intermediate points, contracting officers
shall make use of contractors’ earned
commercial transit credits, which are
recorded with the carriers. A transit
credit represents the transportation
costs for a recorded tonnage from the
initial point to an intermediate point.
The remaining transportation charges
from the intermediate point to the
Government destination, because they
are based on through rates, are frequently lower than the transportation
charges that would apply for the same
tonnage if the intermediate point were
the initial origin point.
(2) If transit credits apply, the contract shall state that the contractor
shall ship the goods on prepaid commercial bills of lading, subject to reim-
bursement by the Government. The
contracting officer shall ensure that
this does not preclude a proper change
in delivery terms under the Changes
clause. The shipments move for the account and at the risk of the Government, as they become Government
property at origin.
(3) The contractor shall show the
transportation and transit charges as
separate amounts on the invoice for
each individual shipment. The amount
to be reimbursed by the Government
shall not exceed the amount quoted in
the offer. Regulations and procedures
regarding contractor prepaid transportation charges are prescribed in 42.1403–
2.
(4) The contracting officer shall insert in solicitations and contracts the
clause at 52.247–57, Transportation
Transit Privilege Credits, when supplies are of such a nature, or when it is
the custom of the trade, that offerors
may have potential transit credits
available and the Government may reduce transportation costs through the
use of transit credits.
47.305–14
Mode of transportation.
Generally, solicitations shall not
specify a particular mode of transportation or a particular carrier. If the use
of particular types of carriers is necessary to meet program requirements,
the solicitation shall provide that only
offers involving the specified types of
carriers will be considered. The contracting officer shall obtain all specifications for mode, route, delivery,
etc., from the transportation office.
47.305–15 Loading responsibilities of
contractors.
(a)(1) Contractors are responsible for
loading, blocking, and bracing carload
shipments as specified in standards
published by the Association of American Railroads.
(2) The contracting officer shall insert in solicitations and contracts the
clause at 52.247–58, Loading, Blocking,
and Bracing of Freight Car Shipments,
when supplies may be shipped in carload lots by rail.
(b) If the nature of the supplies or
safety, environmental, or transportability factors require special methods
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for securing the supplies on the carrier’s equipment, or if only a special
mode of transportation or type vehicle
is appropriate, the contracting officer
shall include in solicitations detailed
specifications that have been coordinated with the transportation office.
47.305–16 Shipping characteristics.
(a) Required shipping weights. The
contracting officer shall insert in solicitations and contracts the clause at
52.247–59, F.o.b. Origin—Carload and
Truckload Shipments, when it is contemplated that they may result in
f.o.b. origin contracts with shipments
in carloads or truckloads. This will facilitate realistic freight cost evaluations of offers and ensure that contractors produce economical shipments of
agreed size.
(b) Guaranteed shipping characteristics.
(1) The contracting officer shall insert
in soliciations and contracts, excluding
those at or below the simplified acquisition threshold, the clause at 52.247–60,
Guaranteed Shipping Characteristics,
when shipping and other characteristics are required to evaluate offers as
to transportation costs. When all of the
shipping characteristics listed in paragraph (a) of the clause at 52.247–60 are
not required to evaluate offers as to
transportation costs, the contracting
officer shall delete the characteristics
not required from the clause.
(2) The award document shall show
the shipping characteristics used in the
evaluation.
(c) Minimum size of shipments. When
volume rates may apply, the contracting officer shall insert in solicitations and contracts the clause at
52.247–61, F.o.b. Origin—Minimum Size
of Shipments.
(d) Specific quantities unknown. (1)
When total requirements and destinations to which shipments will be made
are known, but the specific quantity to
be shipped to each destination cannot
be predetermined, solicitations shall
state that offers are to be submitted on
the basis of delivery f.o.b. origin and/or
f.o.b. destination and that offers will be
evaluated on both bases.
(2) The contracting officer shall insert in solicitations and contracts the
clause at 52.247–62, Specific Quantities
Unknown, when total requirements and
destinations to which shipments will
be made are known, but the specific
quantity to be shipped to each destination cannot be predetermined. This
clause protects the interests of both
the Government and the contractor
during the course of the performance of
the contract.
[48 FR 42424, Sept. 19, 1983, as amended at 54
FR 48990, Nov. 28, 1989; 60 FR 34760, July 3,
1995; 61 FR 39190, July 26, 1996]
47.305–17
Returnable cylinders.
The contracting officer shall insert
the clause at 52.247–66, Returnable Cylinders, in a solicitation and contract
whenever the contract involves the
purchase of gas in contractor-furnished
returnable cylinders and the contractor retains title to the cylinders.
[59 FR 11386, Mar. 10, 1994]
47.306 Transportation factors in the
evaluation of offers.
When evaluating offers, contracting
officers shall consider transportation
and transportation-related costs as
well as the offerors’ shipping and receiving facilities.
47.306–1 Transportation
minations.
cost
When requesting the transportation
officer to assist in evaluating offers,
the contracting officer shall give the
transportation officer all pertinent
data, including the following information:
(a) A complete description of the
commodity being acquired including
packaging instructions.
(b) Planned date of award.
(c) Date of initial shipment.
(d) Total quantity to be shipped (including weight and cubic content, when
appropriate).
(e) Delivery schedule.
(f) Contract period.
(g) Possible use of transit privileges,
including stopoffs for partial loading or
unloading, or both.
47.306–2 Lowest overall transportation
costs.
(a) For the evaluation of offers, the
transportation officer shall give to the
contracting officer, and the contracting officer shall use, the lowest
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48 CFR Ch. 1 (10–1–03 Edition)
available freight rates and related accessorial and incidental charges that
(1) are in effect on, or become effective
before, the expected date of the initial
shipment and (2) are on file or published on the date of the bid opening.
(b) If rates or related charges become
available after the bid opening or the
due date of offers, they shall not be
used in the evaluation unless they
cover transportation for which no applicable rates or accessorial or incidental costs were in existence at the
time of bid opening or due date of the
offers.
side the United States or between two
places both of which are outside the
United States.
United States means the 50 States, the
District of Columbia, and outlying
areas of the United States.
U.S.-flag air carrier means an air carrier holding a certificate under section
401 of the Federal Aviation Act of 1958
(49 U.S.C. 41102).
47.306–3 Adequacy of loading and unloading facilities.
(a) When determining the transportation capabilities of an offeror, the
contracting officer shall consider the
type and adequacy of the offeror’s shipping facilities, including the ability to
consolidate and ship in carload or
truckload lots.
(b) The contracting officer shall consider the type and adequacy of the consignee’s receiving facilities to avoid
shipping schedules that cannot be properly accommodated.
Federal employees and their dependents, consultants, contractors, grantees, and others must use U.S.-flag air
carriers for U.S. Government-financed
international air travel and transportation of their personal effects or property, if available (section 5 of the International Air Transportation Fair Competitive Practices Act of 1974 (49 U.S.C.
40118) (Fly America Act)).
Subpart 47.4—Air Transportation
by U.S.-Flag Carriers
47.401 Definitions.
As used in this subpart—
Air freight forwarder means an indirect air carrier that is responsible for
the transportation of property from
the point of receipt to the point of destination, and utilizes for the whole or
any part of such transportation the
services of a direct air carrier or its
agent, or of another air freight forwarder.
Gateway airport abroad means the airport from which the traveler last embarks en route to the United States or
at which the traveler first debarks incident to travel from the United
States.
Gateway airport in the United States
means the last U.S. airport from which
the traveler’s flight departs or the first
U.S. airport at which the traveler’s
flight arrives.
International air transportation means
transportation by air between a place
in the United States and a place out-
[48 FR 42424, Sept. 19, 1983, as amended at 66
FR 2134, Jan. 10, 2001; 68 FR 28084, May 22,
2003]
47.402
Policy.
[68 FR 28084, May 22, 2003]
47.403 Guidelines for implementation
of the Fly America Act.
This section 47.403 is based on the
Guidelines for Implementation of the
Fly America Act (case number B–
138942), issued by the Comptroller General of the United States on March 31,
1981.
47.403–1 Availability
and
unavailability of U.S.-flag air carrier service.
(a) If a U.S.-flag air carrier cannot
provide the international air transportation needed or if the use of U.S.-flag
air carrier service would not accomplish an agency’s mission, foreign-flag
air carrier service may be deemed necessary.
(b) U.S.-flag air carrier service is
considered available even though—
(1) Comparable or a different kind of
service can be provided at less cost by
a foreign-flag air carrier;
(2) Foreign-flag air carrier service is
preferred by, or is more convenient for,
the agency or traveler; or
(3) Service by a foreign-flag air carrier can be paid for in excess foreign
currency (unless U.S.-flag air carriers
decline to accept excess or near excess
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foreign currencies for transportation
payable only out of such monies).
(c) Except as provided in paragraph
47.403–1(a), U.S.-flag air carrier service
shall be used for U.S. Government-financed commercial foreign air travel if
service provided by U.S.-flag air carriers is available. In determining availability of a U.S.-flag air carrier, the
following scheduling principles shall be
followed unless their application would
result in the last or first leg of travel
to or from the United States being performed by a foreign-flag air carrier:
(1) U.S.-flag air carrier service available at point of origin shall be used to
destination or, in the absence of direct
or through service, to the farthest
interchange point on a usually traveled
route.
(2) When an origin or interchange
point is not served by a U.S.-flag air
carrier, foreign-flag air carrier service
shall be used only to the nearest interchange point on a usually traveled
route to connect with U.S.-flag air carrier service.
(3) When a U.S.-flag air carrier involuntarily reroutes the traveler via a foreign-flag air carrier, the foreign-flag
air carrier may be used notwithstanding the availability of alternative
U.S.-flag air carrier service.
(d) For travel between a gateway airport in the United States and a gateway airport abroad, passenger service
by U.S.-flag air carrier shall not be
considered available if—
(1) The gateway airport abroad is the
traveler’s origin or destination airport
and the use of U.S.-flag air carrier
service would extend the time in a
travel status, including delay at origin
and accelerated arrival at destination,
by at least 24 hours more than travel
by a foreign-flag air carrier; or
(2) The gateway airport abroad is an
interchange point and the use of U.S.flag air carrier service would require
the traveler to wait 6 hours or more to
make connections at that point, or if
delayed departure from, or accelerated
arrival at, the gateway airport in the
United States would extend time in a
travel status by at least 6 hours more
than travel by a foreign-flag air carrier.
(e) For travel between two points
outside the United States, the rules in
paragraphs 47.403–1(a), (b), and (c) shall
be applicable, but passenger service by
a U.S.-flag air carrier shall not be considered to be reasonably available if—
(1) Travel by a foreign-flag air carrier
would eliminate two or more aircraft
changes en route;
(2) One of the two points abroad is
the gateway airport en route to or
from the United States and the use of
a U.S.-flag air carrier would extend the
time in a travel status by at least 6
hours more than travel by a foreignflag air carrier, including accelerated
arrival at the overseas destination or
delayed departure from the overseas
origin, as well as delay at the gateway
airport or other interchange point
abroad; or
(3) The travel is not part of the trip
to or from the United States and the
use of a U.S.-flag air carrier would extend the time in a travel status by at
least 6 hours more than travel by a foreign-flag air carrier including delay at
origin, delay en route, and accelerated
arrival at destination.
(f) For all short-distance travel under
either paragraph (d) or paragraph (e) of
47.403–1, U.S. air carrier service shall
not be considered available when the
elapsed traveltime on a scheduled
flight from origin to destination airport by foreign-flag air carrier is 3
hours or less and service by a U.S.-flag
air carrier would involve twice such
traveltime.
47.403–2 Air transport agreements between the United States and foreign
governments.
Nothing in the guidelines of the
Comptroller General (see 47.403) shall
preclude, and no penalty shall attend,
the use of a foreign-flag air carrier that
provides transportation under an air
transport agreement between the
United States and a foreign government, the terms of which are consistent with the international aviation
policy goals at 49 U.S.C. 1502(b) and
provide reciprocal rights and benefits.
47.403–3
Disallowance of expenditures.
(a) Agencies shall disallow expenditures for U.S. Government-financed
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47.404
48 CFR Ch. 1 (10–1–03 Edition)
commercial international air transportation on foreign-flag air carriers unless there is attached to the appropriate voucher a memorandum adequately explaining why service by U.S.flag air carriers was not available, or
why it was necessary to use foreignflag air carriers.
(b) When the travel is by indirect
route or the traveler otherwise fails to
use available U.S.-flag air carrier service, the amount to be disallowed
against the traveler is based on the
loss of revenues suffered by U.S.-flag
air carriers as determined under the
following formula, which is prescribed
and more fully explained in 56 Comp.
Gen. 209 (1977):
Sum of U.S.-flag carrier
segment mileage,
authorized
× Fare payable
Sum of all segment
by Government
mileage, authorized
bills (1) a copy of the airway bill or
manifest showing the air carriers used
and (2) justification for the use of foreign-flag air carriers similar to the one
shown in the clause at 52.247–63, Preference for U.S.-Flag Air Carriers.
[48 FR 42424, Sept. 19, 1983, as amended at 62
FR 237, Jan. 2, 1997]
47.405
Contract clause.
The contracting officer shall insert
the clause at 52.247–63, ‘‘Preference for
U.S.-Flag Air Carriers, in solicitations
and contracts whenever it is possible
that U.S. Government-financed international air transportation of personnel (and their personal effects) or
property will occur in the performance
of the contract.’’ This clause does not
apply to contracts awarded using the
simplified acquisition procedures in
part 13 or contracts for commercial
items (see part 12).
[48 FR 42424, Sept. 19, 1983, as amended at 53
FR 27468, July 20, 1988; 60 FR 48250, Sept. 18,
1995]
MINUS
Subpart 47.5—Ocean
Transportation by U.S.-Flag Vessels
47.500
[48 FR 42424, Sept. 19, 1983, as amended at 62
FR 237, Jan. 2, 1997]
47.404 Air freight forwarders.
(a) Agencies may use air freight forwarders that are engaged in international air transportation (49 U.S.C.
1301(24)(c)) for U.S. Government-financed movements of property. The
rule on disallowance of expenditures in
47.403–3(a) applies also to the air carriers used by these international air
freight forwarders.
(b) Agency personnel shall inform
international air freight forwarders
that to facilitate prompt payments of
their bills, they shall submit with their
[48 FR 42424, Sept. 19, 1983, as amended at 55
FR 3886, Feb. 5, 1990]
47.501
Definitions.
As used in this subpart—
Dry bulk carrier means a vessel used
primarily for the carriage of shipload
lots of homogeneous unmarked nonliquid cargoes such as grain, coal, cement, and lumber.
Dry cargo liner means a vessel used
for the carriage of heterogeneous
marked cargoes in parcel lots. However, any cargo may be carried in these
vessels, including part cargoes of dry
bulk items or, when carried in deep
tanks, bulk liquids such as petroleum
and vegetable oils.
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EC03AP91.005
(c) The justification requirement is
satisfied by the contractor’s use of a
statement similar to the one contained
in the clause at 52.247–63, Preference
for U.S.-Flag Air Carriers. (See 47.405.)
Scope of subpart.
This subpart prescribes policy and
procedures for giving preference to
U.S.-flag vessels when transportation
of supplies by ocean vessel is required.
This subpart does not apply to the Department of Defense (DoD). Policy and
procedures applicable to DoD appear in
DFARS subpart 247.5.
EC03AP91.004
Sum of U.S.-flag carrier
segment mileage,
traveled
Through fare
×
Sum of all segment
payed
mileage, traveled
Federal Acquisition Regulation
47.503
Foreign-flag vessel means any vessel of
foreign registry including vessels
owned by U.S. citizens but registered
in a nation other than the United
States.
Government vessel means a vessel
owned by the U.S. Government and operated directly by the Government or
for the Government by an agent or contractor, including a privately owned
U.S.-flag vessel under bareboat charter
to the Government.
Privately owned U.S.-flag commercial
vessel means a vessel (1) registered and
operated under the laws of the United
States, (2) used in commercial trade of
the United States, (3) owned and operated by U.S. citizens, including a vessel
under voyage or time charter to the
Government, and (4) a Governmentowned vessel under bareboat charter
to, and operated by, U.S. citizens.
Tanker means a vessel used primarily
for the carriage of bulk liquid cargoes
such as liquid petroleum products, vegetable oils, and molasses.
U.S.-flag vessel when used independently means either a Government vessel or a privately owned U.S.-flag commercial vessel.
[48 FR 42424, Sept. 19, 1983, as amended at 66
FR 2134, Jan. 10, 2001]
47.502 Policy.
(a) The policy of the United States
regarding the use of U.S.-flag vessels is
stated in the following acts:
(1) The Cargo Preference Act of 1904
(10 U.S.C. 2631), which requires the Department of Defense to use only U.S.flag vessels for ocean transportation of
supplies for the Army, Navy, Air Force,
or Marine Corps unless those vessels
are not available at fair and reasonable
rates.
(2) The Merchant Marine Act of 1936
(46 U.S.C. 1101), which declares it is the
policy of the United States to foster
the development and encourage the
maintenance of its merchant marine.
(3) The Cargo Preference Act of 1954
(46 U.S.C. 1241(b), which is Section
901(b) of the Merchant Marine Act).
Under this Act, Government agencies
acquiring, either within or outside the
United States, supplies that may require ocean transportation shall ensure
that at least 50 percent of the gross
tonnage of these supplies (computed
separately for dry bulk carriers, dry
cargo liners, and tankers) is transported on privately owned U.S.-flag
commercial vessels to the extent that
such vessels are available at rates that
are fair and reasonable for U.S.-flag
commercial vessels. This applies when
the supplies are—
(i) Acquired for the account of the
United States;
(ii) Furnished to, or for the account
of, a foreign nation without provision
for reimbursement;
(iii) Furnished for the account of a
foreign nation in connection with
which the United States advances
funds or credits, or guarantees the convertibility of foreign currencies; or
(iv) Acquired with advance of funds,
loans, or guaranties made by or on behalf of the United States.
(b) Additional policies providing preference for the use of U.S.-flag vessels
are contained in—
(1)
10
U.S.C.
2634
for
the
transporation of privately-owned vehicles belonging to service members
when making permanent change of station moves;
(2) 46 U.S.C. 1241(a) for official business travel by officers and employees of
the United States and for the transportation of their personal effects; and
(3) 46 U.S.C. 1241(e) for the transportation of motor vehicles owned by Government personnel when transportation is at Government expense or
otherwise authorized by law.
(c) The provisions of the Cargo Preference Act of 1954 may be temporarily
waived when the Congress, the President, or the Secretary of Defense declares that an emergency justifying a
temporary waiver exists and so notifies
the appropriate agency or agencies.
47.503
Applicability.
(a) Except as stated in paragraph (b)
below and in 47.504, the Cargo Preference Acts of 1904 and 1954 described
in 47.502(a) apply to the following cargoes:
(1) Supplies owned by the Government and in the possession of—
(i) The Government;
(ii) A contractor; or
(iii) A subcontractor at any tier.
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47.504
48 CFR Ch. 1 (10–1–03 Edition)
(2) Supplies for use of the Government that are contracted for and require subsequent delivery to a Government activity but are not owned by the
Government at the time of shipment.
(3) Supplies not owned by the Government at the time of shipment that
are to be transported for distribution
to foreign assistance programs, but
only if these supplies are not acquired
or contracted for with local currency
funds (see 47.504(b)).
(b) Government-owned supplies to be
shipped commercially that are (1) in
the possession of a department, a contractor, or a subcontractor at any tier
and (2) for use of military departments
shall be transported exclusively in privately owned U.S.-flag commercial vessels if such vessels are available at
rates that are fair and reasonable for
U.S.-flag commercial vessels.
(c) The 50-percent requirement shall
not prevent the use of privately owned
U.S.-flag commercial vessels for transportation of up to 100 percent of the
cargo subject to the Cargo Preference
Act of 1954.
47.504 Exceptions.
The policy and procedures in this
subpart do not apply to the following:
(a) Shipments aboard vessels of the
Panama Canal Commission or as required or authorized by law or treaty.
(b) Ocean transportation between foreign countries of supplies purchased
with foreign currencies made available,
or derived from funds that are made
available, under the Foreign Assistance
Act of 1961 (22 U.S.C. 2353).
(c) Shipments of classified supplies
when the classification prohibits the
use of non-Government vessels.
(d) Subcontracts for the acquisition
of commercial items or commercial
components
(see
12.504(a)(1)
and
(a)(11)). This exception does not apply
to—
(1) Grants-in-aid shipments, such as
agricultural and food-aid shipments;
(2) Shipments covered under 46 U.S.C.
Appx 1241–1, such as those generated by
Export-Import Bank loans or guarantees;
(3) Subcontracts under—
(i) Government contracts or agreements for ocean transportation services; or
(ii) Construction contracts; or
(4) Shipments of commercial items
that are—
(i) Items the contractor is reselling
or distributing to the Government
without adding value (see FAR
12.501(b)). Generally, the contractor
does not add value to the items when it
subcontracts items for f.o.b. destination shipment; or
(ii) Shipped in direct support of U.S.
military—
(A) Contingency operations;
(B) Exercises; or
(C) Forces deployed in connection
with United Nations or North Atlantic
Treaty Organization humanitarian or
peacekeeping operations.
[48 FR 42424, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995; 60 FR 48250, Sept. 18,
1995; 65 FR 24324, Apr. 25, 2000; 68 FR 13203,
Mar. 18, 2003]
EDITORIAL NOTE: At 65 FR 36031, June 6,
2000, section 47.504 was amended in the first
sentence of paragraph (e) by removing ‘‘(see
12.504(a)(13))’’ and adding ‘‘(see 12.504(a)(11))’’.
However, prior to this amendment paragraph
(e) was redesignated as (d).
47.505 Construction contracts.
(a) Except as stated in paragraph (b)
below, construction contractors, including subcontractors and suppliers,
engaged in overseas work shall comply
with the policies and regulations in
this subpart.
(b) These requirements shall not
apply to military assistance, foreign
aid, or similar projects under the auspices of the U.S. Government when the
recipient nation furnishes, or pays for,
at least 50 percent of the transportation, in which event foreign-flag vessels may be used for a portion not to
exceed 50 percent of the gross tonnage
for the project.
47.506 Procedures.
(a) The contracting officer shall obtain assistance from the transportation
activity (see 47.105) in developing appropriate shipping instructions and delivery terms for inclusion in solicitations and contracts that may involve
ocean transportation of supplies subject to the requirements of the Cargo
Preference Act of 1954 (see 47.502(a)(3)).
(b) When the contractor notifies the
contracting officer that a privately
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Federal Acquisition Regulation
48.001
owned U.S.-flag commercial vessel is
not available, the contracting officer
shall seek assistance from the transportation activity.
(c) For purposes of determining the
availability of privately owned U.S.flag commercial vessels at fair and reasonable rates, rates filed and published
in accordance with the requirements of
the Federal Maritime Commission may
be accepted as fair and reasonable.
When applicable rates for charter cargoes are not in published tariffs, a determination as to whether the rates
are fair and reasonable shall be obtained from the Maritime Administration.
(d) The Maritime Administration has
issued regulations (46 CFR 381) that require agencies to submit reports regarding ocean shipments. Contracting
officers shall follow agency regulations
when preparing, or furnishing information for, these reports.
47.507 Contract clauses.
(a)(1) Insert the clause at 52.247–64,
Preference for Privately Owned U.S.Flag Commercial Vessels, in solicitations and contracts that may involve
ocean transportation of supplies subject to the Cargo Preference Act of
1954. (For application of the Cargo
Preference Act of 1954, see 47.502(a)(3),
47.503(a), and 47.504.)
(2) If an applicable statute requires,
or if it has been determined under
agency procedures, that the supplies to
be furnished under the contracts must
be transported exclusively in privately
owned U.S.-flag commercial vessels
(see 47.502(a)(1) and 47.503(b)), use the
clause with its Alternate I.
(3) Except for contracts or agreements for ocean transportation services or construction contracts, use the
clause with its Alternate II if any of
the supplies to be transported are commercial items that are shipped in direct support of U.S. military—
(i) Contingency operations;
(ii) Exercises; or
(iii) Forces deployed in connection
with United Nations or North Atlantic
Treaty Organization humanitarian or
peacekeeping operations.
(b) The contracting officer may insert in solicitations and contracts,
under agency procedures, additional
appropriate clauses concerning the vessels to be used.
[68 FR 13203, Mar. 18, 2003]
PART 48—VALUE ENGINEERING
Sec.
48.000
48.001
Scope of part.
Definitions.
Subpart 48.1—Policies and Procedures
48.101 General.
48.102 Policies.
48.103 Processing value engineering change
proposals.
48.104 Sharing arrangements.
48.104–1 Determining sharing period.
48.104–2 Sharing acquisition savings.
48.104–3 Sharing collateral savings.
48.104–4 Sharing alternative—no-cost settlement method.
48.105 Relationship to other incentives.
Subpart 48.2—Contract Clauses
48.201 Clauses for supply or service contracts.
48.202 Clause for construction contracts.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42443, Sept. 19, 1983, unless
otherwise noted.
48.000 Scope of part.
This part prescribes policies and procedures for using and administering
value engineering techniques in contracts.
48.001 Definitions.
As used in this subpart—
Acquisition savings means savings resulting from the application of a value
engineering change proposal (VECP) to
contracts awarded by the same contracting office of its successor for essentially the same unit. Acquisition
savings include—
(1) Instant contract savings, that are
the net cost reductions on the contract
under which the VECP is submitted
and accepted, and that are equal to the
instant unit cost reduction multiplied
by the number of instant contract
units affected by the VECP, less the
contractor’s allowable development
and implementation costs;
(2) Concurrent contract savings, that
are net reductions in the prices of
other contracts that are definitized and
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48.001
48 CFR Ch. 1 (10–1–03 Edition)
ongoing at the time the VECP is accepted; and
(3) Future contract savings, that are
the product of the future unit cost reduction multiplied by the number of
future contract units in the sharing
base. On an instant contract, future
contract savings include savings on increases in quantities after VECP acceptance that are due to contract
modifications, exercise of options, additional orders, and funding of subsequent
year
requirements
on
a
multiyear contract.
Collateral costs means agency costs of
operation, maintenance logistic support, or Government-furnished property.
Collateral savings means those measurable net reductions resulting from a
VECP in the agency’s overall projected
collateral costs, exclusive of acquisition savings, whether or not the acquisition cost changes.
Contracting office includes any contracting office that the acquisition is
transferred to, such as another branch
of the agency or another agency’s office that is performing a joint acquisition action.
Contractor’s development and implementation costs means those costs the
contractor incurs on a VECP specifically in developing, testing, preparing,
and submitting the VECP, as well as
those costs the contractor incurs to
make the contractual changes required
by Government acceptance of a VECP.
Future unit cost reduction means the
instant unit cost reduction adjusted as
the contracting officer considers necessary for projected learning or
changes in quantity during the sharing
period. It is calculated at the time the
VECP is accepted and applies either (1)
throughout the sharing period, unless
the contracting officer decides that recalculation is necessary because conditions are significantly different from
those previously anticipated or (2) to
the calculation of a lump-sum payment, that cannot later be revised.
Government costs means those agency
costs that result directly from developing and implementing the VECP,
such as any net increases in the cost of
testing, operations, maintenance, and
logistics support. The term does not include the normal administrative costs
of processing the VECP or any increase
in instant contract cost or price resulting from negative instant contract savings, except that for use in 52.248–3, see
the definition at 52.248–3(b).
Instant contract means the contract
under which the VECP is submitted. It
does not include increases in quantities
after acceptance of the VECP that are
due to contract modifications, exercise
of options, or additional orders. If the
contract is a multiyear contract, the
term does not include quantities funded after VECP acceptance. In a fixedprice contract with prospective price
redetermination, the term refers to the
period for which firm prices have been
established.
Instant unit cost reduction means the
amount of the decrease in unit cost of
performance (without deducting any
contractor’s development or implementation costs) resulting from using the
VECP on the instant contract. In service contracts, the instant unit cost reduction is normally equal to the number of hours per line-item task saved
by using the VECP on the instant contract, multiplied by the appropriate
contract labor rate.
Negative
instant
contract
savings
means the increase in the instant contract cost or price when the acceptance
of a VECP results in an excess of the
contractor’s allowable development
and implementation costs over the
product of the instant unit cost reduction multiplied by the number of instant contract units affected.
Net acquisition savings means total acquisition savings, including instant,
concurrent, and future contract savings, less Government costs.
Sharing base means the number of affected end items on contracts of the
contracting office accepting the VECP.
Sharing period means the period beginning with acceptance of the first
unit incorporating the VECP and ending at a calendar date or event determined by the contracting officer for
each VECP.
Unit means the item or task to which
the contracting officer and the contractor agree the VECP applies.
Value engineering proposal means, in
connection with an A–E contract, a
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Federal Acquisition Regulation
48.102
change proposal developed by employees of the Federal Government or contractor value engineering personnel
under contract to an agency to provide
value engineering services for the contract or program.
ensure that the contractor’s value engineering effort is applied to areas of
the contract that offer opportunities
for considerable savings consistent
with the functional requirements of
the end item of the contract.
[48 FR 42443, Sept. 19, 1983, as amended at 54
FR 5057, Jan. 31, 1989; 55 FR 3887, Feb. 5, 1990;
61 FR 39220, July 26, 1996; 64 FR 51847, Sept.
24, 1999; 66 FR 2134, Jan. 10, 2001]
[48 FR 42443, Sept. 19, 1983, as amended at 54
FR 5057, Jan. 31, 1989]
Subpart 48.1—Policies and
Procedures
(a) As required by Section 36 of the
Office of Federal Procurement Policy
Act (41 U.S.C. 401, et seq.), agencies
shall establish and maintain cost-effective value engineering procedures and
processes. Agencies shall provide contractors a substantial financial incentive to develop and submit VECP’s.
Contracting activities will include
value engineering provisions in appropriate supply, service, architect-engineer and construction contracts as prescribed by 48.201 and 48.202 except
where exemptions are granted on a
case-by-case basis, or for specific classes of contracts, by the agency head.
(b) Agencies shall: (1) establish guidelines for processing VECP’s; (2) process
VECP’s objectively and expeditiously;
and (3) provide contractors a fair share
of the savings on accepted VECP’s.
(c) Agencies shall consider requiring
incorporation of value engineering
clauses in appropriate subcontracts.
(d)(1) Agencies other than the Department of Defense shall use the value
engineering
program
requirement
clause (52.248–1, Alternates I or II) in
initial production contracts for major
systems programs (see definition of
major system in 34.001) and for contracts for major systems research and
development except where the contracting officer determines and documents the file to reflect that such use
is not appropriate
(2) In Department of Defense contracts, the VE program requirement
clause (52.248–1, Alternates I or II),
shall be placed in initial production solicitations and contracts (first and second production buys) for major system
acquisition programs as defined in DoD
Directive 5000.1, except as specified in
subdivisions (d)(2)(i) and (ii) of this section. A program requirement clause
may be included in initial production
contracts for less than major systems
48.101 General.
(a) Value engineering is the formal
technique by which contractors may (1)
voluntarily suggest methods for performing more economically and share
in any resulting savings or (2) be required to establish a program to identify and submit to the Government
methods for performing more economically. Value engineering attempts to
eliminate, without impairing essential
functions or characteristics, anything
that increases acquisition, operation,
or support costs.
(b) There are two value engineering
approaches:
(1) The first is an incentive approach
in which contractor participation is
voluntary and the contractor uses its
own resources to develop and submit
any value engineering change proposals
(VECP’s). The contract provides for
sharing of savings and for payment of
the contractor’s allowable development
and implementation costs only if a
VECP is accepted. This voluntary approach should not in itself increase
costs to the Government.
(2) The second approach is a mandatory program in which the Government
requires and pays for a specific value
engineering program effort. The contractor must perform value engineering of the scope and level of effort required by the Government’s program
plan and included as a separately
priced item of work in the contract
Schedule. No value engineering (VE)
sharing is permitted in architect-engineer contracts. All other contracts
with a program clause share in savings
on accepted VECP’s, but at a lower percentage rate than under the voluntary
approach. The objective of this value
engineering program requirement is to
48.102
Policies.
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48.103
48 CFR Ch. 1 (10–1–03 Edition)
acquisition programs if there is a potential for savings. The contracting officer is not required to include a program requirement clause in initial production contracts—
(i) Where, in the judgment of the contracting officer, the prime contractor
has demonstrated an effective VE program during either earlier program
phases, or during other recent comparable production contracts.
(ii) Which are awarded on the basis of
competition.
(e) Value engineering incentive payments do not constitute profit or fee
within the limitations imposed by 10
U.S.C. 2306(d) and 41 U.S.C. 254(b) (see
15.404–4(c)(4)(i).
(f) Generally, profit or fee on the instant contact should not be adjusted
downward as a result of acceptance of a
VECP. Profit or fee shall be excluded
when calculating instant or future contract savings.
(g) The contracting officer determines the sharing periods and sharing
rates on a case-by-case basis using the
guidelines in 48.104–1 and 48.104–2, respectively. In establishing a sharing
period and sharing rate, the contracting officer must consider the following, as appropriate, and must insert
supporting rationale in the contract
file:
(1) Extent of the change.
(2) Complexity of the change.
(3) Development risk (e.g., contractor’s financial risk).
(4) Development cost.
(5) Performance and/or reliability impact.
(6) Production period remaining at
the time of VECP acceptance.
(7) Number of units affected.
(h) Contracts for architect-engineer
services must require a mandatory
value engineering program to reduce
total ownership cost in accordance
with 48.101(b)(2). However, there must
be no sharing of value engineering savings in contracts for architect-engineer
services.
(i) Agencies shall establish procedures for funding and payment of the
contractor’s share of collateral savings
and future contract savings.
[48 FR 42443, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 54 FR 5057, Jan. 31,
1989; 55 FR 3887, Feb. 5, 1990; 61 FR 39221, July
26, 1996; 62 FR 51271, Sept. 30, 1997; 64 FR
51847, Sept. 24, 1999]
48.103 Processing value
change proposals.
engineering
(a) Instructions to the contractor for
preparing a VECP and submitting it to
the Government are included in paragraphs (c) and (d) of the value engineering clauses prescribed in subpart 48.2.
Upon receiving a VECP, the contracting officer or other designated official shall promptly process and objectively evaluate the VECP in accordance with agency precedures and shall
document the contract file with the rationale for accepting or rejecting the
VECP.
(b) The contracting officer is responsible for accepting or rejecting the
VECP within 45 days from its receipt
by the Government. If the Government
will need more time to evaluate the
VECP, the contracting officer shall notify the contractor promptly in writing
giving the reasons and the anticipated
decision date. The contractor may
withdraw, in whole or in part, any
VECP not accepted by the Government
within the period specified in the
VECP. Any VECP may be approved, in
whole or in part, by a contract modification incorporating the VECP. Until
the effective date of the contract modification, the contractor shall perform
in accordance with the existing contract. If the Government accepts the
VECP, but properly rejects units subsequently delivered or does not receive
units on which a savings share was
paid, the contractor shall reimburse
the Government for the proportionate
share of these payments. If the VECP
is not accepted, the contracting officer
shall provide the contractor with
prompt written notification, explaining the reasons for rejection.
(c) The following Government decisions are unilateral decisions made
solely at the discretion of the Government:
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48.104–2
(1) The decision to accept or reject a
VECP.
(2) The determination of collateral
costs or collateral savings.
(3) The decision as to which of the
sharing rates applies when Alternate II
of the clause at 52.248–1, Value Engineering, is used.
(4) The contracting officer’s determination of the duration of the sharing
period and the contractor’s sharing
rate.
[48 FR 42443, Sept. 19, 1983, as amended at 54
FR 5057, Jan. 31, 1989; 64 FR 72449, Dec. 27,
1999]
48.104
Sharing arrangements.
48.104–1 Determining sharing period.
(a) Contracting officers must determine discrete sharing periods for each
VECP. If more than one VECP is incorporated into a contract, the sharing period for each VECP need not be identical.
(b) The sharing period begins with acceptance of the first unit incorporating
the VECP. Except as provided in paragraph (c) of this section, the end of the
sharing period is a specific calendar
date that is the later of—
(1) 36 to 60 consecutive months (set at
the discretion of the contracting officer for each VECP) after the first unit
affected by the VECP is accepted; or
(2) The last scheduled delivery date
of an item affected by the VECP under
the instant contract delivery schedule
in effect at the time the VECP is accepted.
(c) For engineering-development contracts and contracts containing lowrate-initial-production or early production units, the end of the sharing period is based not on a calendar date,
but on acceptance of a specified quantity of future contract units. This
quantity is the number of units affected by the VECP that are scheduled
to be delivered over a period of between
36 and 60 consecutive months (set at
the discretion of the contracting officer for each VECP) that spans the
highest planned production, based on
planning and programming or production documentation at the time the
VECP is accepted. The specified quantity begins with the first future contract unit affected by the VECP and
continues over consecutive deliveries
until the sharing period ends at acceptance of the last of the specified quantity of units.
(d) For contracts (other than those in
paragraph (c) of this subsection) for
items requiring a prolonged production
schedule (e.g., ship construction, major
system acquisition), the end of the
sharing period is determined according
to paragraph (b) of this subsection.
Agencies may prescribe sharing of future contract savings on all future contract units to be delivered under contracts awarded within the sharing period for essentially the same item,
even if the scheduled delivery date is
outside the sharing period.
[64 FR 51847, Sept. 24, 1999]
48.104–2
Sharing acquisition savings.
(a) Supply or service contracts. (1) The
sharing base for acquisition savings is
the number of affected end items on
contracts of the contracting office accepting the VECP. The sharing rates
(Government/contractor) for net acquisition savings for supplies and services
are based on the type of contract, the
value engineering clause or alternate
used, and the type of savings, as follows:
GOVERNMENT/CONTRACTOR SHARES OF NET
ACQUISITION SAVINGS
[Figures in percent]
Sharing arrangement
Incentive (voluntary)
Contract type
Instant
contract
rate
Fixed-price (includes fixedprice-award-fee; excludes other fixed-price
incentive contracts)
Incentive (fixed-price or
cost) (other than award
fee)
Concurrent
and
future
contract
rate
1 50/
1 50/
50
50
(2)
1 50/
Program requirement
(mandatory)
Instant
contract
rate
Concurrent
and
future
contract
rate
75/25
75/25
(2)
75/25
50
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48.104–2
48 CFR Ch. 1 (10–1–03 Edition)
GOVERNMENT/CONTRACTOR SHARES OF NET
ACQUISITION SAVINGS—Continued
[Figures in percent]
Sharing arrangement
Incentive (voluntary)
Contract type
Instant
contract
rate
Cost-reimbursement (includes cost-plus-awardfee; excludes other costtype incentive contracts)
Concurrent
and
future
contract
rate
3 75/
3 75/
25
25
Program requirement
(mandatory)
Instant
contract
rate
Concurrent
and
future
contract
rate
85/15
85/15
1 The contracting officer may increase the contractor’s sharing rate to as high as 75 percent for each VECP. (See
48.102(g) (1) through (7).)
2 Same sharing arrangement as the contract’s profit or fee
adjustment formula.
3 The contracting officer may increase the contractor’s sharing rate to as high as 50 percent for each VECP. (See
48.102(g) (1) through (7).)
(2) Acquisition savings may be realized on the instant contract, concurrent contracts, and future contracts.
The contractor is entitled to a percentage share (see paragraph (a)(1) of this
section) of any net acquisition savings.
Net acquisition savings result when the
total of acquisition savings becomes
greater than the total of Government
costs and any negative instant contract savings. This may occur on the
instant contract or it may not occur
until reductions have been negotiated
on concurrent contracts or until future
contract savings are calculated, either
through lump-sum payment or as each
future contract is awarded.
(i) When the instant contract is not
an incentive contract, the contractor’s
share of net acquisition savings is calculated and paid each time such savings are realized. This may occur once,
several times, or, in rare cases, not at
all.
(ii) When the instant contract is an
incentive contract, the contractor
shares in instant contract savings
through the contract’s incentive structure. In calculating acquisition savings
under incentive contracts, the contracting officer shall add any negative
instant contract savings to the target
cost or to the target price and ceiling
price and then offset these negative instant contract savings and any Govern-
ment costs against concurrent and future contract savings.
(3) The contractor shares in the savings on all affected units scheduled for
delivery during the sharing period. The
contractor is responsible for maintaining, for 3 years after final payment on
the contract under which the VECP
was accepted, records adequate to identify the first delivered unit incorporating the applicable VECP.
(4) Contractor shares of savings are
paid through the contract under which
the VECP was accepted. On incentive
contracts, the contractor’s share of
concurrent and future contract savings
and of collateral savings shall be paid
as a separate firm-fixed-price contract
line item on the instant contract.
(5) Within 3 months after concurrent
contracts have been modified to reflect
price reductions attributable to use of
the VECP, the contracting officer shall
modify the instant contract to provide
the contractor’s share of savings.
(6) The contractor’s share of future
contract savings may be paid as subsequent contracts are awarded or in a
lump-sum payment at the time the
VECP is accepted. The lump-sum method may be used only if the contracting
officer has established that this is the
best way to proceed and the contractor
agrees. The contracting officer ordinarily shall make calculations as future contracts are awarded and, within
3 months after their award, modify the
instant contract to provide the contractor’s share of savings. For future
contract savings calculated under the
optional lump-sum method, the sharing
base is an estimate of the number of
items that the contracting office will
purchase for delivery during the sharing period. In deciding whether or not
to use the more convenient lump-sum
method for an individual VECP, the
contracting officer shall consider—
(i) The accuracy with which the number of items to be delivered during the
sharing period can be estimated and
the probability of actual production of
the projected quantity;
(ii) The availability of funds for a
lump-sum payment; and
(iii) The administrative expense of
amending the instant contract as future contracts are awarded.
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Federal Acquisition Regulation
48.201
(b) Construction contracts. Sharing on
construction contracts applies only to
savings on the instant contract and to
collateral savings. The Government’s
share of savings is determined by subtracting Government costs from instant contract savings and multiplying
the result by (1) 45 percent for fixedprice contracts; or (2) 75 percent for
cost-reimbursement contracts. Value
engineering sharing does not apply to
incentive construction contracts.
[48 FR 42443, Sept. 19, 1983, as amended at 54
FR 5057, Jan. 31, 1989; 55 FR 3887, Feb. 5, 1990;
59 FR 11387, Mar. 10, 1994. Redesignated and
amended at 64 FR 51847, 51848, Sept. 24, 1999]
48.104–3 Sharing collateral savings.
(a) The Government shares collateral
savings with the contractor, unless the
head of the contracting activity has determined that the cost of calculating
and tracking collateral savings will exceed the benefits to be derived (see
48.201(e)).
(b) The contractor’s share of collateral savings may range from 20 to 100
percent of the estimated savings to be
realized during a typical year of use
but must not exceed the greater of—
(1) The contract’s firm-fixed-price,
target price, target cost, or estimated
cost, at the time the VECP is accepted;
or
(2) $100,000.
(c) The contracting officer must determine the sharing rate for each
VECP.
(d) In determining collateral savings,
the contracting officer must consider
any degradation of performance, service life, or capability.
cost-effective, and the no-cost settlement would provide adequate consideration to the Government. Under this
method of settlement, the contractor
would keep all of the savings on the instant contract, and all savings on its
concurrent contracts only. The Government would keep all savings resulting from concurrent contracts placed
with other sources, savings from all future contracts, and all collateral savings. Use of this method must be by
mutual agreement of both parties for
individual VECPs.
[63 FR 34079, June 22, 1998. Redesignated at 64
FR 51847, Sept. 24, 1999]
48.105 Relationship
tives.
to
other
Contractors should be offered the
fullest possible range of motivation,
yet the benefits of an accepted VECP
should not be rewarded both as value
engineering shares and under performance, design-to-cost, or similar incentives of the contract. To that end,
when performance, design-to-cost, or
similar
targets
are
set
and
incentivized, the targets of such incentives affected by the VECP are not to
be adjusted because of the acceptance
of the VECP. Only those benefits of an
accepted VECP not rewardable under
other incentives are rewarded under a
value engineering clause.
[48 FR 42443, Sept. 19, 1983, as amended at 54
FR 5057, Jan. 31, 1989]
Subpart 48.2—Contract Clauses
[64 FR 51848, Sept. 24, 1999]
48.201 Clauses for supply or service
contracts.
48.104–4 Sharing alternative—no-cost
settlement method.
In selecting an appropriate mechanism for incorporating a VECP into a
contract, the contracting officer shall
analyze the different approaches available to determine which one would be
in the Government’s best interest. Contracting officers should balance the administrative costs of negotiating a settlement against the anticipated savings. A no-cost settlement may be used
if, in the contracting officer’s judgment, reliance on other VECP approaches likely would not be more
(a) General. The contracting officer
shall insert a value engineering clause
in solicitations and contracts when the
contract amount is expected to be
$100,000 or more, except as specified in
subparagraphs (1) through (5) and in
paragraph (f) below. A value engineering clause may be included in contracts
of lesser value if the contracting officer sees a potential for significant savings. Unless the chief of the contracting office authorizes its inclusion,
the contracting officer shall not include a value engineering clause in solicitations and contracts—
903
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48.201
48 CFR Ch. 1 (10–1–03 Edition)
(1) For research and development
other than full-scale development;
(2) For engineering services from notfor-profit or nonprofit organizations;
(3) For personal services (see subpart
37.1);
(4) Providing for product or component improvement, unless the value engineering incentive application is restricted to areas not covered by provisions for product or component improvement;
(5) For commercial products (see part
11) that do not involve packaging specifications or other special requirements
or specifications; or
(6) When the agency head has exempted the contract (or a class of contracts) from the requirements of part
48.
(b) Value engineering incentive. To provide a value engineering incentive, the
contracting officer shall insert the
clause at 52.248–1, Value Engineering,
in solicitations and contracts except as
provided in paragraph (a) above (but
see subparagraph (e)(1) below).
(c) Value engineering program requirement. (1) If a mandatory value engineering effort is appropriate (i.e., if the
contracting officer considers that substantial savings to the Government
may result from a sustained value engineering effort of a specified level),
the contracting officer shall use the
clause with its Alternate I (but see subparagraph (e)(2) below).
(2) The value engineering program requirement may be specified by the Government in the solicitation or, in the
case of negotiated contracting, proposed by the contractor as part of its
offer and included as a subject for negotiation. The program requirement
shall be shown as a separately priced
line item in the contract Schedule.
(d) Value engineering incentive and
program requirement. (1) If both a value
engineering incentive and a mandatory
program requirement are appropriate,
the contracting officer shall use the
clause with its Alternate II (but see
subparagraph (e)(3) below).
(2) The contract shall restrict the
value engineering program requirement to well-defined areas of performance designated by line item in the
contract Schedule. Alternate II applies
a value engineering program to the
specified areas and a value engineering
incentive to the remaining areas of the
contract.
(e) Collateral savings computation not
cost-effective. If the head of the contracting activity determines for a contract or class of contracts that the cost
of computing and tracking collateral
savings will exceed the benefits to be
derived, the contracting officer shall
use the clause with its—
(1) Alternate III if a value engineering incentive is involved;
(2) Alternate III and Alternate I if a
value engineering program requirement is involved; or
(3) Alternate III and Alternate II if
both an incentive and a program requirement are involved.
(f) Architect-engineering contracts. The
contracting officer shall insert the
clause at 52.248–2, Value Engineering—
Architect-Engineer, in solicitations
and contracts whenever the Government requires and pays for a specific
value engineering effort in architectengineer contracts. The clause at
52.248–1, Value Engineering, shall not
be used in solicitations and contracts
for architect-engineer services.
(g) Engineering-development solicitations and contracts. For engineering-development solicitations and contracts,
and solicitations and contracts containing low-rate-initial-production or
early production units, the contracting
officer must modify the clause at
52.248–1, Value Engineering, by—
(1) Revising paragraph (i)(3)(i) of the
clause by substituting ‘‘a number equal
to the quantity required to be delivered
over a period of between 36 and 60 consecutive months (set at the discretion
of the Contracting Officer for each
VECP) that spans the highest planned
production, based on planning and programming or production documentation at the time the VECP is accepted;’’ for ‘‘the number of future contract
units scheduled for delivery during the
sharing period;’’ and
(2) Revising the first sentence under
paragraph (3) of the definition of ‘‘acquisition savings’’ by substituting ‘‘a
number equal to the quantity to be delivered over a period of between 36 and
60 consecutive months (set at the discretion of the Contracting Officer for
each VECP) that spans the highest
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Federal Acquisition Regulation
Pt. 49
planned production, based on planning
and programming or production documentation at the time the VECP is accepted.’’ for ‘‘the number of future contract units in the sharing base.’’
(h) Extended production period solicitations and contracts. In solicitations and
contracts for items requiring an extended period for production (e.g., ship
construction, major system acquisition), if agency procedures prescribe
sharing of future contract savings on
all units to be delivered under contracts awarded during the sharing period (see 48.104–1(c)), the contracting
officer must modify the clause at
52.248–1, Value Engineering, by revising
paragraph (i)(3)(i) of the clause and the
first sentence under paragraph (3) of
the definition of ‘‘acquisition savings’’
by substituting ‘‘under contracts
awarded during the sharing period’’ for
‘‘during the sharing period.’’
[48 FR 42443, Sept. 19, 1983, as amended at 54
FR 5057, Jan. 31, 1989; 55 FR 3887, Feb. 5, 1990;
64 FR 51848, Sept. 24, 1999]
48.202 Clause for construction contracts.
The contracting officer shall insert
the clause at 52.248–3, Value Engineering—Construction, in construction solicitations and contracts when the contract amount is estimated to be
$100,000 or more, unless an incentive
contract is contemplated. The contracting officer may include the clause
in contracts of lesser value if the contracting officer sees a potential for significant savings. The contracting officer shall not include the clause in incentive-type construction contracts. If
the head of the contracting activity determines that the cost of computing
and tracking collateral savings for a
contract will exceed the benefits to be
derived, the contracting officer shall
use the clause with its Alternate I.
PART 49—TERMINATION OF
CONTRACTS
Sec.
49.000
49.001
49.002
Scope of part.
Definitions.
Applicability.
Subpart 49.1—General Principles
49.100
Scope of subpart.
49.101 Authorities and responsibilities.
49.102 Notice of termination.
49.103 Methods of settlement.
49.104 Duties of prime contractor after receipt of notice of termination.
49.105 Duties of termination contracting officer after issuance of notice of termination.
49.105–1 Termination status reports.
49.105–2 Release of excess funds.
49.105–3 Termination case file.
49.105–4 Cleanup of construction site.
49.106 Fraud or other criminal conduct.
49.107 Audit of prime contract settlement
proposals and subcontract settlements.
49.108 Settlement of subcontract settlement
proposals.
49.108–1 Subcontractor’s rights.
49.108–2 Prime contractor’s rights and obligations.
49.108–3 Settlement procedure.
49.108–4 Authorization for subcontract settlements without approval or ratification.
49.108–5 Recognition of judgments and arbitration awards.
49.108–6 Delay in settling subcontractor settlement proposals.
49.108–7 Government assistance in settling
subcontracts.
49.108–8 Assignment of rights under subcontracts.
49.109 Settlement agreements.
49.109–1 General.
49.109–2 Reservations.
49.109–3 Government property.
49.109–4 No-cost settlement.
49.109–5 Partial settlements.
49.109–6 Joint settlement of two or more
settlement proposals.
49.109–7 Settlement by determination.
49.110 Settlement
negotiation
memorandum.
49.111 Review of proposed settlements.
49.112 Payment.
49.112–1 Partial payments.
49.112–2 Final payment.
49.113 Cost principles.
49.114 Unsettled contract changes.
49.115 Settlement of terminated incentive
contracts.
Subpart 49.2—Additional Principles for
Fixed-Price Contracts Terminated for
Convenience
49.201 General.
49.202 Profit.
49.203 Adjustment for loss.
49.204 Deductions.
49.205 Completed end items.
49.206 Settlement proposals.
49.206–1 Submission of settlement proposals.
49.206–2 Bases for settlement proposals.
49.206–3 Submission of inventory schedules.
49.207 Limitation on settlements.
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49.000
48 CFR Ch. 1 (10–1–03 Edition)
49.208 Equitable adjustment after partial
termination.
Subpart 49.3—Additional Principles for
Cost-Reimbursement Contracts Terminated for Convenience
49.301 General.
49.302 Discontinuance of vouchers.
49.303 Procedure after discontinuing vouchers.
49.303–1 Submission of settlement proposal.
49.303–2 Submission of inventory schedules.
49.303–3 Audit of settlement proposal.
49.303–4 Adjustment of indirect costs.
49.303–5 Final settlement.
49.304 Procedure for partial termination.
49.304–1 General.
49.304–2 Submission of settlement proposal
(fee only).
49.304–3 Submission of vouchers.
49.305 Adjustment of fee.
49.305–1 General.
49.305–2 Construction contracts.
Subpart 49.4—Termination for Default
49.401 General.
49.402 Termination of fixed-price contracts
for default.
49.402–1 The Government’s right.
49.402–2 Effect of termination for default.
49.402–3 Procedure for default.
49.402–4 Procedure in lieu of termination for
default.
49.402–5 Memorandum by the contracting
officer.
49.402–6 Repurchase against contractor’s account.
49.402–7 Other damages.
49.403 Termination of cost-reimbursement
contracts for default.
49.404 Surety-takeover agreements.
49.405 Completion by another contractor.
49.406 Liquidation of liability.
Subpart 49.5—Contract Termination
Clauses
49.501 General.
49.502 Termination for convenience of the
Government.
49.503 Termination for convenience of the
Government and default.
49.504 Termination of fixed-price contracts
for default.
49.505 Other termination clauses.
Subpart 49.6—Contract Termination Forms
and Formats
49.601 Notice of termination for convenience.
49.601–1 Telegraphic notice.
49.601–2 Letter notice.
49.602 Forms for settlement of terminated
contracts.
49.602–1 Termination settlement proposal
forms.
49.602–2 Inventory schedule forms.
49.602–3 Schedule of accounting information.
49.602–4 Partial payments.
49.602–5 Settlement agreement.
49.603 Formats for termination for convenience settlement agreements.
49.603–1 Fixed-price
contracts—complete
termination.
49.603–2 Fixed-price contracts—partial termination.
49.603–3 Cost-reimbursement
contracts—
complete termination, if settlement includes cost.
49.603–4 Cost-reimbursement
contracts—
complete termination, with settlement
limited to fee.
49.603–5 Cost-reimbursement
contracts—
partial termination.
49.603–6 No-cost settlement agreement—
complete termination.
49.603–7 No-cost settlement agreement—partial termination.
49.603–8 Fixed-price contracts—settlements
with subcontractors only.
49.603–9 Settlement of reservations.
49.604 Release of excess funds under terminated contracts.
49.605 Request to settle subcontractor settlement proposals.
49.606 Granting subcontract settlement authorization.
49.607 Delinquency notices.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42447, Sept. 19, 1983, unless
otherwise noted.
49.000 Scope of part.
This part establishes policies and
procedures relating to the complete or
partial termination of contracts for the
convenience of the Government or for
default. It prescribes contract clauses
relating to termination and excusable
delay and includes instructions for
using termination and settlement
forms.
49.001 Definitions.
As used in this part—
Other work means any current or
scheduled work of the contractor,
whether Government or commercial,
other than work related to the terminated contract.
Settlement agreement means a written
agreement in the form of a contract
modification settling all or a severable
portion of a settlement proposal.
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Federal Acquisition Regulation
49.101
Settlement proposal means a proposal
for effecting settlement of a contract
terminated in whole or in part, submitted by a contractor or subcontractor in the form, and supported by
the data, required by this part. A settlement proposal is included within the
generic meaning of the word claim
under false claims acts (see 18 U.S.C.
287 and 31 U.S.C. 3729).
Termination inventory means the same
as the language in 45.601.
Unsettled contract change means any
contract change or contract term for
which a definitive modification is required but has not been executed.
[48 FR 42443, Sept. 19, 1983, as amended at 51
FR 2666, Jan. 17, 1986; 66 FR 2134, Jan. 10,
2001; 67 FR 43514, June 27, 2002]
49.002 Applicability.
(a) This part applies to contracts
that provide for termination for the
convenience of the Government or for
the default of the contractor (see also
13.302–4).
(b) Contractors shall use this part,
unless inappropriate, to settle subcontracts terminated as a result of
modification of prime contracts. The
contracting officer shall use this part
as a guide in evaluating settlements of
subcontracts terminated for the convenience of a contractor whenever the
settlement will be the basis of a proposal for reimbursement from the Government under a cost-reimbursement
contract.
(c) The contracting officer may use
this part in determining an equitable
adjustment resulting from a modification under the Changes clause of any
contract, except cost-reimbursement
contracts.
(d) When action to be taken or authority to be exercised under this part
depends upon the amount of the settlement proposal, that amount shall be
determined by deducting from the
gross settlement proposed the amounts
payable for completed articles or work
at the contract price and amounts for
the settlement of subcontractor settlement proposals. Credits for retention
or other disposal of termination inventory and amounts for advance or partial payments shall not be deducted.
[48 FR 42447, Sept. 19, 1983, as amended at 62
FR 64927, Dec. 9, 1997]
Subpart 49.1—General Principles
49.100
Scope of subpart.
(a) This subpart deals with—
(1) The authority and responsibility
of contracting officers to terminate
contracts in whole or in part for the
convenience of the Government or for
default;
(2) Duties of the contractor and the
contracting officer after issuance of
the notice of termination;
(3) General procedures for the settlement of terminated contracts; and
(4) Settlement agreements.
(b) Additional principles applicable
to the termination for convenience and
settlement of fixed-price and cost-reimbursement contracts are included in
subparts 49.2 and 49.3. Additional principles applicable to the termination of
contracts for default are included in
subpart 49.4.
49.101 Authorities
ities.
and
responsibil-
(a) The termination clauses or other
contract clauses authorize contracting
officers to terminate contracts for convenience, or for default, and to enter
into settlement agreements under this
regulation.
(b) The contracting officer shall terminate contracts, whether for default
or convenience, only when it is in the
Government’s
interest.
The
contracting officer shall effect a no-cost
settlement instead of issuing a termination notice when (1) it is known that
the contractor will accept one, (2) Government property was not furnished,
and (3) there are no outstanding payments, debts due the Government, or
other contractor obligations.
(c) When the price of the undelivered
balance of the contract is less than
$5,000, the contract should not normally be terminated for convenience
but should be permitted to run to completion.
(d) After the contracting officer
issues a notice of termination, the termination contracting officer (TCO) is
responsible for negotiating any settlement with the contractor, including a
no-cost settlement if appropriate.
Auditors and TCO’s shall promptly
schedule and complete audit reviews
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49.102
48 CFR Ch. 1 (10–1–03 Edition)
and negotiations, giving particular attention to the need for timely action
on all settlements involving small
business concerns.
(e) If the same item is under contract
with both large and small business concerns and it is necessary to terminate
for convenience part of the units still
to be delivered, preference shall be
given to the continuing performance of
small business contracts over large
business contracts unless the chief of
the contracting office determines that
this is not in the Government’s interest.
(f) The contracting officer is responsible for the release of excess funds resulting from the termination unless
this responsibility is specifically delegated to the TCO.
[48 FR 42447, Sept. 19, 1983, as amended at 55
FR 52797, Dec. 21, 1990; 56 FR 67134, Dec. 27,
1991]
49.102 Notice of termination.
(a) General. The contracting officer
shall terminate contracts for convenience or default only by a written notice to the contractor (see 49.601). When
the notice is mailed, it shall be sent by
certified mail, return receipt requested. When the contracting office
arranges for hand delivery of the notice, a written acknowledgment shall
be obtained from the contractor. The
notice shall state—
(1) That the contract is being terminated for the convenience of the Government (or for default) under the contract clause authorizing the termination;
(2) The effective date of termination;
(3) The extent of termination;
(4) Any special instructions; and
(5) The steps the contractor should
take to minimize the impact on personnel if the termination, together
with all other outstanding terminations, will result in a significant reduction in the contractor’s work force
(see paragraph (g) of the notice in
49.601–2). If the termination notice is
by telegram, include these steps in the
confirming letter or modification.
(b) Distribution of copies. The contracting officer shall simultaneously
send the termination notice to the contractor, and a copy to the contract administration office and to any known
assignee, guarantor, or surety of the
contractor.
(c) Amendment of termination notice.
The contracting officer may amend a
termination notice to—
(1) Correct nonsubstantive mistakes
in the notice;
(2) Add supplemental data or instructions; or
(3) Rescind the notice if it is determined that items terminated had been
completed or shipped before the contractor’s receipt of the notice.
(d) Reinstatement of terminated contracts. Upon written consent of the contractor, the contracting office may reinstate the terminated portion of a
contract in whole or in part by amending the notice of termination if it has
been determined in writing that—
(1) Circumstances clearly indicate a
requirement for the terminated items;
and
(2) Reinstatement is advantageous to
the Government.
49.103
Methods of settlement.
Settlement of terminated cost-reimbursement contracts and fixed-price
contracts terminated for convenience
may be effected by (a) negotiated
agreement, (b) determination by the
TCO, (c) costing-out under vouchers
using SF 1034, Public Voucher for Purchases and Services Other Than Personal, for cost-reimbursement contracts (as prescribed in subpart 49.3), or
(d) a combination of these methods.
When possible, the TCO should negotiate a fair and prompt settlement with
the contractor. The TCO shall settle a
settlement proposal by determination
only when it cannot be settled by
agreement.
49.104 Duties of prime contractor after
receipt of notice of termination.
After receipt of the notice of termination, the contractor shall comply
with the notice and the termination
clause of the contract, except as otherwise directed by the TCO. The notice
and clause applicable to convenience
terminations generally require that
the contractor—
(a) Stop work immediately on the
terminated portion of the contract and
stop placing subcontracts thereunder;
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(b) Terminate all subcontracts related to the terminated portion of the
prime contract;
(c) Immediately advise the TCO of
any special circumstances precluding
the stoppage of work;
(d) Perform the continued portion of
the contract and submit promptly any
request for an equitable adjustment of
price for the continued portion, supported by evidence of any increase in
the cost, if the termination is partial;
(e) Take necessary or directed action
to protect and preserve property in the
contractor’s possession in which the
Government has or may acquire an interest and, as directed by the TCO, deliver the property to the Government;
(f) Promptly notify the TCO in writing of any legal proceedings growing
out of any subcontract or other commitment related to the terminated portion of the contract;
(g) Settle outstanding liabilities and
proposals arising out of termination of
subcontracts, obtaining any approvals
or ratifications required by the TCO;
(h) Promptly submit the contractor’s
own settlement proposal, supported by
appropriate schedules; and
(i) Dispose of termination inventory,
as directed or authorized by the TCO.
49.105 Duties of termination contracting officer after issuance of notice of termination.
(a) Consistent with the termination
clause and the notice of termination,
the TCO shall—
(1) Direct the action required of the
prime contractor;
(2) Examine the settlement proposal
of the prime contractor and, when appropriate, the settlement proposals of
subcontractors;
(3) Promptly negotiate settlement
with the contractor and enter into a
settlement agreement; and
(4) Promptly settle the contractor’s
settlement proposal by determination
for the elements that cannot be agreed
on, if unable to negotiate a complete
settlement.
(b) To expedite settlement, the TCO
may request specially qualified personnel to—
(1) Assist in dealings with the contractor;
(2) Advise on legal and contractual
matters;
(3) Conduct accounting reviews and
advise and assist on accounting matters; and
(4) Perform the following functions
regarding termination inventory (see
subpart 45.6):
(i) Verify its existence.
(ii) Determine qualitative and quantitative allocability.
(iii) Make recommendations concerning serviceability.
(iv) Undertake necessary screening
and redistribution.
(v) Assist the contractor in accomplishing other disposition.
(c) The TCO should promptly hold a
conference with the contractor to develop a definite program for effecting
the settlement. When appropriate in
the judgment of the TCO, after consulting with the contractor, principal
subcontractors should be requested to
attend. Topics that should be discussed
at the conference and documented include—
(1) General principles relating to the
settlement of any settlement proposal,
including obligations of the contractor
under the termination clause of the
contract;
(2) Extent of the termination, point
at which work is stopped, and status of
any plans, drawings, and information
that would have been delivered had the
contract been completed;
(3) Status of any continuing work;
(4) Obligation of the contractor to
terminate subcontracts and general
principles to be followed in settling
subcontractor settlement proposals;
(5) Names of subcontractors involved
and the dates termination notices were
issued to them;
(6) Contractor personnel handling review and settlement of subcontractor
settlement proposals and the methods
being used;
(7) Arrangements for transfer of title
and delivery to the Government of any
material required by the Government;
(8) General principles and procedures
to be followed in the protection, preservation, and disposition of the contractor’s and subcontractors’ termination
inventories, including the preparation
of termination inventory schedules;
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49.105–1
48 CFR Ch. 1 (10–1–03 Edition)
(9) Contractor accounting practices
and preparation of SF 1439 (Schedule of
Accounting Information (49.602–3);
(10) Form in which to submit settlement proposals;
(11) Accounting review of settlement
proposals;
(12) Any requirement for interim financing in the nature of partial payments;
(13) Tentative time schedule for negotiation of the settlement, including
submission by the contractor and subcontractors of settlement proposals,
termination inventory schedules, and
accounting information schedules (see
49.206–3 and 49.303–2);
(14) Actions taken by the contractor
to minimize impact upon employees affected adversely by the termination
(see paragraph (g) of the letter notice
in 49.601–2); and
(15) Obligation of the contractor to
furnish accurate, complete, and current cost or pricing data, and to certify
to that effect in accordance with
15.403–4(a)(1) when the amount of a termination settlement agreement, or a
partial termination settlement agreement plus the estimate to complete the
continued portion of the contract exceeds the threshold in 15.403–4.
[48 FR 42447, Sept. 19, 1983, as amended at 61
FR 39221, July 26, 1996; 62 FR 51271, Sept. 30,
1997]
49.105–1 Termination status reports.
When the TCO and contracting officer are in different activities, the TCO
will furnish periodic status reports on
termination actions to the contracting
office upon request. The contracting office shall specify the information required.
49.105–2 Release of excess funds.
(a) The TCO shall estimate the funds
required to settle the termination, and
within 30 days after the receipt of the
termination notice, recommend the release of excess funds to the contracting
officer. The initial deobligation of excess funds should be accomplished in a
timely manner by the contracting officer, or the TCO, if delegated the responsibility. The TCO shall not recommend the release of amounts under
$1,000, unless requested by the contracting officer.
(b) The TCO shall maintain continuous surveillance of required funds to
permit timely release of any additional
excess funds (a recommended format
for release of excess funds is in 49.604).
If previous releases of excess funds result in a shortage of the amount required for settlement, the TCO shall
promptly inform the contracting officer, who shall reinstate the funds within 30 days.
[56 FR 67134, Dec. 27, 1991]
49.105–3
Termination case file.
The TCO responsible for negotiating
the final settlement shall establish a
separate case file for each termination.
This file will include memoranda and
records of all actions relative to the
settlement (see 4.801).
49.105–4
Cleanup of construction site.
In the case of terminated construction contracts, the contracting officer
shall direct action to ensure the cleanup of the site, protection of serviceable
materials, removal of hazards, and
other action necessary to leave a safe
and healthful site.
49.106 Fraud or other criminal conduct.
If the TCO suspects fraud or other
criminal conduct related to the settlement of a terminated contract, the
TCO shall discontinue negotiations and
report the facts under agency procedures.
49.107 Audit of prime contract settlement proposals and subcontract
settlements.
(a) The TCO shall refer each prime
contractor settlement proposal of
$100,000 or more to the appropriate
audit agency for review and recommendations. The TCO may submit
settlement proposals of less than
$100,000 to the audit agency. Referrals
shall indicate any specific information
or data that the TCO desires and shall
include facts and circumstances that
will assist the audit agency in performing its function. The audit agency
shall develop requested information
and may make any further accounting
reviews it considers appropriate. After
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Federal Acquisition Regulation
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its review, the audit agency shall submit written comments and recommendations to the TCO. When a formal examination of settlement proposals under $100,000 is not warranted,
the TCO will perform or have performed a desk review and include a
written summary of the review in the
termination case file.
(b) The TCO shall refer subcontract
settlements received for approval or
ratification to the appropriate audit
agency for review and recommendations when (1) the amount exceeds
$100,000 or (2) the TCO wants a complete or partial accounting review. The
audit agency shall submit written comments and recommendations to the
TCO. The review by the audit agency
does not relieve the prime contractor
or higher tier subcontractor of the responsibility for performing an accounting review.
(c)(1) The responsibility of the prime
contractor and of each subcontractor
(see 49.108) includes performance of accounting reviews and any necessary
field audits. However, the TCO should
request the Government audit agency
to perform the accounting review of a
subcontractor’s settlement proposal
when—
(i) A subcontractor objects, for competitive reasons, to an accounting review of its records by an upper tier
contractor;
(ii) The Government audit agency is
currently performing audit work at the
subcontractor’s plant, or can perform
the audit more economically or efficiently;
(iii) Audit by the Government is necessary for consistent audit treatment
and orderly administration; or
(iv) The contractor has a substantial
or controlling financial interest in the
subcontractor.
(2) The audit agency should avoid duplication of accounting reviews performed by the upper tier contractor on
subcontractor settlement proposals.
However, this should not preclude the
Government from making additional
reviews when appropriate. When the
contractor is performing accounting
reviews according to this section, the
TCO should request the audit agency to
periodically examine the contractor’s
accounting review procedures and per-
formance, and to make appropriate
comments and recommendations to the
TCO.
(d) The audit report is advisory only,
and is for the TCO to use in negotiating a settlement or issuing a unilateral determination. Government personnel handling audit reports must be
careful not to reveal privileged information or information that will jeopardize the negotiation position of the
Government, the prime contractor, or
a higher tier subcontractor. Consistent
with this, and when in the Government’s interest, the TCO may furnish
audit reports under paragraph (c) above
to prime and higher tier subcontractors for their use in settling subcontract settlement proposals.
[48 FR 42447, Sept. 19, 1983, as amended at 55
FR 52797, Dec. 21, 1990]
49.108 Settlement of subcontract settlement proposals.
49.108–1
Subcontractor’s rights.
A subcontractor has no contractual
rights against the Government upon
the termination of a prime contract. A
subcontractor may have rights against
the prime contractor or intermediate
subcontractor with whom it has contracted. Upon termination of a prime
contract, the prime contractor and
each subcontractor are responsible for
the prompt settlement of the settlement proposals of their immediate subcontractors.
49.108–2 Prime contractor’s rights and
obligations.
(a) Termination for convenience
clauses provide that after receipt of a
termination notice the prime contractor shall, unless directed otherwise
by the TCO, terminate all subcontracts
to the extent that they relate to the
performance of prime work terminated.
Therefore, prime contractors should include a termination clause in their subcontracts for their own protection.
Suggestions regarding use of subcontract termination clauses are in
subpart 49.5.
(b) The failure of a prime contractor
to include an appropriate termination
clause in any subcontract, or to exercise the clause rights, shall not—
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49.108–3
48 CFR Ch. 1 (10–1–03 Edition)
(1) Affect the Government’s right to
require the termination of the subcontract; or
(2) Increase the obligation of the
Government beyond what it would
have been if the subcontract had contained an appropriate clause.
(c) In any case, the reasonableness of
the prime contractor’s settlement with
the subcontractor should normally be
measured by the aggregate amount due
under paragraph (f) of the subcontract
termination
clause
suggested
in
49.502(e). The TCO shall allow reimbursement in excess of that amount
only in unusual cases and then only to
the extent that the terms of the subcontract did not unreasonably increase
the rights of the subcontractor.
part, that the proposed allocation is
reasonable). In considering the reasonableness of any subcontract settlement, the TCO shall generally be guided by the provisions of this part relating to the settlement of prime contracts, and shall comply with any applicable requirements of 49.107 and
49.111 relating to accounting and other
reviews. After the examination, the
TCO shall notify the contractor in
writing of (1) approval or ratification,
or (2) the reasons for disapproval.
49.108–3 Settlement procedure.
(a) Contractors shall settle with subcontractors in general conformity with
the policies and principles relating to
settlement of prime contracts in this
subpart and subparts 49.2 or 49.3. However, the basis and form of the subcontractor’s settlement proposal must
be acceptable to the prime contractor
or the next higher tier subcontractor.
Each settlement must be supported by
accounting data and other information
sufficient for adequate review by the
Government. In no event will the Government pay the prime contractor any
amount for loss of anticipatory profits
or consequential damages resulting
from the termination of any subcontract (but see 49.108–5).
(b) Except as provided in 49.108–4, the
TCO shall require that—
(1) All subcontractor termination inventory be disposed of and accounted
for in accordance with part 45; and
(2) The prime contractor submit, for
approval or ratification, all termination settlements with subcontractors.
(c) The TCO shall promptly examine
each subcontract settlement received
to determine that the subcontract termination was made necessary by the
termination of the prime contract (or
by issuance of a change order—see
49.002(b)). The TCO will also determine
if the settlement was arrived at in good
faith, is reasonable in amount, and is
allocable to the terminated portion of
the contract (or, if allocable only in
(a)(1) The TCO may, upon written request, give written authorization to
the prime contractor to conclude settlements of subcontracts terminated in
whole or in part without approval or
ratification when the amount of settlement (see 49.002(d)) is $100,000 or less,
if—
(i) The TCO is satisfied with the adequacy of the procedures used by the
contractor in settling settlement proposals, including proposals for retention, sale, or other disposal of termination inventory of the immediate and
lower tier subcontractors (the TCO
shall obtain the advice and recommendations of (A) the appropriate
audit agency relating to the adequacy
of the contractor’s audit administration, including personnel, and (B) the
cognizant plant clearance officer relating to the adequacy of the contractor’s
procedures and personnel for the administration of property disposal matters);
(ii) Any termination inventory included in determining the amount of
the settlement will be disposed of as directed by the prime contractor, generally using the requirements of 45.614,
except that the disposition of the inventory shall not (A) be subject to review by the TCO under 49.108–3(c) or
45.607, or (B) be subject to the screening requirements in 45.608; and
(iii) A certificate similar to the certificate in the settlement proposal
form in 49.602–1(a) will accompany the
settlement.
[48 FR 42424, Sept. 19, 1983, as amended at 62
FR 237, Jan. 2, 1997
49.108–4 Authorization for subcontract
settlements without approval or
ratification.
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Federal Acquisition Regulation
49.108–5
(2) Except as provided in subparagraph (4) below, authority granted to a
prime contractor under subparagraph
(1) above by any TCO shall apply to all
Executive agencies’ prime contracts
that are terminated, or modified by
change orders.
(3) Except as provided in subparagraph (4) below, the TCO shall accept,
as part of the prime contractor’s settlement proposal, settlements of terminated lower tier subcontracts concluded by any of the prime contractor’s
immediate or lower tier subcontractors
who have been granted authority as
prime contractors to settle subcontracts; provided, that the settlement is within the limit of the authority. Authorization to settle proposals
of lower tier subcontractors shall not
be granted directly to subcontractors.
However, a prime contractor authorized to approve subcontractor settlements may also exercise this authority
in its capacity as a subcontractor, with
respect to its terminated subcontracts
and orders. When exercising this authority as a subcontractor, the contractor shall notify the purchaser.
(4) The provisions of subparagraphs
(1), (2), and (3) above shall not apply to
contracts under the administration of
any contracting officer if the contracting officer so notifies the prime
contractor concerned. This notice shall
(i) be in writing, and (ii) if subparagraph (3) above is involved, specify any
subcontractor affected.
(b) Section 45.614 shall apply to disposal of completed end items allocable
to the terminated subcontract. However, these items may be disposed of
without review by the TCO under
49.108–3 or 45.607, and without screening
under 45.608, if the total amount (at the
subcontract price) when added to the
amount of the settlement does not exceed the amount authorized under this
subsection.
(c) A TCO granting the authorization
in subparagraph (a)(1) above shall periodically (at least annually) make a selective review of settlements and settlement procedures to determine if the
contractor is making adequate reviews
and fair settlements, and whether the
authorization should remain in effect.
The TCO shall obtain the advice and
recommendations of the appropriate
audit agency and the cognizant plant
clearance officer. When it is determined that the contractor’s procedures
are not adequate, or that improper settlements are being made, or when the
authority has not been used in the preceding 2 years, the TCO shall revoke
the authorization by written notice to
the contractor, effective on the date of
receipt.
(d) The contractor may make any
number of separate settlements with a
single subcontractor but shall not divide settlement proposals solely to
bring them under an authorization
limit. Separate settlement proposals
that would normally be included in a
single proposal, such as those based on
a series of separate orders for the same
item under one contract, shall be consolidated whenever possible.
(e) Upon written request of the contractor, the TCO may increase an authorization granted under subparagraph (a)(1) of this subsection to authorize the contractor to conclude settlements under a particular prime contract. The TCO may limit the increased
authorization to specific subcontracts
or classes of subcontracts.
(f) Authorizations granted under this
49.108–4 shall not authorize the settlement of requisitions or orders placed
with any unit within the contractor’s
corporate entity.
(g) Recommended formats for a request to settle subcontractor settlement proposals and the TCO’s letter of
authorization to the contractor are in
49.605 and 49.606, respectively.
[48 FR 42447, Sept. 19, 1983, as amended at 55
FR 52797, Dec. 21, 1990]
49.108–5 Recognition of judgments and
arbitration awards.
(a) When a subcontractor obtains a
final judgment against a prime contractor, the TCO shall, for the purposes
of settling the prime contract, treat
the amount of the judgment as a cost
of settling with the contractor, to the
extent the judgment is properly allocable to the terminated portion of the
prime contract, if—
(1) The prime contractor has made
reasonable efforts to include in the
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49.108–6
48 CFR Ch. 1 (10–1–03 Edition)
subcontract a termination clause described in 49.502(e), 49.503(c), or a similar clause excluding payment of anticipatory profits or consequential damages;
(2) The provisions of the subcontract
relating to the rights of the parties
upon its termination are fair and reasonable and do not unreasonably increase the common law rights of the
subcontractor;
(3) The contractor made reasonable
efforts to settle the settlement proposal of the subcontractor;
(4) The contractor gave prompt notice to the contracting officer of the
initiation of the proceedings in which
the judgment was rendered and did not
refuse to give the Government control
of the defense of the proceedings; and
(5) The contractor diligently defended the suit or, if the Government
assumed control of the defense of the
proceedings, rendered reasonable assistance requested by the Government.
(b) If the conditions in subparagraphs
(a)(1) through (5) above are not all met,
the TCO may allow the contractor the
part of the judgment considered fair for
settling the subcontract settlement
proposal, giving due regard to the policies in this part for settlement of proposals.
(c) When a contractor and a subcontractor submit the subcontractor’s settlement proposal to arbitration under
any applicable law or contract provision, the TCO shall recognize the arbitration award as the cost of settling
the proposal of the contractor to the
same extent and under the same conditions as in paragraphs (a) and (b)
above.
49.108–6 Delay in settling subcontractor settlement proposals.
When a prime contractor’s inability
to settle with a subcontractor delays
the settlement of the prime contract,
the TCO may settle with the prime
contractor. The TCO shall except the
subcontractor
settlement
proposal
from the settlement in whole or part
and reserve the rights of the Government and the prime contractor with respect to the subcontractor proposal.
49.108–7 Government assistance in settling subcontracts.
In unusual cases the TCO may determine, with the consent of the prime
contractor, that it is in the Government’s interest to provide assistance to
the prime contractor in the settlement
of a particular subcontract. In these
situations, the Government, the prime
contractor, and a subcontractor may
enter into an agreement covering the
settlement of one or more subcontracts. In these settlements, the
subcontractor shall be paid through
the prime contractor as part of the
overall settlement with the prime contractor.
49.108–8 Assignment of rights under
subcontracts.
(a) The termination for convenience
clauses in 52.249, except the short-form
clauses, obligate the prime contractor
to assign to the Government, as directed by the TCO, all rights, titles,
and interest under any subcontract terminated because of termination of the
prime contract. The TCO shall not require the assignment unless it is in the
Government’s interest.
(b) The termination for convenience
clauses (except the short-form clauses)
also provide the Government the right,
in its discretion, to settle and pay any
settlement proposal arising out of the
termination of subcontracts. This right
does not obligate the Government to
settle and pay settlement proposals of
subcontractors. As a general rule, the
prime contractor is obligated to settle
and pay these proposals. However,
when the TCO determines that it is in
the Government’s interest, the TCO
shall, after notifying the contractor,
settle the subcontractor’s proposal
using the procedures for settlement of
prime contracts. An example in which
the Government’s interest would be
served is when a subcontractor is a sole
source and it appears that a delay by
the prime contractor in settlement or
payment of the subcontractor’s proposal will jeopardize the financial position of the subcontractor. Direct settlements with subcontractors are not
encouraged.
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Federal Acquisition Regulation
49.109
49.109–6
Settlement agreements.
49.109–4
49.109–1 General.
When a termination settlement has
been negotiated and all required reviews have been obtained, the contractor and the TCO shall execute a
settlement agreement on Standard
Form 30 (Amendment of Solicitation/
Modification of Contract) (see 49.603).
The settlement shall cover (a) any
setoffs that the Government has
against the contractor that may be applied against the terminated contract
and (b) all settlement proposals of subcontractors, except proposals that are
specifically excepted from the agreement and reserved for separate settlement.
49.109–2 Reservations.
(a) The TCO shall—
(1) Reserve in the settlement agreement any rights or demands of the parties that are excepted from the settlement;
(2) Ensure that the wording of the
reservation does not create any rights
for the parties beyond those in existence before execution of the settlement
agreement;
(3) Mark each applicable settlement
agreement with ‘‘This settlement
agreement contains a reservation’’ and
retain the contract file until the reservation is removed;
(4) Ensure that sufficient funds are
retained to cover complete settlement
of the reserved items; and
(5) At the appropriate time, prepare a
separate settlement of reserved items
and include it in a separate settlement
agreement.
(b) A recommended format for settlement of reservations appears in 49.603–
9.
49.109–3 Government property.
Before execution of a settlement
agreement, the TCO shall determine
the accuracy of the Government property account for the terminated contract. If an audit discloses property for
which the contractor cannot account,
the TCO shall reserve in the settlement
agreement the rights of the Government regarding that property or make
an appropriate deduction from the
amount otherwise due the contractor.
No-cost settlement.
The TCO shall execute a no-cost settlement agreement (see 49.603–6 or
49.603–7, as applicable) if (a) the contractor has not incurred costs for the
terminated portion of the contract or
(b) the contractor is willing to waive
the costs incurred and (c) no amounts
are due the Government under the contract.
49.109–5
Partial settlements.
The TCO should attempt to settle in
one agreement all rights and liabilities
of the parties under the contract except those arising from any continued
portion of the contract. Generally, the
TCO shall not attempt to make partial
settlements covering particular items
of the prime contractor’s settlement
proposal. However, when a TCO cannot
promptly complete settlement under
the terminated contract, a partial settlement may be entered into if (a) the
issues on which agreement has been
reached are clearly severable from
other issues and (b) the partial settlement will not prejudice the Government’s or contractor’s interests in disposing of the unsettled part of the settlement proposal.
49.109–6 Joint settlement of two or
more settlement proposals.
(a) With the consent of the contractor, the TCO or TCO’s concerned
may negotiate jointly two or more termination settlement proposals of the
same contractor under different contracts, even though the contracts are
with different contracting offices or
agencies. In such cases, accounting
work shall be consolidated to the
greatest extent practical. The resulting
settlement may be evidenced by one
settlement agreement covering all contracts involved or by a separate agreement for each contract involved.
(b) When the settlement agreement
covers more than one contract, it shall
(1) clearly identify the contracts involved, (2) assign an amendment modification number to each contract, (3)
apportion the total amount of the settlement among the several contracts
on some reasonable basis, (4) have attached or incorporated a schedule
showing the apportionment, and (5) be
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49.109–7
48 CFR Ch. 1 (10–1–03 Edition)
distributed and attached to each contract involved in the same manner as
other contract modifications.
49.109–7 Settlement by determination.
(a) General. If the contractor and TCO
cannot agree on a termination settlement, or if a settlement proposal is not
submitted within the period required
by the termination clause, the TCO
shall issue a determination of the
amount due consistent with the termination clause, including any cost principles incorporated by reference. The
TCO shall comply with 49.109–1 through
49.109–6 in making a settlement by determination and with 49.203 in making
an adjustment for loss, if any. Copies of
determinations shall receive the same
distribution as other contract modifications.
(b) Notice to contractor. Before issuing
a determination of the amount due the
contractor, the TCO shall give the contractor at least 15 days notice by certified mail (return receipt requested)
to submit written evidence, so as to
reach the TCO on or before a stated
date, substantiating the amount previously proposed.
(c) Justification of settlement proposal.
(1) The contractor has the burden of establishing, by proof satisfactory to the
TCO, the amount proposed.
(2) The contractor may submit
vouchers, verified transcripts of books
of account, affidavits, audit reports,
and other documents as desired. The
TCO may request the contractor to
submit additional documents and data,
and may request appropriate accountings, investigations, and audits.
(3) The TCO may accept copies of
documents and records without requiring original documents unless there is
a question of authenticity.
(4) The TCO may hold any conferences considered appropriate (i) to
confer with the contractor, (ii) to obtain additional information from Government personnel or from independent
experts, or (iii) to consult persons who
have submitted affidavits or reports.
(d) Determinations. After reviewing
the information available, the TCO
shall determine the amount due and
shall transmit a copy of the determination to the contractor by certified mail
(return receipt requested), or by any
other method that provides evidence of
receipt. The transmittal letter shall
advise the contractor that the determination is a final decision from which
the contractor may appeal under the
Disputes clause, except as shown in
paragraph (f) below. The determination
shall specify the amount due the contractor and will be supported by detailed schedules conforming generally
to the forms for settlement proposals
prescribed in 49.602–1 and by additional
information, schedules, and analyses as
appropriate. The TCO shall explain
each major item of disallowance. The
TCO need not reconsider any other action relating to the terminated portion
of the contract that was ratified or approved by the TCO or another contracting officer.
(e) Preservation of evidence. The TCO
shall retain all written evidence and
other data relied upon in making a determination, except that copies of
original books of account need not be
made. The TCO shall return books of
account, together with other original
papers and documents, to the contractor within a reasonable time.
(f) Appeals. The contractor may appeal, under the Disputes clause, any
settlement by determination, except
when the contractor has failed to submit the settlement proposal within the
time provided in the contract and
failed to request an extension of time.
The pendency of an appeal shall not affect the authority of the TCO to settle
the settlement proposal or any part by
negotiation with the contractor at any
time before the appeal is decided.
(g) Decision on the contractor’s appeal.
The TCO shall give effect to a decision
of the Claims Court or a board of contract appeals, when necessary, by an
appropriate modification to the contract. When appropriate, the TCO
should obtain a release from the contractor. TCO’s are authorized to modify the formats of settlement agreements in 49.603 to agree with this provision.
[48 FR 42447, Sept. 19, 1983, as amended at 52
FR 19805, May 27, 1987]
49.110 Settlement negotiation memorandum.
(a) The TCO shall, at the conclusion
of negotiations, prepare a settlement
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Federal Acquisition Regulation
49.112–1
negotiation memorandum describing
the principal elements of the settlement for inclusion in the termination
case file and for use by reviewing authorities. Pricing aspects of the settlement shall be documented in accordance with 15.406–3. The memorandum
shall be distributed in accordance with
15.406–3.
(b) If the settlement was negotiated
on the basis of individual items, the
TCO shall specify the factors considered for each item. If the settlement
was negotiated on an overall lump-sum
basis, the TCO need not evaluate each
item or group of items individually,
but shall support the total amount of
the recommended settlement in reasonable detail. The memorandum shall
include explanations of matters involving differences and doubtful questions
settled by agreement, and the factors
considered. The TCO should include
any other matters that will assist reviewing authorities in understanding
the basis for the settlement.
[48 FR 42447, Sept. 19, 1983, as amended at 56
FR 67135, Dec. 27, 1991; 62 FR 51271, Sept. 30,
1997]
49.111 Review of proposed settlements.
Each agency shall establish procedures, when necessary, for the administrative review of proposed termination
settlements. When one agency provides
termination settlement services for another agency, the agency providing the
services shall also perform the settlement review function.
49.112
Payment.
49.112–1 Partial payments.
(a) General. If the contract authorizes
partial payments on settlement proposals before settlement, a prime contractor may request them on the form
prescribed in 49.602–4 at any time after
submission of interim or final settlement proposals. The Government will
process applications for partial payments promptly. A subcontractor shall
submit its application through the
prime contractor which shall attach its
own invoice and recommendations to
the subcontractor’s application. Partial payments to a subcontractor shall
be made only through the prime con-
tractor and only after the prime contractor has submitted its interim or
final settlement proposal. Except for
undelivered acceptable finished products, partial payments shall not be
made for profit or fee claimed under
the terminated portion of the contract.
In exercising discretion on the extent
of partial payments to be made, the
TCO shall consider the diligence of the
contractor in settling with subcontractors and in preparing its own settlement proposal.
(b) Amount of partial payment. Before
approving any partial payment, the
TCO shall obtain any desired accounting, engineering, or other specialized
reviews of the data submitted in support of the contractor’s settlement proposal. If the reviews and the TCO’s examination of the data indicate that the
requested partial payment is proper,
reasonable payments may be authorized in the discretion of the TCO up
to—
(1) 100 percent of the contract price,
adjusted for undelivered acceptable
items completed before the termination date, or later completed with
the approval of the TCO (see 49.205);
(2) 100 percent of the amount of any
subcontract settlement paid by the
prime contractor if the settlement was
approved or ratified by the TCO under
49.108–3(c) or was authorized under
49.108–4;
(3) 90 percent of the direct cost of termination inventory, including costs of
raw materials, purchased parts, supplies, and direct labor;
(4) 90 percent of other allowable costs
(including settlement expense and
manufacturing and administrative indirect costs) allocable to the terminated portion of the contract and not
included in subparagraphs (1), (2), or (3)
above; and
(5) 100 percent of partial payments
made to subcontractors under this section.
(c) Recognition of assignments. When
an assignment of claims has been made
under the contract, the Government
shall not make partial payments to
other than the assignee unless the parties to the assignment consent in writing (see 32.805(e)).
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49.112–2
48 CFR Ch. 1 (10–1–03 Edition)
(d) Security for partial payments. If
any partial payment is made for completed end items or for costs of termination inventory, the TCO shall protect the Government’s interest. This
shall be done by obtaining title to the
completed end items or termination inventory, or by the creation of a lien in
favor of the Government, paramount to
all other liens, on the completed end
items or termination inventory, or by
other appropriate means.
(e) Deductions in computing amount of
partial payments. The TCO shall deduct
from the gross amount of any partial
payment otherwise payable under
49.112–1(b)—
(1) All unliquidated balances of
progress and advance payments (including interest) made to the contractor, which are allocable to the terminated portion of the contract; and
(2) The amounts of all credits arising
from the purchase, retention, or sale of
property, the costs of which are included in the application for payment.
(f) Limitation on total amount. The
total amount of all partial payments
shall not exceed the amount that will,
in the opinion of the TCO, become due
to the contractor because of the termination.
(g) Effect of overpayment. If the total
of partial payments exceeds the
amount finally determined due on the
settlement proposal, the contractor
shall repay the excess to the Government on demand, together with interest. The interest shall be computed at
the rate established by the Secretary
of the Treasury under 50 U.S.C. App.
1215(b)(2) from the date the excess payment was received by the contractor to
the date of repayment. However, interest will not be charged for any (1) excess payment attributable to a reduction in the settlement proposal because
of retention or other disposition of termination inventory, until 10 days after
the date of the retention or disposition,
or a later date determined by the TCO,
or (2) overpayment under cost-reimbursement research and development
contracts without profit or fee if the
overpayments are repaid to the Government within 30 days after demand.
(h) Certification and approval of partial
payments. (1) The contractor shall place
the following certification on vouchers
or invoices for partial payments:
The payment covered by this voucher
is a partial payment on the Contractor’s settlement proposal under contract No. .......... made under part 49 of
the Federal Acquisition Regulation.
(2) The TCO shall approve the invoice
or voucher by noting on it the following:
Payment of $........ is approved.
49.112–2
Final payment.
(a) Negotiated settlement. After execution of a settlement agreement, the
contractor shall submit a voucher or
invoice showing the amount agreed
upon, less any portion previously paid.
The TCO shall attach a copy of the settlement agreement to the voucher or
invoice and forward the documents to
the disbursing officer for payment.
(b) Settlement by determination. If the
settlement is by determination and—
(1) There is no appeal within the allowed time, the contractor shall submit a voucher or invoice showing the
amount determined due, less any portion previously paid; or
(2) There is an appeal, the contractor
shall submit a voucher or invoice showing the amount finally determined due
on the appeal, less any portion previously paid. Pending determination of
any appeal, the contractor may submit
vouchers or invoices for charges that
are not directly involved with the portion being appealed, without prejudice
to the rights of either party on the appeal.
(c) Construction contracts. In the case
of construction contracts, before forwarding the final payment voucher, the
contracting officer shall ascertain
whether there are any outstanding
labor violations. If so, the contracting
officer shall determine the amount to
be withheld from the final payment
(see subpart 22.4).
(d) Interest. The Government shall
not pay interest on the amount due
under a settlement agreement or a settlement by determination. The Government may, however, pay interest on a
successful contractor appeal from a
contracting officer’s determination
under the Disputes clause at 52.233–1.
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Federal Acquisition Regulation
49.201
49.113 Cost principles.
The cost principles and procedures in
the applicable subpart of part 31 shall,
subject to the general principles in
49.201, (a) be used in asserting, negotiating, or determining costs relevant to
termination settlements under contracts with other than educational institutions, and (b) be a guide for the
negotiation of settlements under contracts
for
experimental,
developmental, or research work with educational institutions (but see 31.104).
49.114 Unsettled contract changes.
(a) Before settlement of a completely
terminated contract, the TCO shall obtain from the contracting office a list
of all related unsettled contract
changes. The TCO shall settle, as part
of final settlement, all unsettled contract changes after obtaining the recommendations of the contracting office
concerning the changes.
(b) When the contract has been partially terminated, any outstanding unsettled contract changes will usually
be handled by the contracting officer.
However, the contracting officer may
delegate this function to the TCO.
49.115 Settlement of terminated incentive contracts.
(a) Fixed-price incentive contracts. The
TCO shall settle terminated fixed-price
incentive (FPI) contracts under the
provisions of paragraph (j) of the clause
at 52.216–16, Incentive Price Revision—
Firm Target, and 52.249–2, Termination
for Convenience of the Government
(Fixed-Price).
(1) Partial termination. Under a partially terminated contract, the TCO
shall negotiate a settlement as provided in the termination clause of the
contract, and paragraph (j) of the
clause at 52.216–16, Incentive Price Revision—Firm Target, or paragraph (1)
of the clause at 52.216–17, Incentive
Price Revision—Successive Targets.
The contracting officer shall apply the
incentive price revision provisions to
completed items accepted by the Government, including any for which the
contractor may request reimbursement
in the settlement proposal. The TCO
shall reimburse the contractor at target price for completed articles included in the settlement proposal for
which a final price has not been established. The TCO shall incorporate in
the settlement agreement an appropriate reservation as to final price for
these completed articles.
(2) Complete termination. If any items
were delivered and accepted by the
Government, the contracting officer
shall establish prices under the incentive provisions of the contract. On the
terminated portion of the contract, the
provisions of the termination clause
(see 52.249–2, Termination for Convenience of the Government (Fixed-Price))
shall govern and the provisions of the
incentive clause shall not apply. The
TCO responsible for the termination
settlement will ensure, on the basis of
evidence considered proper (including
coordination with the contracting officer), that no portion of the costs considered in the negotiations under the
incentive provisions are included in the
termination settlement.
(b) Cost-plus-incentive-fee contracts.
The TCO shall settle terminated costplus-incentive-fee contracts under the
clause at 52.249–6, Termination (CostReimbursement).
(1) Partial termination. Under a partial
termination, the TCO shall limit the
settlement to an adjustment of target
fee as provided in paragraph (e) of the
clause at 52.216–10, Incentive Fee. The
settlement agreement shall include a
reservation regarding any adjustment
of target cost resulting from the partial termination. The contracting officer shall adjust the target cost, if required.
(2) Complete termination. The parties
shall negotiate the settlement under
the provisions of subpart 49.3 and the
clause at 52.249–6, Termination (CostReimbursement). The fee shall be adjusted on the basis of the target fee,
and the incentive provisions shall not
be applied or considered.
Subpart
49.2—Additional
Principles for Fixed-Price Contracts Terminated for Convenience
49.201
General.
(a) A settlement should compensate
the contractor fairly for the work done
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49.202
48 CFR Ch. 1 (10–1–03 Edition)
and the preparations made for the terminated portions of the contract, including a reasonable allowance for
profit. Fair compensation is a matter
of judgment and cannot be measured
exactly. In a given case, various methods may be equally appropriate for arriving at fair compensation. The use of
business judgment, as distinguished
from strict accounting principles, is
the heart of a settlement.
(b) The primary objective is to negotiate a settlement by agreement. The
parties may agree upon a total amount
to be paid the contractor without
agreeing on or segregating the particular elements of costs or profit comprising this amount.
(c) Cost and accounting data may
provide guides, but are not rigid measures, for ascertaining fair compensation. In appropriate cases, costs may be
estimated, differences compromised,
and doubtful questions settled by
agreement. Other types of data, criteria, or standards may furnish equally
reliable guides to fair compensation.
The amount of recordkeeping, reporting, and accounting related to the settlement of terminated contracts should
be kept to a minimum compatible with
the reasonable protection of the public
interest.
49.202 Profit.
(a) The TCO shall allow profit on
preparations made and work done by
the contractor for the terminated portion of the contract but not on the settlement expenses. Anticipatory profits
and consequential damages shall not be
allowed (but see 49.108–5). Profit for the
contractor’s efforts in settling subcontractor proposals shall not be based on
the dollar amount of the subcontract
settlement agreements but the contractor’s efforts will be considered in
determining the overall rate of profit
allowed the contractor. Profit shall not
be allowed the contractor for material
or services that, as of the effective date
of termination, have not been delivered
by a subcontractor, regardless of the
percentage of completion. The TCO
may use any reasonable method to arrive at a fair profit.
(b) In negotiating or determining
profit, factors to be considered include—
(1) Extent and difficulty of the work
done by the contractor as compared
with the total work required by the
contract (engineering estimates of the
percentage of completion ordinarily
should not be required, but if available
should be considered);
(2) Engineering work, production
scheduling, planning, technical study
and supervision, and other necessary
services;
(3) Efficiency of the contractor, with
particular regard to—
(i) Attainment of quantity and quality production;
(ii) Reduction of costs;
(iii) Economic use of materials, facilities, and manpower; and
(iv) Disposition of termination inventory;
(4) Amount and source of capital and
extent of risk assumed;
(5) Inventive and developmental contributions, and cooperation with the
Government and other contractors in
supplying technical assistance;
(6) Character of the business, including the source and nature of materials
and the complexity of manufacturing
techniques;
(7) The rate of profit that the contractor would have earned had the contract been completed;
(8) The rate of profit both parties
contemplated at the time the contract
was negotiated; and
(9) Character and difficulty of subcontracting, including selection, placement,
and
management
of
subcontracts, and effort in negotiating
settlements
of
terminated
subcontracts.
(c) When computing profit on the terminated portion of a construction contract, the contracting officer shall—
(1) Comply with paragraphs (a) and
(b) above;
(2) Allow profit on the prime contractor’s settlements with construction
subcontractors for actual work in place
at the job site; and
(3) Exclude profit on the prime contractor’s settlements with construction subcontractors for materials on
hand and for preparations made to
complete the work.
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Federal Acquisition Regulation
49.203
49.206–1
Adjustment for loss.
(a) In the negotiation or determination of any settlement, the TCO shall
not allow profit if it appears that the
contractor would have incurred a loss
had the entire contract been completed. The TCO shall negotiate or determine the amount of loss and make
an adjustment in the amount of settlement as specified in paragraph (b) or
(c) below. In estimating the cost to
complete, the TCO shall consider expected production efficiencies and
other factors affecting the cost to complete.
(b) If the settlement is on an inventory basis (see 49.206–2(a)), the contractor shall not be paid more than the
total of the amounts in subparagraphs
(1), (2), and (3) below, less all disposal
credits and all unliquidated advance
and progress payments previously
made under the contract:
(1) The amount negotiated or determined for settlement expenses.
(2) The contract price, as adjusted,
for acceptable completed end items
(see 49.205).
(3) The remainder of the settlement
amount otherwise agreed upon or determined (including the allocable portion of initial costs (see 31.205–42(c)),
reduced by multiplying the remainder
by the ratio of (i) the total contract
price to (ii) the total cost incurred before termination plus the estimated
cost to complete the entire contract.
(c) If the settlement is on a total cost
basis (see 49.206–2(b)), the contractor
shall not be paid more than the total of
the amounts in subparagraphs (1) and
(2) below, less all disposal and other
credits, all advance and progress payments, and all other amounts previously paid under the contract:
(1) The amount negotiated or determined for settlement expenses.
(2) The remainder of the total settlement amount otherwise agreed upon or
determined (lines 7 and 14 of SF 1436,
Settlement
Proposal
(Total
Cost
Basis)) reduced by multiplying the remainder by the ratio of (i) the total
contract price to (ii) the remainder
plus the estimated cost to complete the
entire contract.
49.204 Deductions.
From the amount payable to the contractor under a settlement, the TCO
shall deduct—
(a) The agreed price for any part of
the termination inventory purchased
or retained by the contractor, and the
proceeds from any materials sold that
have not been paid or credited to the
Government;
(b) The fair value, as determined by
the TCO, of any part of the termination inventory that, before transfer
of title to the Government or to a
buyer under part 45, is destroyed, lost,
stolen, or so damaged as to become undeliverable (normal spoilage is excepted, as is inventory for which the
Government has expressly assumed the
risk of loss); and
(c) Any other amounts as appropriate
in the particular case.
49.205 Completed end items.
(a) Promptly after the effective date
of termination, the TCO shall (1) have
all undelivered completed end items inspected and accepted if they comply
with the contract requirements, and (2)
determine which accepted end items
are to be delivered under the contract.
The contractor shall invoice accepted
and delivered end items at the contract
price in the usual manner and shall not
include them in the settlement proposal. When completed end items,
though accepted, are not to be delivered under the contract, the contractor
shall include them in the settlement
proposal at the contract price, adjusted
for any saving of freight or other
charges, together with any credits for
their purchase, retention, or sale.
(b) Work in place accepted by the
Government under a construction contract is not considered a completed
item even though that work may have
been paid for at unit prices specified in
the contract.
49.206
Settlement proposals.
49.206–1 Submission of settlement proposals.
(a) Subject to the provisions of the
termination clause, the contractor
should promptly submit to the TCO a
settlement proposal for the amount
claimed because of the termination.
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49.206–2
48 CFR Ch. 1 (10–1–03 Edition)
The final settlement proposal must be
submitted within one year from the effective date of the termination, unless
the period is extended by the TCO. Termination charges under a single prime
contract involving two or more divisions or units of the prime contractor
may be consolidated and included in a
single settlement proposal.
(b) The settlement proposal must
cover all cost elements including settlements with subcontractors and any
proposed profit. With the consent of
the TCO, proposals may be filed in successive steps covering separate portions of the contractor’s costs. Such interim proposals shall include all costs
of a particular type, except as the TCO
may authorize otherwise.
(c) Settlement proposals must be on
the forms prescribed in 49.602 unless
the forms are inadequate for a particular contract. Settlement proposals
must be in reasonable detail supported
by adequate accounting data. Actual,
standard (appropriately adjusted), or
average costs may be used in preparing
settlement proposals if they are determined under generally recognized accounting principles consistently followed by the contractor. When actual,
standard, or average costs are not reasonably available, estimated costs may
be used if the method of arriving at the
estimates is approved by the TCO. Contractors shall not be required to maintain unduly elaborate cost accounting
systems merely because their contracts
may subsequently be terminated.
(d) The contractor may use the Settlement Proposal (Short Form), SF
1438 (see 49.602–1(d) and 53.249), when
the total proposal is less than $10,000,
unless otherwise instructed by the
TCO. Settlement proposals that would
normally be included in a single settlement proposal; e.g., those based on a
series of separate orders for the same
item under one contract, should be
consolidated whenever possible and not
divided to bring them below $10,000.
(e) The Schedule of Accounting Information, SF 1439, must be submitted for
each termination under a contract for
which a settlement proposal is submitted, except when the Standard
Form 1438 is used. Although several interim proposals may be submitted, SF
1439 need be submitted only once un-
less, subsequent to filing the original
form, major changes occur in the information submitted.
49.206–2 Bases for settlement proposals.
(a) Inventory basis. (1) Use of the inventory basis for settlement proposals
is preferred. Under this basis, the contractor may propose only costs allocable to the terminated portion of the
contract, and the settlement proposal
must itemize separately—
(i) Metals, raw materials, purchased
parts, work in process, finished parts,
components, dies, jigs, fixtures, and
tooling, at purchase or manufacturing
cost;
(ii) Charges such as engineering
costs, initial costs, and general administrative costs;
(iii) Costs of settlements with subcontractors;
(iv) Settlement expenses; and
(v) Other proper charges.
(2) An allowance for profit (49.202) or
adjustment for loss (49.203(b)) must be
made to complete the gross settlement
proposal. All unliquidated advance and
progress payments and all disposal and
other credits known when the proposal
is submitted must then be deducted.
(3) This inventory basis is also appropriate for use under the following circumstances:
(i) The partial termination of a construction or related professional services contract.
(ii) The partial or complete termination of supply orders under any terminated construction contract.
(iii) The complete termination of a
unit-price (as distinguished from a
lump-sum) professional services contract.
(b) Total cost basis. (1) When use of the
inventory basis is not practicable or
will unduly delay settlement, the
total-cost basis (SF–1436) may be used
if approved in advance by the TCO as in
the following examples:
(i) If production has not commenced
and the accumulated costs represent
planning and preproduction or get ready
expenses.
(ii) If, under the contractor’s accounting system, unit costs for work in
process and finished products cannot
readily be established.
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Federal Acquisition Regulation
49.301
(iii) If the contract does not specify
unit prices.
(iv) If the termination is complete
and involves a letter contract.
(2) When the total-cost basis is used
under a complete termination, the contractor must itemize all costs incurred
under the contract up to the effective
date of termination. The costs of settlements with subcontractors and applicable settlement expenses must also
be added. An allowance for profit
(49.202) or adjustment for loss (49.203(c))
must be made. The contract price for
all end items delivered or to be delivered and accepted must be deducted.
All unliquidated advance and progress
payments and disposal and other credits known when the proposal is submitted must also be deducted.
(3) When the total-cost basis is used
under a partial termination, the settlement proposal shall not be submitted
until completion of the continued portion of the contract. The settlement
proposal must be prepared as in subparagraph (2) above, except that all
costs incurred to the date of completion of the continued portion of the
contract must be included.
(4) If a construction contract or a
lump-sum professional services contract is completely terminated, the
contractor shall—
(i) Use the total cost basis of settlement;
(ii) Omit Line 10 ‘‘Deduct-Finished
Product Invoiced or to be Invoiced’’
from Section II of Standard Form–1436)
Settlement
Proposal
(Total
Cost
Basis); and
(iii) Reduce the gross amount of the
settlement by the total of all progress
and other payments.
(c) Other basis. Settlement proposals
may not be submitted on any basis
other than paragraph (a) or (b) above
without the prior approval of the chief
of the contracting or contract administration office.
49.206–3 Submission
of
inventory
schedules.
Subject to the terms of the termination clause and whenever termination inventory is involved, the contractor shall submit complete inventory schedules, to the TCO, reflecting
inventory that is allocable to the ter-
minated portion of the contract. The
inventory schedules shall be submitted
within 120 days from the effective date
of termination unless otherwise extended by the TCO based on a written
justification to support the extension.
The inventory schedules shall be prepared on the forms prescribed in 49.602–
2 and in accordance with 45.606–5.
[61 FR 39221, July 26, 1996]
49.207 Limitation on settlements.
The total amount payable to the contractor for a settlement, before deducting disposal or other credits and exclusive of settlement costs, must not exceed the contract price less payments
otherwise made or to be made under
the contract.
49.208 Equitable adjustment after partial termination.
Under the termination clause, after
partial termination, a contractor may
request an equitable adjustment in the
price or prices of the continued portion
of a fixed-price contract. The TCO shall
forward the proposal to the contracting
officer except when negotiation authority is delegated to the TCO. The contractor shall submit the proposal in
the format of Table 15–2 of 15.408.
(a) When the contracting officer retains responsibility for negotiating the
equitable adjustment and executing a
supplemental agreement, the contracting officer shall ensure that no
portion of an increase in price is included in a termination settlement
made or in process.
(b) The TCO shall also ensure that no
portion of the costs included in the equitable adjustment are included in the
termination settlement.
[48 FR 42447, Sept. 19, 1983, as amended at 60
FR 48218, Sept. 18, 1995; 62 FR 51259, Sept. 30,
1997]
Subpart
49.3—Additional
Principles for Cost-Reimbursement Contracts Terminated
for Convenience
49.301 General.
Termination clauses for cost-reimbursement contracts (see 49.503(a)) provide for the settlement of costs and fee,
if any. The contract clauses governing
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49.302
48 CFR Ch. 1 (10–1–03 Edition)
costs shall determine what costs are allowable.
49.302
Discontinuance of vouchers.
(a) When the contract has been completely terminated, the contractor
shall not use Standard Form 1034 (Public Voucher for Purchases and Services
Other than Personal) after the last day
of the sixth month following the month
in which the termination is effective.
The contractor may elect to stop using
vouchers at any time during the 6month period. When the contractor has
vouchered out all costs within the 6month period, a proposal for fee, if any,
may be submitted on SF 1437 (see
49.602–1) or by letter appropriately certified. The contractor must submit a
substantiated proposal for fee to the
TCO within 1 year from the effective
date of termination, unless the period
is extended by the TCO. When the use
of vouchers is discontinued, the contractor shall submit all unvouchered
costs and the proposed fee, if any, as
specified in 49.303.
(b) When the contract is partially
terminated, 49.304 shall apply.
49.303 Procedure after discontinuing
vouchers.
49.303–1 Submission of settlement proposal.
The contractor shall submit a final
settlement
proposal
covering
unvouchered costs and any proposed
fee to the TCO within 1 year from the
effective date of termination, unless
the period is extended by the TCO. The
contractor shall use the form prescribed in 49.602–1, unless the TCO authorizes otherwise. The proposal shall
not include costs that have been—
(a) Finally disallowed by the contracting officer; or
(b) Previously vouchered and formally questioned by the Government
but not yet decided as to allowability.
49.303–2 Submission
schedules.
of
inventory
Subject to the terms of the termination clause and whenever termination inventory is involved, the contractor shall submit complete inventory schedules, to the TCO, reflecting
inventory that is allocable to the ter-
minated portion of the contract. The
inventory schedules shall be submitted
within 120 days from the effective date
of termination unless otherwise extended by the TCO based on a written
justification to support the extension.
The inventory schedules shall be prepared on the forms prescribed in 49.602–
2 and in accordance with 45.606–5.
[61 FR 39221, July 26, 1996]
49.303–3
Audit of settlement proposal.
The TCO shall submit the settlement
proposal to the appropriate audit agency for review (see 49.107). However, if
the settlement proposal is limited to
an adjustment of fee, no referral to the
audit agency is required.
[48 FR 42447, Sept. 19, 1983. Redesignated at
61 FR 39221, July 26, 1996]
49.303–4
Adjustment of indirect costs.
(a) If the contract contains the
clause at 52.216–7, Allowable Cost and
Payment, and it appears that adjustment of indirect costs will unduly
delay final settlement, the TCO, after
obtaining information from the appropriate audit agency, may agree with
the contractor to—
(1) Negotiate the amount of indirect
costs for the contract period for which
final indirect cost rates have not been
negotiated, or to use billing rates as
final rates for this period if the billing
rates appear reasonable; or
(2) Reserve any indirect cost adjustment in the final settlement agreement, pending establishment of negotiated rates under subpart 42.7.
(b) When an amount of indirect cost
is negotiated under subparagraph (a)(1)
above, the contractor shall eliminate
the indirect cost and the related direct
costs on which it was based from the
total pool and base used to compute indirect costs for other contracts performed during the applicable accounting period.
[48 FR 42447, Sept. 19, 1983. Redesignated at
61 FR 39221, July 26, 1996]
49.303–5
Final settlement.
(a) The TCO shall proceed with the
settlement and execution of a settlement agreement upon receipt of the
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49.305–2
audit report, if applicable, and the contract audit closing statement covering
vouchered costs.
(b) The TCO shall adjust the fee as
provided in 49.305.
(c) The final settlement agreement
may include all demands of the Government and proposals of the contractor under the terminated contract.
However, no amount shall be allowed
for any item of cost disallowed by the
Government, nor for any other item of
cost of the same nature.
(d) If an overall settlement of costs is
agreed upon, agreement on each element of cost is not necessary. If appropriate, differences may be compromised and doubtful questions settled by agreement. An overall settlement shall not include costs that are
clearly not allowable under the terms
of the contract.
[48 FR 42447, Sept. 19, 1983. Redesignated at
61 FR 39221, July 26, 1996]
49.304 Procedure
nation.
for
partial
termi-
49.304–1 General.
(a) In a partial termination, the TCO
shall limit the settlement to an adjustment of the fee, if any, and with the
concurrence of the contracting office,
to a reduction in the estimated cost.
The TCO shall adjust the fee as provided in 49.304–2 and 49.305, unless—
(1) The terminated portion is clearly
severable from the balance of the contract; or
(2) Performance of the contract is
virtually complete, or performance of
any continued portion is only on subsidiary items or spare parts, or is otherwise not substantial.
(b) In the case of the exceptions in
paragraph (a), the procedures in 49.302
and 49.303 apply.
49.304–2 Submission of settlement proposal (fee only).
The contractor shall limit the settlement proposal to a proposed reduction
in the amount of fee. The final settlement proposal shall be submitted to
the TCO within one year from the effective date of termination, unless the
period is extended by the TCO. The proposal may be submitted in the form
prescribed in 49.602–1 or by letter ap-
propriately certified. The contractor
shall substantiate the amount of fee
claimed (see 49.305).
49.304–3
Submission of vouchers.
When a partial termination settlement is limited to adjustment of fee,
the contractor shall continue to submit the SF 1034, Public Voucher for
Purchases and Services Other than
Personal, for costs reimbursable under
the contract. The contractor shall not
be reimbursed for costs of settlements
with subcontractors unless required approvals or ratifications have been obtained (see 49.108).
49.305
Adjustment of fee.
49.305–1
General.
(a) The TCO shall determine the adjusted fee to be paid, if any, in the
manner provided by the contract. The
determination is generally based on a
percentage of completion of the contract or of the terminated portion.
When this basis is used, factors such as
the extent and difficulty of the work
performed by the contractor (e.g., planning, scheduling, technical study, engineering work production and supervision, placing and supervising subcontracts, and work performed by the
contractor in (1) stopping performance,
(2) settling terminated subcontracts,
and (3) disposing of termination inventory) shall be compared with the total
work required by the contract or by
the terminated portion. The contractor’s adjusted fee shall not include an
allowance for fee for subcontract effort
included in subcontractors’ settlement
proposals.
(b) The ratio of costs incurred to the
total estimated cost of performing the
contract or the terminated portion is
only one factor in computing the percentage of completion. This percentage
may be either greater or less than that
indicated by the ratio of costs incurred, depending upon the evaluation
by the TCO of other pertinent factors.
49.305–2
Construction contracts.
(a) The percentage of completion
basis refers to the contractor’s total effort and not solely to the actual construction work. Generally, the effort of
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49.401
48 CFR Ch. 1 (10–1–03 Edition)
a contractor under a cost-reimbursement construction or professional services contract can be segregated into
factors such as (1) mobilization including organization, (2) use of finances, (3)
contracting for and receipt of materials, (4) placement of subcontracts, (5)
preparation of shop drawings, (6) work
in place performed by own forces, (7)
supervision of subcontractors’ work (8)
job administration, and (9) demobilization.
(b) Each of the applicable factors in
paragraph (a) above shall be assigned a
weighted value depending on its importance and difficulty. The total weight
value of all factors should be easily divisible (e.g., by 100) to determine percentages. The percentage of completion
of each factor must be established
based upon the specific facts of each
contract. When totaled, the percentage
of completion of each factor applied to
the weighted value of each factor results in the overall percentage of contract completion. The percentage of
completion is then applied to the total
contract fee or to the fee applicable to
the terminated portion of the contract
to arrive at an equitable adjustment.
Subpart 49.4—Termination for
Default
49.401 General.
(a) Termination for default is generally the exercise of the Government’s
contractual right to completely or partially terminate a contract because of
the contractor’s actual or anticipated
failure to perform its contractual obligations.
(b) If the contractor can establish, or
it is otherwise determined that the
contractor was not in default or that
the failure to perform is excusable; i.e.,
arose out of causes beyond the control
and without the fault or negligence of
the contractor, the default clauses prescribed in 49.503 and located at 52.249
provide that a termination for default
will be considered to have been a termination for the convenience of the
Government, and the rights and obligations of the parties governed accordingly.
(c) The Government may, in appropriate cases, exercise termination or
cancellation rights in addition to those
in the contract clauses (see for example, paragraph (h) of the Default clause
at 52.249–8).
(d) For default terminations of orders
under Federal Supply Schedule contracts, see subpart 8.4.
(e) Notwithstanding the provisions of
this 49.401, the contracting officer may,
with the written consent of the contractor, reinstate the terminated contract by amending the notice of termination, after a written determination
is made that the supplies or services
are still required and reinstatement is
advantageous to the Government.
49.402 Termination of fixed-price contracts for default.
49.402–1
The Government’s right.
Under contracts containing the Default clause at 52.249–8, the Government has the right, subject to the notice requirements of the clause, to terminate the contract completely or partially for default if the contractor fails
to (a) make delivery of the supplies or
perform the services within the time
specified in the contract, (b) perform
any other provision of the contract, or
(c) make progress and that failure endangers performance of the contract.
49.402–2 Effect of termination for default.
(a) Under a termination for default,
the Government is not liable for the
contractor’s costs on undelivered work
and is entitled to the repayment of advance and progress payments, if any,
applicable to that work. The Government may elect, under the Default
clause, to require the contractor to
transfer title and deliver to the Government completed supplies and manufacturing materials, as directed by the
contracting officer.
(b) The contracting officer shall not
use the Default clause as authority to
acquire any completed supplies or
manufacturing materials unless it has
been ascertained that the Government
does not already have title under some
other provision of the contract. The
contracting officer shall acquire manufacturing materials under the Default
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49.402–3
clause for furnishing to another contractor only after considering the difficulties the other contractor may have
in using the materials.
(c) Subject to paragraph (d) below,
the Government shall pay the contractor the contract price for any completed supplies, and the amount agreed
upon by the contracting officer and the
contractor for any manufacturing materials, acquired by the Government
under the Default clause.
(d) The Government must be protected from overpayment that might
result from failure to provide for the
Government’s potential liability to laborers and material suppliers for lien
rights outstanding against the completed supplies or materials after the
Government has paid the contractor
for them. To accomplish this, before
paying for supplies or materials, the
contracting officer shall take one or
more of the following measures:
(1) Ascertain whether the payment
bonds, if any, furnished by the contractor are adequate to satisfy all
lienors’ claims or whether it is feasible
to obtain similar bonds to cover outstanding liens.
(2) Require the contractor to furnish
appropriate statements from laborers
and material suppliers disclaiming any
lien rights they may have to the supplies and materials.
(3) Obtain appropriate agreement by
the Government, the contractor, and
lienors ensuring release of the Government from any potential liability to
the contractor or lienors.
(4) Withhold from the amount due for
the supplies or materials any amount
the contracting officer determines necessary to protect the Government’s interest, but only if the measures in subparagraphs (d)(1), (2), and (3) above cannot be accomplished or are considered
inadequate.
(5) Take other appropriate action
considering the circumstances and the
degree of the contractor’s solvency.
(e) The contractor is liable to the
Government for any excess costs incurred in acquiring supplies and services similar to those terminated for default (see 49.402–6), and for any other
damages, whether or not repurchase is
effected (see 49.402–7).
49.402–3
Procedure for default.
(a) When a default termination is
being considered, the Government shall
decide which type of termination action to take (i.e., default, convenience,
or no-cost cancellation) only after review by contracting and technical personnel, and by counsel, to ensure the
propriety of the proposed action.
(b) The administrative contracting
officer shall not issue a show cause notice or cure notice without the prior
approval of the contracting office,
which should be obtained by the most
expeditious means.
(c) Subdivision (a)(1)(i) of the Default
clause covers situations when the contractor has defaulted by failure to
make delivery of the supplies or to perform the services within the specified
time. In these situations, no notice of
failure or of the possibility of termination for default is required to be sent
to the contractor before the actual notice of termination (but see paragraph
(e) below). However, if the Government
has taken any action that might be
construed as a waiver of the contract
delivery or performance date, the contracting officer shall send a notice to
the contractor setting a new date for
the contractor to make delivery or
complete performance. The notice shall
reserve the Government’s rights under
the Default clause.
(d)
Subdivisions
(a)(1)(ii)
and
(a)(1)(iii) of the Default clause cover
situations when the contractor fails to
perform some of the other provisions of
the contract (such as not furnishing a
required performance bond) or so fails
to make progress as to endanger performance of the contract. If the termination is predicated upon this type of
failure, the contracting officer shall
give the contractor written notice
specifying the failure and providing a
period of 10 days (or longer period as
necessary) in which to cure the failure.
When appropriate, this notice may be
made a part of the notice described in
subparagraph (e)(1) below. Upon expiration of the 10 days (or longer period),
the contracting officer may issue a notice of termination for default unless it
is determined that the failure to perform has been cured. A format for a
cure notice is in 49.607.
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49.402–3
48 CFR Ch. 1 (10–1–03 Edition)
(e)(1) If termination for default appears appropriate, the contracting officer should, if practicable, notify the
contractor in writing of the possibility
of the termination. This notice shall
call the contractor’s attention to the
contractual liabilities if the contract is
terminated for default, and request the
contractor to show cause why the contract should not be terminated for default. The notice may further state
that failure of the contractor to
present an explanation may be taken
as an admission that no valid explanation exists. When appropriate, the
notice may invite the contractor to
discuss the matter at a conference. A
format for a show cause notice is in
49.607.
(2) When a termination for default
appears imminent, the contracting officer shall provide a written notification to the surety. If the contractor is
subsequently terminated for default, a
copy of the notice of default shall be
sent to the surety.
(3) If requested by the surety, and
agreed to by the contractor and any assignees, arrangements may be made to
have future checks mailed to the contractor in care of the surety. In this
case, the contractor must forward a
written request to the designated disbursing officer specifically directing a
change in address for mailing checks.
(4) If the contractor is a small business firm, the contracting officer shall
immediately provide a copy of any cure
notice or show cause notice to the contracting office’s small business specialist and the Small Business Administration Regional Office nearest the
contractor. The contracting officer
should, whenever practicable, consult
with the small business specialist before proceeding with a default termination (see also 49.402–4).
(f) The contracting officer shall consider the following factors in determining whether to terminate a contract for default:
(1) The terms of the contract and applicable laws and regulations.
(2) The specific failure of the contractor and the excuses for the failure.
(3) The availability of the supplies or
services from other sources.
(4) The urgency of the need for the
supplies or services and the period of
time required to obtain them from
other sources, as compared with the
time delivery could be obtained from
the delinquent contractor.
(5) The degree of essentiality of the
contractor in the Government acquisition program and the effect of a termination for default upon the contractor’s capability as a supplier under
other contracts.
(6) The effect of a termination for default on the ability of the contractor to
liquidate guaranteed loans, progress
payments, or advance payments.
(7) Any other pertinent facts and circumstances.
(g) If, after compliance with the procedures in paragraphs (a) through (f) of
this 49.402–3, the contracting officer determines that a termination for default
is proper, the contracting officer shall
issue a notice of termination stating—
(1) The contract number and date;
(2) The acts or omissions constituting the default;
(3) That the contractor’s right to proceed further under the contract (or a
specified portion of the contract) is
terminated;
(4) That the supplies or services terminated may be purchased against the
contractor’s account, and that the contractor will be held liable for any excess costs;
(5) If the contracting officer has determined that the failure to perform is
not excusable, that the notice of termination constitutes such decision, and
that the contractor has the right to appeal such decision under the Disputes
clause;
(6) That the Government reserves all
rights and remedies provided by law or
under the contract, in addition to
charging excess costs; and
(7) That the notice constitutes a decision that the contractor is in default as
specified and that the contractor has
the right to appeal under the Disputes
clause.
(h) The contracting officer shall
make the same distribution of the termination notice as was made of the
contract. A copy shall also be furnished
to the contractor’s surety, if any, when
the notice is furnished to the contractor. The surety should be requested
to advise if it desires to arrange for
completion of the work. In addition,
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49.402–6
the contracting officer shall notify the
disbursing officer to withhold further
payments under the terminated contract, pending further advice, which
should be furnished at the earliest
practicable time.
(i) In the case of a construction contract, promptly after issuance of the
termination notice, the contracting officer shall determine the manner in
which the work is to be completed and
whether the materials, appliances, and
plant that are on the site will be needed.
(j) If the contracting officer determines before issuing the termination
notice that the failure to perform is excusable, the contract shall not be terminated for default. If termination is
in the Government’s interest, the contracting officer may terminate the
contract for the convenience of the
Government.
(k) If the contracting officer has not
been able to determine, before issuance
of the notice of termination whether
the contractor’s failure to perform is
excusable, the contracting officer shall
make a written decision on that point
as soon as practicable after issuance of
the notice of termination. The decision
shall be delivered promptly to the contractor with a notification that the
contractor has the right to appeal as
specified in the Disputes clause.
[48 FR 42447, Sept. 19, 1983, as amended at 54
FR 48990, Nov. 28, 1989]
49.402–4 Procedure in lieu of termination for default.
The following courses of action,
among others, are available to the contracting officer in lieu of termination
for default when in the Government’s
interest:
(a) Permit the contractor, the surety,
or the guarantor, to continue performance of the contract under a revised delivery schedule.
(b) Permit the contractor to continue
performance of the contract by means
of a subcontract or other business arrangement with an acceptable third
party, provided the rights of the Government are adequately preserved.
(c) If the requirement for the supplies
and services in the contract no longer
exists, and the contractor is not liable
to the Government for damages as pro-
vided in 49.402–7, execute a no-cost termination settlement agreement using
the formats in 49.603–6 and 49.603–7 as a
guide.
49.402–5 Memorandum
tracting officer.
by
the
When a contract is terminated for default or a procedure authorized by
49.402–4 is followed, the contracting officer shall prepare a memorandum for
the contract file explaining the reasons
for the action taken.
49.402–6 Repurchase against contractor’s account.
(a) When the supplies or services are
still required after termination, the
contracting officer shall repurchase
the same or similar supplies or services
against the contractor’s account as
soon as practicable. The contracting
officer shall repurchase at as reasonable a price as practicable, considering
the quality and delivery requirements.
The contracting officer may repurchase
a quantity in excess of the undelivered
quantity terminated for default when
the excess quantity is needed, but excess cost may not be charged against
the defaulting contractor for more
than the undelivered quantity terminated for default (including variations
in quantity permitted by the terminated contract). Generally, the contracting officer will make a decision
whether or not to repurchase before
issuing the termination notice.
(b) If the repurchase is for a quantity
not over the undelivered quantity terminated for default, the Default clause
authorizes the contracting officer to
use any terms and acquisition method
deemed appropriate for the repurchase.
However, the contracting officer shall
obtain competition to the maximum
extent practicable for the repurchase.
The contracting officer shall cite the
Default clause as the authority. If the
repurchase is for a quantity over the
undelivered quantity terminated for
default, the contracting officer shall
treat the entire quantity as a new acquisition. If the repurchase is for a
quantity over the undelivered quantity
terminated for default, the contracting
officer shall treat the entire quantity
as a new acquisition.
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49.402–7
48 CFR Ch. 1 (10–1–03 Edition)
(c) If repurchase is made at a price
over the price of the supplies or services terminated, the contracting officer
shall, after completion and final payment of the repurchase contract, make
a written demand on the contractor for
the total amount of the excess, giving
consideration to any increases or decreases in other costs such as transportation, discounts, etc. If the contractor
fails to make payment, the contracting
officer shall follow the procedures in
subpart 32.6 for collecting contract
debts due the Government.
[48 FR 42447, Sept. 19, 1983, as amended at 50
FR 1745, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
49.402–7 Other damages.
(a) If the contracting officer terminates a contract for default or follows
a course of action instead of termination for default (see 49.402–4), the
contracting officer promptly must assess and demand any liquidated damages to which the Government is entitled under the contract. Under the contract clause at 52.211–11, these damages
are in addition to any excess repurchase costs.
(b) If the Government has suffered
any other ascertainable damages, including administrative costs, as a result of the contractor’s default, the
contracting officer must, on the basis
of legal advice, take appropriate action
as prescribed in subpart 32.6 to assert
the Government’s demand for the damages.
[48 FR 42447, Sept. 19, 1983, as amended at 56
FR 15154, Apr. 15, 1991; 60 FR 48250, Sept. 18,
1995; 65 FR 46066, July 26, 2000]
49.403 Termination of cost-reimbursement contracts for default.
(a) The right to terminate a cost-reimbursement contract for default is
provided for in the Termination for Default or for Convenience of the Government clause at 52.249–6. A 10-day notice
to the contractor before termination
for default is required in every case by
the clause.
(b) Settlement of a cost-reimbursement contract terminated for default is
subject to the principles in subparts
49.1 and 49.3 the same as when a contract is terminated for convenience,
except that—
(1) The costs of preparing the contractor’s settlement proposal are not
allowable (see subparagraph (h)(3) of
the clause); and
(2) The contractor is reimbursed the
allowable costs, and an appropriate reduction is made in the total fee, if any,
(see subparagraph (h)(4) of the clause).
(c) The contracting officer shall use
the procedures in 49.402 to the extent
appropriate in considering the termination for default of a cost-reimbursement contract. However, a cost-reimbursement contract does not contain
any provision for recovery of excess repurchase costs after termination for
default (but see paragraph (g) of the
clause at 52.246–3 with respect to failure of the contractor to replace or correct defective supplies).
[48 FR 42447, Sept. 19, 1983, as amended at 61
FR 39222, July 26, 1996]
49.404 Surety-takeover agreements.
(a) The procedures in this section
apply primarily, but not solely, to
fixed-price construction contracts terminated for default.
(b) Since the surety is liable for damages resulting from the contractor’s
default, the surety has certain rights
and interests in the completion of the
contract work and application of any
undisbursed funds. Therefore, the contracting officer must consider carefully
the surety’s proposals for completing
the contract. The contracting officer
must take action on the basis of the
Government’s interest, including the
possible effect upon the Government’s
rights against the surety.
(c) The contracting officer should
permit surety offers to complete the
contract, unless the contracting officer
believes that the persons or firms proposed by the surety to complete the
work are not competent and qualified
or the proposal is not in the best interest of the Government.
(d) There may be conflicting demands
for the defaulting contractor’s assets,
including unpaid prior earnings (retained percentages and unpaid progress
estimates). Therefore, the surety may
include a ‘‘takeover’’ agreement in its
proposal, fixing the surety’s rights to
payment from those funds. The contracting officer may (but not before the
effective date of termination) enter
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49.501
into a written agreement with the surety. The contracting officer should
consider using a tripartite agreement
among the Government, the surety,
and the defaulting contractor to resolve the defaulting contractor’s residual rights, including assertions to unpaid prior earnings.
(e) Any takeover agreement must require the surety to complete the contract and the Government to pay the
surety’s costs and expenses up to the
balance of the contract price unpaid at
the time of default, subject to the following conditions:
(1) Any unpaid earnings of the defaulting contractor, including retained
percentages and progress estimates for
work accomplished before termination,
must be subject to debts due the Government by the contractor, except to
the extent that the unpaid earnings
may be used to pay the completing surety its actual costs and expenses incurred in the completion of the work,
but not including its payments and obligations under the payment bond
given in connection with the contract.
(2) The surety is bound by contract
terms governing liquidated damages
for delays in completion of the work,
unless the delays are excusable under
the contract.
(3) If the contract proceeds have been
assigned to a financing institution, the
surety must not be paid from unpaid
earnings, unless the assignee provides
written consent.
(4) The contracting officer must not
pay the surety more than the amount
it expended completing the work and
discharging its liabilities under the defaulting contractor’s payment bond.
Payments to the surety to reimburse it
for discharging its liabilities under the
payment bond of the defaulting contractor must be only on authority of—
(i) Mutual agreement among the Government, the defaulting contractor,
and the surety;
(ii) Determination of the Comptroller
General as to payee and amount; or
(iii) Order of a court of competent jurisdiction.
49.405 Completion
tractor.
[65 FR 46067, July 26, 2000]
[60 FR 48250, Sept. 18, 1995, as amended at 62
FR 64927, Dec. 9, 1997]
by
another
If the surety does not arrange for
completion of the contract, the contracting officer normally will arrange
for completion of the work by awarding
a new contract based on the same plans
and specifications. The new contract
may be the result of sealed bidding or
any other appropriate contracting
method or procedure. The contracting
officer shall exercise reasonable diligence to obtain the lowest price available for completion.
[48 FR 42447, Sept. 19, 1983, as amended at 50
FR 1746, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
49.406
Liquidation of liability.
The contract provides that the contractor and the surety are liable to the
Government for resultant damages.
The contracting officer shall use all retained percentages of progress payments previously made to the contractor and any progress payments due
for work completed before the termination to liquidate the contractor’s
and the surety’s liability to the Government. If the retained and unpaid
amounts are insufficient, the contracting officer shall take steps to recover the additional sum from the contractor and the surety.
Subpart 49.5—Contract
Termination Clauses
49.501
General.
This subpart prescribes the principal
contract termination clauses. This subpart does not apply to contracts that
use the clause at 52.213–4, Terms and
Conditions—Simplified
Acquisitions
(Other Than Commercial Items). For
contracts for the acquisition of commercial items, this part provides administrative guidance which may be
followed when it is consistent with the
requirements and procedures in the
clause at 52.212–4, Contract Terms and
Conditions—Commercial Items. In appropriate cases, agencies may authorize the use of special purpose clauses, if
consistent with this chapter.
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49.502
48 CFR Ch. 1 (10–1–03 Edition)
49.502 Termination for convenience of
the Government.
(a) Fixed-price contracts of $100,000 or
less (short form).
(1) General use. The contracting officer shall insert the clause at 52.249–1,
Termination for Convenience of the
Government
(Fixed-Price)
(Short
Form), in solicitations and contracts
when a fixed-price contract is contemplated and the contract amount is
expected to be $100,000 or less, except
(i) if use of the clause at 52.249–4, Termination for Convenience of the Government (Services) (Short Form) is appropriate, (ii) in contracts for research
and development work with an educational or nonprofit institution on a
no-profit basis, (iii) in contracts for architect-engineer services, or (iv) if one
of the clauses prescribed or cited at
49.505(a), (b), or (e), is appropriate.
(2) Dismantling and demolition. If the
contract is for dismantling, demolition, or removal of improvements, the
contracting officer shall use the clause
with its Alternate I.
(b) Fixed-price contracts over $100,000.
(1)(i) General use. The contracting officer shall insert the clause at 52.249–2,
Termination for Convenience of the
Government (Fixed-Price), in solicitations and contracts when a fixed-price
contract is contemplated and the contract amount is expected to be over
$100,000, except in contracts for (i) dismantling and demolition, (ii) research
and development work with an educational or nonprofit institution on a
no-profit basis, or (iii) architect-engineer services; it shall not be used if the
clause at 52.249–4, Termination for Convenience of the Government (Services)
(Short Form), is appropriate (see
49.502(c)), or one of the clauses prescribed or cited at 49.505(a), (b), or (e),
is appropriate.
(ii) Construction. If the contract is for
construction, the contracting officer
shall use the clause with its Alternate
I.
(iii) Partial payments. If the contract
is with an agency of the U.S. Government or with State, local, or foreign
governments or their agencies, and if
the contracting officer determines that
the requirement to pay interest on excess partial payments is inappropriate,
the contracting officer shall use the
clause with its Alternate II. In such
contracts for construction, the contracting officer shall use the clause
with its Alternate III.
(2) Dismantling and demolition. The
contracting officer shall insert the
clause at 52.249–3, Termination for Convenience of the Government (Dismantling, Demolition, or Removal of Improvements) in solicitations and contracts for dismantling, demolition, or
removal of improvements, when a
fixed-price contract is contemplated
and the contract amount is expected to
be over $100,000. If the contract is with
an agency of the U.S. Government or
with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess
partial payments is inappropriate, the
contracting officer shall use the clause
with its Alternate I.
(c) Service contracts (short form). The
contracting officer shall insert the
clause at 52.249–4, Termination for Convenience of the Government (Services)
(Short Form), in solicitations and contracts for services, regardless of value,
when a fixed-price contract is contemplated and the contracting officer
determines that because of the kind of
services required, the successful offeror
will not incur substantial charges in
preparation for and in carrying out the
contract, and would, if terminated for
the convenience of the Government,
limit termination settlement charges
to services rendered before the date of
termination. Examples of services
where this clause may be appropriate
are contracts for rental of unreserved
parking space, laundry and drycleaning, etc.
(d) Research and development contracts. The contracting officer shall insert the clause at 52.249–5, Termination
for the Convenience of the Government
(Educational and Other Nonprofit Institutions), in solicitations and contracts when either a fixed-price or costreimbursement
contract
is
contemplated for research and development work with an educational or nonprofit institution on a no-profit or nofee basis.
(e) Subcontracts. (1) General use. The
prime contractor may find the clause
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Federal Acquisition Regulation
49.504
at 52.249–1, Termination for Convenience of the Government (Fixed-Price)
(Short Form), or at 52.249–2, Termination for Convenience of the Government (Fixed-Price), as appropriate,
suitable for use in fixed-price subcontracts, except as noted in subparagraph (2) below; provided, that the relationship between the contractor and
subcontractor is clearly indicated. Inapplicable conditions (e.g., paragraph
(d)) in 52.249–2 should be deleted and
the periods reduced for submitting the
subcontractor’s termination settlement proposal (e.g., 6 months), and for
requesting an equitable price adjustment (e.g., 45 days).
(2) Research and development. The
prime contractor may find the clause
at 52.249–5, Termination for the Convenience of the Government (Educational and Other Nonprofit Institutions), suitable for use in subcontracts
placed with educational or nonprofit
institutions on a no-profit or no-fee
basis; provided, that the relationship
between the contractor and subcontractor is clearly indicated. Inapplicable conditions (e.g., paragraph (h))
should be deleted, the period for submitting the subcontractor’s termination settlement proposal should be
reduced (e.g., 6 months), the subcontract should be placed on a no-profit or no-fee basis, and the subcontract
should incorporate or be negotiated on
the basis of the cost principles in part
31 of the Federal Acquisition Regulation.
[48 FR 42447, Sept. 19, 1983, as amended at 61
FR 39222, July 26, 1996]
49.503 Termination for convenience of
the Government and default.
(a) Cost-reimbursement contracts—(1)
General use. Insert the clause at 52.249–
6, Termination (Cost-Reimbursement),
in solicitations and contracts when a
cost-reimbursement contract is contemplated, except contracts for research and development with an educational or nonprofit institution on a
no-fee basis.
(2) Construction. If the contract is for
construction, the contracting officer
shall use the clause with its Alternate
I.
(3) Partial payments. If the contract is
with an agency of the U.S. Government
or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess
partial payments is inappropriate, the
contracting officer shall use the clause
with its Alternate II. In such contracts
for construction, the contracting officer shall use the clause with its Alternate III.
(4) Time-and-material and labor-hour
contracts. If the contract is a time-andmaterial or labor-hour contract, the
contracting officer shall use the clause
with its Alternate IV. If the contract is
with an agency of the U.S. Government
or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess
partial payments is inappropriate, the
contracting officer shall use the clause
with its Alternate V.
(b) Insert the clause at 52.249–7, Termination (Fixed-Price Architect-Engineer), in solicitations and contracts for
architect-engineer services, when a
fixed-price contract is contemplated.
(c) Subcontracts. The prime contractor may find the clause at 52.249–6,
Termination
(Cost-Reimbursement),
suitable for use in cost-reimbursement
subcontracts; provided, that the relationship between the contractor and
subcontractor is clearly indicated. Inapplicable conditions (e.g., paragraphs
(e), (j) and (n)) should be deleted and
the period for submitting the subcontractor’s termination settlement
proposal should be reduced (e.g., 6
months).
[48 FR 42447, Sept. 19, 1983, as amended at 61
FR 39222, July 26, 1996; 64 FR 51845, Sept. 24,
1999]
49.504 Termination of fixed-price contracts for default.
(a)(1) Supplies and services. The contracting officer shall insert the clause
at 52.249–8, Default (Fixed-Price Supply
and Service), in solicitations and contracts when a fixed-price contract is
contemplated and the contract amount
is expected to exceed the simplified acquisition threshold. The contracting
officer may use the clause when the
contract amount is at or below the
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49.505
48 CFR Ch. 1 (10–1–03 Edition)
simplified acquisition threshold, if appropriate (e.g., if the acquisition involves items with a history of unsatisfactory quality).
(2) Transportation. If the contract is
for transportation or transportationrelated services, the contracting officer
shall use the clause with its Alternate
I.
(b) Research and development. The
contracting officer shall insert the
clause at 52.249–9, Default (Fixed-Price
Research and Development), in solicitations and contracts for research and
development when a fixed-price contract is contemplated and the contract
amount is expected to exceed the simplified acquisition threshold, except
those with educational or nonprofit institutions on a no-profit basis. The
contracting officer may use the clause
when the contract amount is at or
below
the
simplified
acquisition
threshold, if appropriate (e.g., if the
contracting officer believes that key
personnel essential to the work may be
devoted to other programs).
(c)(1) Construction. The contracting
officer shall insert the clause at 52.249–
10, Default (Fixed-Price Construction),
in solicitations and contracts for construction, when a fixed-price contract
is contemplated and the contract
amount is expected to exceed the simplified acquisition threshold. The contracting officer may use the clause
when the contract amount is at or
below
the
simplified
acquisition
threshold, if appropriate (e.g., if completion dates are essential).
(2) Dismantling and demolition. If the
contract is for dismantling, demolition, or removal of improvements, the
contracting officer shall use the clause
with its Alternate I.
(3) National emergencies. If the contract is to be awarded during a period
of national emergency, the contracting
officer may use the clause (i) with its
Alternate II when a fixed-price contract for construction is contemplated,
or (ii) with its Alternate III when a
contract for dismantling, demolition,
or removal of improvements is contemplated.
[48 FR 42447, Sept. 19, 1983, as amended at 60
FR 34760, July 3, 1995]
49.505 Other termination clauses.
(a) Facilities. The contracting officer
shall insert the clause at 52.249–11, Termination of Work (Consolidated Facilities or Facilities Acquisition), in consolidated facilities contracts and facilities acquisition contracts. If the contract is with an agency of the U.S.
Government or with State, local, or
foreign governments or their agencies,
and if the contracting officer determines that the requirement to pay interest on excess partial payments is inappropriate, the contracting officer
shall use the clause with its Alternate
I.
(b) Personal service contracts. The contracting officer shall insert the clause
at 52.249–12, Termination (Personal
Services), in solicitations and contracts for personal services (see part
37).
(c) Failure to perform. The contracting
officer shall insert the clause at 52.249–
13, Failure to Perform, in facilities
contracts, except facilities use contracts with nonprofit educational institutions.
(d) Excusable delays. The contracting
officer shall insert the clause at 52.249–
14, Excusable Delays, in solicitations
and contracts for supplies, services,
construction, and research and development on a fee basis, when a cost-reimbursement contract is contemplated.
The contracting officer shall also insert the clause in time-and-material
contracts, labor-hour contracts, consolidated facilities contracts, and facilities acquisition contracts.
(e) Communication service contracts.
This regulation does not prescribe a
clause for the cancellation or termination of orders under communication
service contracts with common carriers because of special agency requirements that apply to these services. An
appropriate clause, however, shall be
prescribed at agency level, within
those agencies contracting for these
services.
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Federal Acquisition Regulation
49.601–2
Contracting Officer
Subpart 49.6—Contract
Termination Forms and Formats
49.601 Notice of termination for convenience.
(See 49.402–3(g) for notice of termination for default.)
49.601–1
Telegraphic notice.
(a) Complete termination. The following telegraphic notice is suggested
for use if a supply contract is being
completely terminated for convenience. If appropriately modified, the
notice may be used for other than supply contracts.
DATEllllllllll
XYZ Corporation
New York, NY 12345
Contract No. ............... is completely terminated under clause ..........., effective
..........
[insert
‘‘immediately’’
or
‘‘on
..............., 20..’’, or ‘‘as soon as you have delivered, including prior deliveries, the following items:’’ (list)]. Immediately stop all
work, terminate subcontracts, and place no
further orders except to the extent [insert if
applicable ‘‘necessary to complete items not
terminated or’’] that you or a subcontractor
wish to retain and continue for your own account any work-in-process or other materials. Telegraph similar instructions to all
subcontractors and suppliers. Detailed instructions follow.
llllllllllllllllllllllll
Contracting Officer
(b) Partial termination. The following
telegraphic notice is suggested for use
if a supply contract is being partially
terminated for convenience. If appropriately modified, the notice may be
used for other than supply contracts.
DATEllllllllll
XYZ Corporation
New York, NY 12345
Contract No. ..... is partially terminated
under clause ...................., effective ..............
[insert ‘‘immediately’’ or ‘‘on ...............,
20..’’]. Reduce items to be delivered as follows: [insert instructions]. Immediately stop
all work, terminate subcontracts, and place
no further orders except as necessary to perform the portion not terminated or that you
or a subcontractor wish to retain and continue for your account any work-in-process
or other materials. Telegraph similar instructions to all subcontractors and suppliers. Detailed instructions follow.
llllllllllllllllllllllll
[48 FR 42447, Sept. 19, 1983, as amended at 65
FR 36031, June 6, 2000]
49.601–2 Letter notice.
The following letter notice of termination is suggested for use if a contract
for supplies is being terminated for
convenience. With appropriate modifications, it may be used in terminating contracts for other than supplies and in terminating subcontracts.
This notice shall be sent by certified
mail, return receipt requested. If no
prior telegraphic notice was issued, use
the alternate notice that follows this
notice.
NOTICE OF TERMINATION TO PRIME
CONTRACTORS
[At the top of the notice, set out all special details relating to the particular termination; e.g.,
name and address of company, contract number
of terminated contract, items, etc.]
(a) Effective date of termination. This confirms the Government’s telegram to you
dated .........., 20...., terminating ..............
[insert ‘‘completely’’ or ‘‘in part’’] Contract
No. ...... (referred to as ‘‘the contract’’) for
the Government’s convenience under the
clause entitled ......... [insert title of appropriate termination clause]. The termination is
effective on the date and in the manner stated in the telegram.
(b) Cessation of work and notification to immediate subcontractors. You shall take the following steps:
(1) Stop all work, make no further shipments, and place no further orders relating
to the contract, except for—
(i) The continued portion of the contract,
if any;
(ii) Work-in-process or other materials
that you may wish to retain for your own account; or
(iii) Work-in-process that the Contracting
Officer authorizes you to continue (A) for
safety precautions, (B) to clear or avoid damage to equipment, (C) to avoid immediate
complete spoilage of work-in-process having
a definite commercial value, or (D) to prevent any other undue loss to the Government. (If you believe this authorization is
necessary or advisable, immediately notify
the Contracting Officer by telephone or personal conference and obtain instructions.)
(2) Keep adequate records of your compliance with subparagraph (1) above showing
the—
(i) Date you received the Notice of Termination;
(ii) Effective date of the termination; and
(iii) Extent of completion of performance
on the effective date.
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49.601–2
48 CFR Ch. 1 (10–1–03 Edition)
(3) Furnish notice of termination to each
immediate subcontractor and supplier that
will be affected by this termination. In the
notice—
(i) Specify your Government contract number;
(ii) State whether the contract has been
terminated completely or partially;
(iii) Provide instructions to stop all work,
make no further shipments, place no further
orders, and terminate all subcontracts under
the contract, subject to the exceptions in
subparagraph (1) above;
(iv) Provide instructions to submit any
settlement proposal promptly; and
(v) Request that similar notices and instructions be given to its immediate subcontractors.
(4) Notify the Contracting Officer of all
pending legal proceedings that are based on
subcontracts or purchase orders under the
contract, or in which a lien has been or may
be placed against termination inventory to
be reported to the Government. Also,
promptly notify the Contracting Officer of
any such proceedings that are filed after receipt of this Notice.
(5) Take any other action required by the
Contracting Officer or under the Termination clause in the contract.
(c) Termination inventory. (1) As instructed
by the Contracting Officer, transfer title and
deliver to the Government all termination
inventory of the following types or classes,
including subcontractor termination inventory that you have the right to take:
[Contracting Officer insert proper identification
or ‘‘None’’].
(2) To settle your proposal, it will be necessary to establish that all prime and subcontractor termination inventory has been
properly accounted for. For detailed information, see part 45.
(d) Settlements with subcontractors. You remain liable to your subcontractors and suppliers for proposals arising because of the
termination of their subcontracts or orders.
You are requested to settle these settlement
proposals as promptly as possible. For purposes of reimbursement by the Government,
settlements will be governed by the provisions of part 49.
(e) Completed end items. (1) Notify the Contracting Officer of the number of items completed under the contract and still on hand
and arrange for their delivery or other disposal (see 49.205).
(2) Invoice acceptable completed end items
under the contract in the usual way and do
not include them in the settlement proposal.
(f) Patents. If required by the contract,
promptly forward the following to the Contracting Officer:
(1) Disclosure of all inventions, discoveries,
and patent applications made in the performance of the contract.
(2) Instruments of license or assignment on
all inventions, discoveries, and patent applications made in the performance of the contract.
(g) Employees affected. (1) If this termination, together with other outstanding terminations, will necessitate a significant reduction in your work force, you are urged
to—
(i) Promptly inform the local State Employment Service of your reduction-in-force
schedule in numbers and occupations, so
that the Service can take timely action in
assisting displaced workers;
(ii) Give affected employees maximum
practical advance notice of the employment
reduction and inform them of the facilities
and services available to them through the
local State Employment Service offices;
(iii) Advise affected employees to file applications with the State Employment Service to qualify for unemployment insurance,
if necessary;
(iv) Inform officials of local unions having
agreements with you of the impending reduction-in-force; and
(v) Inform the local Chamber of Commerce
and other appropriate organizations which
are prepared to offer practical assistance in
finding employment for displaced workers of
the impending reduction-in-force.
(2) If practicable, urge subcontractors to
take similar actions to those described in
subparagraph (1) above.
(h) Administrative. The contract administration office named in the contract will
identify the Contracting Officer who will be
in charge of the settlement of this termination and who will, upon request, provide
the necessary settlement forms. Matters not
covered by this notice should be brought to
the attention of the undersigned.
(i) Please acknowledge receipt of this notice as provided below.
llllllllllllllllllllllll
(Contracting Officer)
llllllllllllllllllllllll
llllllllllllllllllllllll
(Name of Office)
llllllllllllllllllllllll
(Address)
Acknowledgment of Notice
The undersigned acknowledges receipt of a
signed copy of this notice on ............, 20.......
Two signed copies of this notice are returned.
llllllllllllllllllllllll
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Federal Acquisition Regulation
49.602–4
(Name of Contractor)
By llllllllllllllllllllll
(Name)
llllllllllllllllllllllll
(Title)
(End of notice)
tlement proposals resulting from the
termination of cost-reimbursement
contracts (see 49.302).
(d) Standard Form 1438, Settlement
Proposal (Short Form), shall be used to
submit settlement proposals resulting
from the termination of fixed-price
contracts if the total proposal is less
than $10,000 (see 49.206–1(d)).
49.602–2
Alternate notice. If no prior telegraphic notice was issued, substitute
the following paragraph (a) for paragraph (a) of the notice above:
(a) Effective date of termination. You are notified that Contract No. ...... (referred to as
‘‘the contract’’) is terminated ..............
[insert ‘‘completely’’ or ‘‘in part’’] for the
Government’s convenience under the clause
entitled .............. [insert title of appropriate
termination clause]. The termination is effective .............. [insert either ‘‘immediately
upon receipt of this Notice’’ or ‘‘on ...........,
20...,’’ or ‘‘as soon as you have delivered, including prior deliveries, the following
items:’’ (list)]. Reduce items to be delivered
as follows: [insert instructions].
[48 FR 42447, Sept. 19, 1983, as amended at 65
FR 36031, June 6, 2000]
49.602 Forms for settlement of terminated contracts.
The standard forms listed below shall
be used for settling terminated prime
contracts. The forms at 49.602–1 and
49.602–2 may also be used for settling
terminated
subcontracts.
Standard
forms are illustrated in subpart 53.3.
49.602–1 Termination settlement proposal forms.
(a) Standard Form 1435, Settlement
Proposal (Inventory Basis), shall be
used to submit settlement proposals resulting from the termination of fixedprice contracts if the proposals are
computed on an inventory basis (see
49.206–2(a)).
(b) Standard Form 1436, Settlement
Proposal (Total Cost Basis), shall be
used to submit settlement proposals resulting from the termination of fixedprice contracts if the proposals are
computed on a total cost basis (see
49.206–2(b)).
(c) Standard Form 1437, Settlement
Proposal for Cost-Reimbursement Type
Contracts, shall be used to submit set-
Inventory schedule forms.
The following forms shall be used to
support settlement proposals submitted on the forms specified in 49.602–
1(a), (b), and (c) (see 45.606):
(a) Standard Form 1426, Inventory
Schedule A (Metals in Mill Product
Form), and Standard Form 1427, Inventory Schedule A—Continuation Sheet
(Metals in Mill Product Form).
(b) Standard Form 1428, Inventory
Schedule B, and Standard Form 1429,
Inventory Schedule B—Continuation
Sheet (used for reporting raw materials, purchased parts, finished components, finished product, plant equipment, and miscellaneous inventory).
(c) Standard Form 1430, Inventory
Schedule C—(Work-in-Process), and
Standard Form 1431, Inventory Schedule C—Continuation Sheet (Work-inProcess).
(d) Standard Form 1432, Inventory
Schedule D (Special Tooling and Special Test Equipment), and Standard
Form 1433, Inventory Schedule D—Continuation Sheet (Special Tooling and
Special Test Equipment).
(e) Standard Form 1434, Termination
Inventory Schedule E (Short Form for
use with SF 1438 Only).
49.602–3 Schedule of accounting information.
Standard Form 1439, Schedule of Accounting Information, shall be filed in
support of a settlement proposal unless
the proposal is filed on Standard Form
1438, Settlement Proposal (Short Form)
(see 49.206–1(e)).
49.602–4
Partial payments.
Standard Form 1440, Application for
Partial Payment, shall be used to
apply for partial payments (see 49.112–
1).
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49.602–5
48 CFR Ch. 1 (10–1–03 Edition)
49.602–5 Settlement agreement.
Standard Form 30 (SF 30), Amendment of Solicitation/Modification of
Contract, shall be used to execute a
settlement agreement (see 49.109–1).
49.603 Formats for termination for
convenience settlement agreements.
The formats to be used for termination for convenience settlement
agreements should be substantially as
shown in this section (see 49.109). Termination contracting officers (TCO’s)
may, however, modify the contents of
these agreements to conform with special termination clauses prescribed or
authorized by their agencies (e.g., see
49.501 and 49.505(e)).
49.603–1 Fixed-price contracts—complete termination.
[Insert the following in Block 14 of SF
30 for settlements of fixed-price contracts
completely terminated.]
(a) This supplemental agreement settles
the settlement proposal resulting from the
Notice of Termination dated .......... .
(b) The parties agree to the following:
(1) The Contractor certifies that all contract termination inventory (including
scrap) has been retained or acquired by the
Contractor, sold to third parties, returned to
suppliers, delivered to or stored for the Government, or otherwise properly accounted
for, and that all proceeds and retention credits have been used in arriving at this agreement.
(2) The Contractor certifies that each immediate subcontractor, whose settlement
proposal is included in the proposal settled
by this agreement, has furnished the Contractor a certificate stating (i) that all subcontract termination inventory (including
scrap) has been retained or acquired by the
subcontractor, sold to third parties, returned
to suppliers, delivered to or stored for the
Government, or otherwise properly accounted for, and that all proceeds and retention credits were used in arriving at the settlement of the subcontract, and (ii) that the
subcontractor has received a similar certificate from each immediate subcontractor
whose proposal was included in its proposal.
(3) The Contractor certifies that all items
of termination inventory, the costs of which
were used in arriving at the amount of this
settlement or the settlement of any subcontract settlement proposal included in this
settlement, (i) are properly allocable to the
terminated portion of the contract, (ii) do
not exceed the reasonable quantitative requirements of the terminated portion of the
contract, and (iii) do not include any items
reasonably usable without loss to the Contractor on its other work. The Contractor
further certifies that the Contracting Officer
has been informed of any substantial change
in the status of the items between the dates
of the termination inventory schedules and
the date of this agreement.
(4) The Contractor transfers, conveys, and
assigns to the Government all the right,
title, and interest, if any, that the Contractor has received, or is entitled to receive,
in and to subcontract termination inventory
not otherwise properly accounted for.
(5) The Contractor shall, within 10 days
after receipt of the payment specified in this
agreement, pay to each of its immediate subcontractors (or their respective assignees)
the amounts to which they are entitled,
after deducting any prior payments and, if
the Contractor so elects, any amounts due
and payable to the Contractor by those subcontractors.
(6)(i) The Contractor has received $..........
for work and services performed, or items delivered, under the completed portion of the
contract. The Government confirms the
right of the Contractor, subject to paragraph
(7) below, to retain this sum and agrees that
it constitutes a portion of the total amount
to which the Contractor is entitled in settlement of the contract.
(ii) Further, the Government agrees to pay
to the Contractor or its assignee, upon presentation of a proper invoice or voucher, the
sum of $.......... [insert net amount of settlement], arrived at by deducting from the sum
of $.......... [for proposals on an inventory basis
insert gross amount of settlement; for proposals
on a total cost basis, insert gross amount of settlement less amount shown in subdivision (6)(i)
above], (A) the amount of $.......... for all unliquidated partial or progress payments previously made to the Contractor or its assignee and all unliquidated advance payments (with any interest) and (B) the
amount of $.......... for all applicable property
disposal credits [insert if appropriate, ‘‘and (C)
the amount of $.......... for all other amounts
due the Government under this contract, except as provided in paragraph (7) below’’].
(iii) The net settlement of $........... in subdivision (ii) above, together with sums previously paid, constitutes payment in full and
complete settlement of the amount due the
Contractor for the complete termination of
the contract and of all other demands and liabilities of the Contractor and the Government under the contract except as provided
in paragraph (7) below.
(7) Regardless of any other provision of
this agreement, the following rights and liabilities of the parties under the contract
are reserved:
[The following list of reserved or excepted
rights and liabilities is intended to cover those
that should most frequently be reserved and
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49.603–2
that should be scrutinized at the time a settlement agreement is negotiated (see 49.109–2). The
suggested language of the excepted items on the
list may be varied at the discretion of the contracting officer. If accuracy or completeness can
be achieved by referencing the number of a contract clause or provision covering the matter in
question, then follow that method of enumerating reserved rights and liabilities. Omit any of
the following that are not applicable and add
any additional exceptions or reservations required.]
(i) All rights and liabilities, if any, of the
parties, as to matters covered by any renegotiation authority.
(ii) All rights of the Government to take
the benefit of agreements or judgments affecting royalties paid or payable in connection with the performance of the contract.
(iii) All rights and liabilities, if any, of the
parties under those clauses inserted in the
contract because of the requirements of Acts
of Congress and Executive Orders, including,
without limitation, any applicable clauses
relating to: labor law, contingent fees, domestic articles, and employment of aliens.’’
[If the contract contains clauses of this character inserted for reasons other than requirements of Acts of Congress or Executive Orders,
the suggested language should be appropriately
modified.]
(iv) All rights and liabilities of the parties
arising under the contract and relating to reproduction rights, patent infringements, inventions, or applications for patents, including rights to assignments, invention reports,
licenses, covenants of indemnity against patent risks, and bonds for patent indemnity obligations, together with all rights and liabilities under the bonds.
(v) All rights and liabilities of the parties,
arising under the contract or otherwise, and
concerning defects, guarantees, or warranties relating to any articles or component
parts furnished to the Government by the
Contractor under the contract or this agreement.
(vi) All rights and liabilities of the parties
under the contract relating to any contract
termination inventory stored for the Government.
(vii) All rights and liabilities of the parties
under agreements relating to the future care
and disposition by the Contractor of Government-owned property remaining in the Contractor’s custody.
(viii) All rights and liabilities of the parties relating to Government property furnished to the Contractor for the performance
of this contract.
(ix) All rights and liabilities of the parties
under the contract relating to options (except options to continue or increase the
work under the contract), covenants not to
compete, and covenants of indemnity.
(x) All rights and liabilities, if any, of the
parties under those clauses of the contract
relating to price reductions for defective
cost or pricing data.
(End of agreement)
[48 FR 42447, Sept. 19, 1983, as amended at 60
FR 37773, July 21, 1995; 60 FR 49723, Sept. 26,
1995]
49.603–2 Fixed-price contracts—partial
termination.
[Insert the following in Block 14 of SF
30 for settlements of fixed-price contracts
partially terminated.]
(a) This supplemental agreement settles
the settlement proposal resulting from the
Notice of Termination dated ............... .
(b) The parties agree to the following:
(1) The terminated portion of the contract
is as follows: [specify the terminated portion
clearly as to (i) item numbers, (ii) descriptions,
(iii) quantity terminated, (iv) unit price of items,
(v) total price of terminated items, and (vi) any
other explanation necessary to avoid uncertainty or misunderstanding].
(2) The Contractor certifies that all contract termination inventory (including
scrap) has been retained or acquired by the
Contractor, sold to third parties, returned to
suppliers, delivered to or stored for the Government, or otherwise properly accounted
for, and that all proceeds and retention credits have been used in arriving at this agreement.
(3) The Contractor certifies that each immediate subcontractor, whose settlement
proposal is included in the proposal settled
by this agreement, has furnished the Contractor a certificate stating (i) that all subcontract termination inventory (including
scrap) has been retained or acquired by the
subcontractor, sold to third parties, returned
to suppliers, delivered to or stored for the
Government, or otherwise properly accounted for, and that all proceeds and retention credits were used in arriving at the settlement of the subcontract, and (ii) that the
subcontractor has received a similar certificate from each immediate subcontractor
whose proposal was included in its proposal.
(4) The Contractor certifies that all items
of termination inventory, the costs of which
were used in arriving at the amount of this
settlement or the settlement of any subcontract settlement proposal included in this
settlement, (i) are properly allocable to the
terminated portion of the contract, (ii) do
not exceed the reasonable quantitative requirements of the terminated portion of the
contract, and (iii) do not include any items
reasonably usable without loss to the Contractor on its other work. The Contractor
further certifies that the Contracting Officer
has been informed of any substantial change
in the status of the items between the dates
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49.603–3
48 CFR Ch. 1 (10–1–03 Edition)
of the termination inventory schedules and
the date of this agreement.
(5) The Contractor transfers, conveys, and
assigns to the Government all the right,
title, and interest, if any, that the Contractor has received, or is entitled to receive,
in and to subcontract termination inventory
not otherwise properly accounted for.
(6) The Contractor shall, within 10 days
after receipt of the payment specified in this
agreement, pay to each of its immediate subcontractors (or their respective assignees)
the amounts to which they are entitled,
after deducting any prior payments and, if
the Contractor so elects, any amounts due
and payable to the Contractor by those subcontractors.
(7)(i) The Government agrees to pay to the
Contractor or its assignee, upon presentation
of a proper invoice or voucher, the sum of
$.......... [insert net amount of settlement], arrived at by deducting from $.......... [insert
gross amount of settlement], (A) the amount of
$.......... for all unliquidated partial or
progress payments previously made to the
Contractor or its assignee and all unliquidated advance payments (with any interest)
applicable to the terminated portion of the
contract and (B) the amount of $.......... for
all applicable property disposal credits.
(ii) The net settlement of $.......... in subdivision (i) above, together with sums previously paid, constitutes payment in full and
complete settlement of the amount due the
Contractor for the terminated portion of the
contract, except as provided in subparagraph
(8) below.
(iii) Upon payment of the net settlement of
$.........., all obligations of the Contractor to
perform further work or services or to make
further deliveries under the terminated portion of the contract and all obligations of
the Government to make further payments
or carry out other undertakings concerning
the terminated portion of the contract shall
cease; provided, that nothing in this agreement shall impair or affect any covenants,
terms, or conditions of the contract relating
to the completed or continued portion of this
contract.
(8) Regardless of any other provision of
this agreement, the following rights and liabilities of the parties under the contract
are reserved:
[The following list of reserved or excepted
rights and liabilities is intended to cover those
that should most frequently be reserved and
that should be scrutinized at the time a settlement agreement is negotiated (see 49.109–2). The
suggested language of the excepted items on the
list may be varied at the discretion of the contracting officer. If accuracy or completeness can
be achieved by referencing the number of a contract clause or provision covering the matter in
question, then follow that method of enumerating reserved rights and liabilities. Omit any of
the following that are not applicable and add
any additional exceptions or reservations required.]
(i) All rights and liabilities, if any, of the
parties, as to matters covered by any renegotiation authority.
(ii) All rights of the Government to take
the benefit of agreements or judgments affecting royalties paid or payable in connection with the performance of the contract.
(iii) All rights and liabilities, if any, of the
parties under those clauses inserted in the
contract because of the requirements of Acts
of Congress and Executive Orders, including,
without limitation, any applicable clauses
relating to: labor law, contingent fees, domestic articles, and employment of aliens.
[If the contract contains clauses of this character inserted for reasons other than requirements of Acts of Congress or Executive Orders,
the suggested language should be appropriately
modified.]
(iv) All rights and liabilities of the parties
arising under the contract and relating to reproduction rights, patent infringements, inventions, or applications for patents, including rights to assignments, invention reports,
licenses, covenants of indemnity against patent risks, and bonds for patent indemnity obligations, together with all rights and liabilities under the bonds.
(v) All rights and liabilities of the parties,
arising under the contract or otherwise, and
concerning defects, guarantees, or warranties relating to any articles or component
parts furnished to the Government by the
Contractor under the contract or this agreement.
(vi) All rights and liabilities of the parties
under the contract relating to any contract
termination inventory stored for the Government.
(vii) All rights and liabilities, if any, of the
parties under those clauses of the contract
relating to price reductions for defective
cost or pricing data.
(End of agreement)
[48 FR 42447, Sept. 19, 1983, as amended at 60
FR 37773, July 21, 1995; 60 FR 49723, Sept. 26,
1995]
49.603–3 Cost-reimbursement
contracts—complete termination, if settlement includes cost.
[Insert the following in Block 14 of SF
30 for settlement of cost-reimbursement
contracts that are completely terminated,
if settlement includes costs.]
(a) This supplemental agreement settles
the settlement proposal resulting from the
Notice of Termination dated .......... .
(b) The parties agree to the following:
(1) The Contractor certifies that all contract termination inventory (including
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Federal Acquisition Regulation
49.603–3
scrap) has been retained or acquired by the
Contractor, sold to third parties, returned to
suppliers, delivered to or stored for the Government, or otherwise properly accounted
for, and that all proceeds and retention credits have been used in arriving at this agreement.
(2) The Contractor certifies that each immediate subcontractor, whose settlement
proposal is included in the proposal settled
by this agreement, has furnished the Contractor a certificate stating (i) that all subcontract termination inventory (including
scrap) has been retained or acquired by the
subcontractor, sold to third parties, returned
to suppliers, delivered to or stored for the
Government, or otherwise properly accounted for, and that all proceeds and retention credits were used in arriving at the settlement of the subcontract, and (ii) that the
subcontractor has received a similar certificate from each immediate subcontractor
whose proposal was included in its proposal.
(3) The Contractor certifies that all items
of termination inventory, the costs of which
were used in arriving at the amount of this
settlement or the settlement of any subcontract settlement proposal included in this
settlement, (i) are properly allocable to the
terminated portion of the contract, (ii) do
not exceed the reasonable quantitative requirements of the terminated portion of the
contract, and (iii) do not include any items
reasonably usable without loss to the Contractor on its other work. The Contractor
further certifies that the Contracting Officer
has been informed of any substantial change
in the status of the items between the dates
of the termination inventory schedules and
the date of this agreement.
(4) The Contractor transfers, conveys, and
assigns to the Government all the right,
title, and interest, if any, that the Contractor has received, or is entitled to receive,
in and to subcontract termination inventory
not otherwise properly accounted for.
(5) The Contractor shall, within 10 days
after receipt of the payment specified in this
agreement, pay to each of its immediate subcontractors (or their respective assignees)
the amounts to which they are entitled,
after deducting any prior payments and, if
the Contractor so elects, any amounts due
and payable to the Contractor by those subcontractors.
(6)(i) The Contractor has received $..........
for work and services performed, or articles
delivered, under the contract before the effective date of termination. The Government
confirms the right of the Contractor, subject
to paragraph (7) below, to retain this sum
and agrees that it constitutes a portion of
the total amount to which the Contractor is
entitled in complete and final settlement of
the contract.
(ii) Further, the Government agrees to pay
to the Contractor or its assignee, upon pres-
entation of a proper invoice or voucher, the
sum of $.......... [insert net amount of settlement], arrived at by deducting from the sum
of $.......... [insert gross amount of settlement
less amount shown in subdivision (6)(i) above]
(A) the amount of $.......... for all unliquidated partial or progress payments previously made to the Contractor or its assignee and all unliquidated advance payments (with any interest), (B) the amount of
$......... for all applicable property disposal
credits [insert if appropriate, ‘‘and (C) the
amount of $.......... for all other amounts due
the Government under this contract, except
as provided in paragraph (7) below.’’]
(iii) The net settlement of $.......... in subdivision (ii) above, together with sums previously paid, constitutes payment in full and
complete settlement of the amount due the
Contractor for the complete termination of
the contract and of all other demands and liabilities of the Contractor and the Government under the contract, except as provided
in paragraph (7) below.
(7) Regardless of any other provision of
this agreement, the following rights and liabilities of the parties under the contract
are reserved:
[The following list of reserved or excepted
rights and liabilities is intended to cover those
that should most frequently be reserved and
that should be scrutinized at the time a settlement agreement is negotiated (see 49.109–
2). The suggested language of the excepted
items on the list may be varied at the discretion of the contracting officer. If accuracy or
completeness can be achieved by referencing
the number of a contract clause or provision
covering the matter in question, then follow
that method of enumerating reserved rights
and liabilities. Omit any of the following
that are not applicable and add any additional exceptions or reservations required.]
(i) All rights and liabilities, if any, of the
parties, as to matters covered by any renegotiation authority.
(ii) All rights of the Government to take
the benefit of agreements or judgments affecting royalties paid or payable in connection with the performance of the contract.
(iii) All rights and liabilities, if any, of the
parties under those clauses inserted in the
contract because of the requirements of Acts
of Congress and Executive Orders, including,
without limitation, any applicable clauses
relating to: labor law, contingent fees, domestic articles, and employment of aliens.’’
[If the contract contains clauses of this character inserted for reasons other than requirements of Acts of Congress or Executive Orders,
the suggested language should be appropriately
modified.]
(iv) All rights and liabilities of the parties
arising under the contract and relating to reproduction rights, patent infringements, inventions, or applications for patents, including rights to assignments, invention reports,
941
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49.603–4
48 CFR Ch. 1 (10–1–03 Edition)
licenses, covenants of indemnity against patent risks, and bonds for patent indemnity obligations, together with all rights and liabilities under the bonds.
(v) All rights and liabilities of the parties,
arising under the contract or otherwise, and
concerning defects, guarantees, or warranties relating to any articles or component
parts furnished to the Government by the
Contractor under the contract or this agreement.
(vi) All rights and liabilities of the parties
under the contract relating to any contract
termination inventory stored for the Government.
(vii) All rights and liabilities of the parties
under agreements relating to the future care
and disposition by the Contractor of Government-owned property remaining in the Contractor’s custody.
(viii) All rights and liabilities of the parties relating to Government property furnished to the Contractor for the performance
of this contract.
(ix) All rights and liabilities of the parties
under the contract relating to options (except options to continue or increase the
work under the contract), covenants not to
compete, and covenants of indemnity.
(x) Unresolved demands or assertions by
the Contractor against the Government for
costs under General Accounting Office exceptions or other costs of the same nature that
are excluded from the settlement without
prejudice to the rights of either party, as follows: [Insert amount and describe charges not
waived.]
(xi) Claims by the Contractor against the
Government, when the Contractor’s rights of
reimbursement are disputed, that are excluded without prejudice to the rights of either party are as follows: [Insert the amounts
and describe the claims on which the Contracting Officer has made findings and has disallowed and on which the Contractor has taken,
or intends to take, timely appeal.]
(xii) Unresolved demands or assertions by
the Contractor against the Government that
are unknown in amount and involve costs alleged to be reimbursable under the contract
are as follows: [Insert the estimated amounts
and describe the charges.]
(xiii) Unknown amounts alleged by the
Contractor against the Government, based
upon responsibility of the Contractor to
third parties that involve costs reimbursable
under the contract.
(xiv) Debts due the Government by the
Contractor that are based on refunds, rebates, credits, or other amounts not now
known to the Government, with interest,
now due or that may become due the Contractor from third parties, if the amounts
arise out of transactions for which reimbursement has been made to the Contractor
under the contract. The Contractor shall pay
to the Government, within 30 days after re-
ceipt, any of these amounts that become due
from any third party or any other source. Interest at the rate established by the Secretary of the Treasury under 50 U.S.C. (App.)
1215(b)(2) shall accrue and shall be paid to
the Government on any amounts that remain unpaid after the 30-day period.
(xv) All rights and liabilities, if any, of the
parties under those clauses of the contract
relating to price reductions for defective
cost or pricing data.
(End of agreement)
[48 FR 42447, Sept. 19, 1983, as amended at 60
FR 37773, July 21, 1995; 60 FR 49723, Sept. 26,
1995]
49.603–4 Cost-reimbursement
contracts—complete termination, with
settlement limited to fee.
[Insert the following in Block 14 of SF
30 for settlement of cost-reimbursement
contracts that are completely terminated,
if settlement is limited to fee.]
(a) This supplemental agreement settles
the amount of fee due under the contract,
terminated in its entirety by Notice of Termination dated .......... .
(b) The parties agree to the following:
(1) The Contractor has received $.......... on
account of its fee under the contract before
the effective date of termination.
(2) The Government agrees to pay to the
Contractor or its assignee, upon presentation
of a proper invoice or voucher, $.......... [insert
net amount to be paid on account of fee]. This
sum, with sums previously paid, constitutes
payment in full and complete settlement of
the amount due the Contractor on account of
its fee under the contract.
(3) The Contractor’s allowable costs under
the contract will be paid under the terms
and conditions of the contract and parts 31
and 49 of the Federal Acquisition Regulation.
[Insert subparagraph (3) only if there are
costs to be vouchered out (see 49.302) or if there
are costs to be covered later by a separate settlement agreement.]
(4) Regardless of any other provision of
this agreement, the following rights and liabilities of the parties under the contract
are reserved:
[The following list of reserved or excepted
rights and liabilities is intended to cover those
that should most frequently be reserved and
that should be scrutinized at the time a settlement agreement is negotiated (see 49.109–2). The
suggested language of the excepted items on the
list may be varied at the discretion of the contracting officer. If accuracy or completeness can
be achieved by referencing the number of a contract clause or provision covering the matter in
question, then follow that method of enumerating reserved rights and liabilities. Omit any of
942
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the following that are not applicable and add
any additional exceptions or reservations required.]
(i) All rights and liabilities, if any, of the
parties, as to matters covered by any renegotiation authority.
(ii) All rights and liabilities, if any, of the
parties under those clauses inserted in the
contract because of the requirements of Acts
of Congress and Executive Orders, including,
without limitation, any applicable clauses
relating to: labor law, contingent fees, domestic articles, and employment of aliens.
[If the contract contains clauses of this character inserted for reasons other than requirements of Acts of Congress or Executive Orders,
the suggested language should be appropriately
modified.]
(iii) All rights and liabilities of the parties
arising under the contract and relating to reproduction rights, patent infringements, inventions, or applications for patents, including rights to assignments, invention reports,
licenses, covenants of indemnity against patent risks, and bonds for patent indemnity obligations, together with all rights and liabilities under the bonds.
(iv) All rights and liabilities of the parties,
arising under the contract or otherwise, and
concerning defects, guarantees, or warranties relating to any articles or component
parts furnished to the Government by the
Contractor under the contract or this agreement.
(v) All rights and liabilities of the parties
under agreements relating to the future care
and disposition by the Contractor of Government-owned property remaining in the Contractor’s custody.
(vi) All rights and liabilities of the parties
relating to Government property furnished
to, or acquired by, the Contractor for the
performance of the contract.
(vii) All rights and liabilities of the parties
under the contract relating to options (except options to continue or increase the
work under the contract), covenants not to
compete, and covenants of indemnity.
(viii) All rights and liabilities, if any, of
the parties under those clauses of the contract relating to price reductions for defective cost or pricing data.
(a) This supplemental agreement settles
the termination settlement proposal resulting from the Notice of Termination dated
......... .
(b) The parties agree as follows:
(1) The contract is amended by deleting the
terminated portion as follows: [specify the
terminated portion clearly as to (i) item numbers, (ii) descriptions, (iii) quantity terminated,
(iv) unit and total price of terminated items, and
(v) any other explanation necessary to avoid
uncertainty or misunderstanding].
(2) The fee stated in the contract is decreased by $.........., from $.......... to $.......... .
[Insert, if appropriate, ‘‘(3) The estimated
cost of the contract is decreased by $..........,
from $.......... to $.........’’.]
(c) The Contractor’s allowable costs and
earned fee, if any, for the terminated portion
of the contract will continue to be reimbursed on SF 1034, Public Voucher for Purchase and Services Other Than Personal,
under the applicable provisions of the contract and part 31 of the Federal Acquisition
Regulation.
(End of agreement)
49.603–6 No-cost
settlement
agreement—complete termination.
[Insert the following in Block 14 of SF
30 if a no-cost settlement agreement,
under a complete termination, is to be executed.]
(a) This supplemental agreement ..........
[insert ‘‘modifies the contract to reflect a nocost settlement agreement with respect to
the Notice of Termination dated ..........’’ or,
if not previously terminated, ‘‘terminates the
contract in its entirety’’.]
(b) The parties agree as follows:
The Contractor unconditionally waives
any charges against the Government because
of the termination of the contract and, except as set forth below, releases it from all
obligations under the contract or due to its
termination. The Government agrees that all
obligations under the contract are concluded, except as follows:
[List reserved or excepted rights and liabilities. See 49.109–2 and 49.603–1(b)(7).]
(End of agreement)
(End of agreement)
[48 FR 42447, Sept. 19, 1983, as amended at 60
FR 37773, July 21, 1995; 60 FR 49723, Sept. 26,
1995]
49.603–5 Cost-reimbursement
contracts—partial termination.
[Insert the following in Block 14 of SF
30, Amendment of Solicitation/Modification of Contract, for settlement agreements for cost-reimbursement contracts as
a result of partial termination.]
49.603–7 No-cost
settlement
agreement—partial termination.
[Insert the following in Block 14 of SF
30 if a no-cost settlement agreement,
under a partial termination, is to be executed.]
(a) This supplemental agreement modifies
the contract to reflect a no-cost settlement
agreement with respect to the Notice of Termination dated .......... .
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48 CFR Ch. 1 (10–1–03 Edition)
(b) The parties agree as follows:
(1) The terminated portion of the contract
is as follows: [Specify (i) item numbers, (ii) descriptions, (iii) quantity terminated, (iv) unit
and total price of terminated items, and (v) any
other explanation necessary to avoid uncertainty or misunderstanding.]
(2) The Contractor unconditionally waives
any charges against the Government arising
under the terminated portion of the contract
or by reason of its termination, including,
without limitation, all obligations of the
Government to make further payments or to
carry out any further undertakings under
the terminated portion of the contract. The
Government acknowledges that the Contractor has no obligation to perform further
work or services or to make further deliveries under the terminated portion of the
contract. Nothing in this paragraph affects
any other covenants, terms, or conditions of
the contract. Under the terminated portion
of the contract, the following rights and liabilities of the parties are reserved:
[List reserved or excepted rights and liabilities. See 49.109–2 and 49.603–1(b)(7).]
(End of agreement)
49.603–8 Fixed-price contracts—settlements with subcontractors only.
[Insert the following in Block 14 of SF
30 for settlements of fixed-price contracts
covering only settlements with subcontractors.]
(a) This agreement settles that portion of
the settlement proposal of the Contractor
that is based upon termination of the following subcontracts entered into in performing this contract:
[Insert a list of the terminated subcontracts
included in this settlement.]
(b) The parties agree to the following:
(1) The Contractor certifies that each immediate subcontractor, whose settlement
proposal is included in the proposal settled
by the agreement, has furnished the Contractor a certificate stating (i) that all subcontract termination inventory (including
scrap) has been retained or acquired by the
subcontractor, sold to third parties, returned
to suppliers, delivered to or stored for the
Government, or otherwise properly accounted for, and that all proceeds and retention credits were used in arriving at the settlement of the subcontract, and (ii) that the
subcontractor has received a similar certificate from each immediate subcontractor
whose proposal was included in its proposal.
(2) The Contractor certifies that all items
of termination inventory, the costs of which
were used in arriving at the amount of this
settlement or the settlement of any subcontract settlement proposal included in this
settlement, (i) are properly allocable to the
terminated portion of the contract, (ii) do
not exceed the reasonable quantitative requirements of the terminated portion of the
contract, and (iii) do not include any items
reasonably usable without loss to the Contractor on its other work. The Contractor
further certifies that the Contracting Officer
has been informed of any substantial change
in the status of the items between the dates
of the termination inventory schedules and
the date of this agreement.
(3) The Contractor transfers, conveys, and
assigns to the Government all the right,
title, and interest, if any, that the Contractor has received or is entitled to receive,
in and to subcontract termination inventory
not otherwise properly accounted for.
(4) The Contractor shall, within 10 days
after receipt of the payment specified in this
agreement, pay to each of its immediate subcontractors (or their respective assignees)
the amounts to which they are entitled,
after deducting any prior payments and, if
the Contractor so elects, any amounts due
and payable to the Contractor by those subcontractors.
(5) The Government agrees to pay the Contractor or its assignee, upon presentation of
a proper invoice or voucher, $.......... [insert
net amount of settlement], which, together
with the amount of $.......... previously paid
the Contractor as partial, progress, or advance payments, constitutes payment in full
and complete settlement, except as provided
in subparagraph (b)(6) below, of the amount
due the Contractor for that portion of its
settlement proposal that is based upon termination of the subcontracts listed above.
(6) Regardless of any other provision of
this agreement, the following rights and liabilities of the parties under the contract
are reserved: [List reserved or excepted rights
and liabilities. See 49.109–2 and 49.603–1(b)(7).]
(End of agreement)
49.603–9
Settlement of reservations.
[Insert the following in Block 14 of SF
30 for settlement of reservations.]
(a) Supplemental Agreement No. llll,
dated llll, was executed to reflect the
settlement of the termination of this contract. The supplemental agreement excepted
from the settlement certain items described
in the agreement including the items described in paragraph (b) below. This supplemental agreement settles those items listed
in paragraph (b) below.
(b) The parties agree to the following:
(1) The Government agrees to pay the Contractor $ lll for the following reserved or
excepted items:* [List items.]
(2) The Contractor releases and forever discharges the Government from all liability
and from all existing and future claims and
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Federal Acquisition Regulation
49.606
demands that it may have under this contract, insofar as it pertains to the contract,
for the items described in subparagraph (1)
above.*
[*When payment is due the Government, reverse
the words Government and Contractor in subparagraphs (b)(1) and (b)(2).]
(End of agreement)
49.604 Release of excess funds under
terminated contracts.
The following format shall be used to
recommend the release of excess funds
under terminated contracts, except if
the contracting office retains responsibility for settlement of the termination:
FROM: Termination Contracting Officer
lll [address]
TO: Contracting office llll [address]
SUBJ: Terminated Contract No. ll with
ll [Contractor]
Refs:
(a) [Cite termination notice and effective
date.]
(b) [Cite prior letters releasing excess funds, if
any.]
1. Referenced termination notice, lll
[insert ‘‘completely’’ or ‘‘partially’’] terminated contract lll.
2. Based on the best information available,
it is estimated that the gross settlement
cost will be $ lll. The amount available
for release as excess to the contract is $
lll. Any payments previously made to the
Contractor for terminated items have been
considered in arriving at the above amounts.
[If prior letters recommending release of excess
funds are cited, use the following as paragraph
2:
‘‘The estimated settlement costs previously reported by reference (b) in the
amount of $ lll are revised. On the best
evidence now available, it is estimated that
the settlement costs will be $ lll. The additional amount available for release is $
lll’’.]
3. The related appropriations and amounts
involved are:
posals shall furnish applicable information from the list below and any additional information required by the contracting officer:
(a) Name of contractor and address of
principal office.
(b) Name and location of divisions of
the applicant’s plant for which authorization is requested.
(c) An explanation of the necessity
and justification for the authorization
requested.
(d) A full description of the applicant’s organization for handling terminations, including the names of the officials in charge of processing and settling proposals.
(e) The number and dollar amount
(estimated
if
necessary)
of
uncompleted contracts with Government agencies and the percentage applicable to each agency.
(f) The number and dollar amount
(estimated
if
necessary)
of
uncompleted subcontracts under Government contracts and the percentage
applicable to each agency.
(g) The extent of the applicant’s experience in termination matters, including the handling of proposals of
subcontractors.
(h) The approximate amount and general nature of terminations of the applicant currently in process.
(i) A statement that no other application has been made for any division
of the applicant’s plant covered by the
application or, if one has been made, a
full statement of the facts.
(j) The limit of authorization requested.
49.606 Granting subcontract settlement authorization.
Contracting officers shall use the following format when granting subcontract settlement authorization:
Appropriations
Allocated Amounts
LETTER OF AUTHORIZATION
..........................................
..........................................
..........................................
..........................................
(a) Your request of lll (date) is approved, and you are authorized, subject to
the limitations of subsection 49.108–4 and
those stated below, to settle, without further
approval of the Government, all subcontracts and purchase orders terminated by
you as a result of a Government contract
being terminated or modified (1) for the convenience of the Government or (2) under any
other circumstances that may require the
Government to bear the cost of their settlement.
Copies to:
Paying Office
Accounting and Finance Office
Other
49.605 Request to settle subcontractor
settlement proposals.
Contractors requesting authority to
settle subcontractor settlement pro-
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49.607
48 CFR Ch. 1 (10–1–03 Edition)
(b) This authorization does not extend to
the disposition of Government-furnished material or articles completed but undelivered
under the subcontract or purchase order, as
these require screening and approval of disposal actions by the Government, except
that allocable completed articles may be disposed of without Government approval or
screening if the total amount (at subcontract price) when added to the amount of
settlement (as computed below) does not exceed $ llll [insert limit of authorization
being granted].
(c) This authorization is subject to the following conditions and requirements:
(1) The amount of the subcontract termination settlement does not exceed $ lll
[insert limit of authorization being granted],
computed as follows:
(i) Do not deduct advance or partial payments or credits for retention or other disposal of termination inventory allocated to
the settlement proposal.
(ii) Deduct amounts payable for completed
articles or work at the contract price or for
the settlement of termination proposals of
subcontractors (except those settlements
that have not been approved by the Government).
(2) Any termination inventory involved has
been disposed of under subsection 49.108–4,
except that screening and Government approval of scrap and salvage determinations
are not required.
(3) The Contracting Officer may incorporate into each Notice of Termination specific instructions about the disposition of
specific items of termination inventory, or
the Contracting Officer may, at any time before final settlement, issue specific instructions. These instructions will not affect any
disposal action taken by you or your subcontractors before their receipt.
(4) The settlements made by you with your
subcontractors and suppliers under this authorization, including sales, retention, or
other dispositions of property involved in
making these settlements, are reimbursable
under part 49 and the Termination clause of
the contract, and do not require approval of
the Contracting Officer.
(5) Any number of separate settlements of
$ lll [insert limit of authorization granted]
or less may be made with a single subcontractor. Settlement proposals that would
normally be included in a single proposal;
e.g., those based on a series of separate orders for the same item under one contract,
should be consolidated whenever possible
and shall not be divided to bring them within
the authorization.
(6) This authorization does not apply if a
subcontractor or supplier is affiliated with
you. For this purpose, you should consider a
contractor to be affiliated with you if you
are under common control or if there is any
common interest between you by reason of
stock ownership, or otherwise, that is sufficient to create a reasonable doubt that the
bargaining between you is completely at
arm’s length.
(7) A representative of this office will, from
time to time, review the methods used in negotiating settlements with your subcontractors and will make a selective examination
of the settlements made by you. If the review indicates that you are not adequately
protecting the Government’s interest, this
delegation will be revoked.
(End of letter)
49.607
Delinquency notices.
The formats of the delinquency notices in this section may be used to
satisfy the requirements of 49.402–3. All
notices will be sent with proof of delivery requested. (See subpart 42.13 for
stop-work orders.)
(a) Cure notice. If a contract is to be
terminated for default before the delivery date, a Cure Notice is required by
the Default clause. Before using this
notice, it must be ascertained that an
amount of time equal to or greater
than the period of cure remains in the
contract delivery schedule or any extension to it. If the time remaining in
the contract delivery schedule is not
sufficient to permit a realistic cure period of 10 days or more, the Cure Notice
should not be issued. The Cure Notice
may be in the following format:
CURE NOTICE
You are notified that the Government considers your lll [specify the contractor’s failure or failures] a condition that is endangering performance of the contract. Therefore, unless this condition is cured within 10
days after receipt of this notice [or insert any
longer time that the Contracting Officer may
consider reasonably necessary], the Government may terminate for default under the
terms and conditions of the lll [insert
clause title] clause of this contract.
(End of notice)
(b) Show cause notice. If the time remaining in the contract delivery schedule is not sufficient to permit a realistic cure period of 10 days or more, the
following Show Cause Notice may be
used. It should be sent immediately
upon expiration of the delivery period.
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Federal Acquisition Regulation
50.001
SHOW CAUSE NOTICE
Since you have failed to lll [insert ‘‘perform Contract No. lll within the time required by its terms’’, or ‘‘cure the conditions
endangering performance under Contract No.
lll as described to you in the Government’s letter of llll (date)’’], the Government is considering terminating the contract under the provisions for default of this
contract. Pending a final decision in this
matter, it will be necessary to determine
whether your failure to perform arose from
causes beyond your control and without
fault or negligence on your part. Accordingly, you are given the opportunity to
present, in writing, any facts bearing on the
question to llll [insert the name and complete address of the contracting officer], within
10 days after receipt of this notice. Your failure to present any excuses within this time
may be considered as an admission that none
exist. Your attention is invited to the respective rights of the Contractor and the
Government and the liabilities that may be
invoked if a decision is made to terminate
for default.
Any assistance given to you on this contract or any acceptance by the Government
of delinquent goods or services will be solely
for the purpose of mitigating damages, and it
is not the intention of the Government to
condone any delinquency or to waive any
rights the Government has under the contract.
(End of notice)
[48 FR 42447, Sept. 19, 1983, as amended at 60
FR 48250, Sept. 18, 1995]
PART 50—EXTRAORDINARY
CONTRACTUAL ACTIONS
Sec.
50.000
50.001
Scope of part.
Definitions.
Subpart 50.1—General
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42471, Sept. 19, 1983, unless
otherwise noted.
50.000
Scope of part.
This part prescribes policies and procedures for entering into, amending, or
modifying contracts in order to facilitate the national defense under the extraordinary
emergency
authority
granted by Public Law 85–804 (50 U.S.C.
1431–1434), referred to in this part as
the ‘‘Act’’, and Executive Order 10789,
dated November 14, 1958, referred to in
this part as ‘‘the Executive order’’, It
does not cover advance payments (see
subpart 32.4).
50.001
Subpart 50.2—Delegation of and
Limitations on Exercise of Authority
Delegation of authority.
Contract adjustment boards.
Limitations on exercise of authority.
Subpart 50.3—Contract Adjustments
50.300
50.301
Subpart 50.4—Residual Powers
50.400 Scope of subpart.
50.401 Standards for use.
50.402 General.
50.403 Special procedures for unusually hazardous or nuclear risks.
50.403–1 Indemnification requests.
50.403–2 Action on indemnification requests.
50.403–3 Contract clause.
[65 FR 46073, July 26, 2000]
50.101 Authority.
50.102 Policy.
50.103–50.104 [Reserved]
50.105 Records.
50.201
50.202
50.203
50.302 Types of contract adjustment.
50.302–1 Amendments
without
consideration.
50.302–2 Correcting mistakes.
50.302–3 Formalizing
informal
commitments.
50.303 Contract adjustment.
50.303–1 Contractor requests.
50.303–2 Contractor certification.
50.304 Facts and evidence.
50.305 Processing cases.
50.306 Disposition.
50.307 Contract requirements.
Definitions.
As used in this part—
Approving authority means an agency
official or contract adjustment board
authorized to approve actions under
the Act and Executive Order.
Secretarial level means a level at or
above the level of a deputy assistant
agency head, or a contract adjustment
board.
[48 FR 42471, Sept. 19, 1983, as amended at 66
FR 2134, Jan. 10, 2001]
Scope of subpart.
General.
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50.101
48 CFR Ch. 1 (10–1–03 Edition)
Subpart 50.1—General
50.101
50.103–50.104
50.105
Authority.
(a) The Act empowers the President
to authorize agencies exercising functions in connection with the national
defense to enter into, amend, and modify contracts, without regard to other
provisions of law related to making,
performing, amending, or modifying
contracts, whenever the President considers that such action would facilitate
the national defense.
(b) The Executive Order authorizes
the heads of the following agencies to
exercise the authority conferred by the
Act and to delegate it to other officials
within the agency: the Government
Printing Office; the Federal Emergency
Management Agency; the Tennessee
Valley Authority; the National Aeronautics and Space Administration; the
General Services Administration; the
Defense, Army, Navy, Air Force, Treasury, Interior, Agriculture, Commerce,
and Transportation Departments; the
Department of Energy for functions
transferred to that Department from
other authorized agencies; and any
other agency that may be authorized
by the President.
50.102
Policy.
(a) The authority conferred by the
Act may not (1) be used in a manner
that encourages carelessness and laxity
on the part of persons engaged in the
defense effort or (2) be relied upon
when other adequate legal authority
exists within the agency.
(b) Actions authorized under the Act
shall be accomplished as expeditiously
as practicable, consistent with the
care, restraint, and exercise of sound
judgment appropriate to the use of
such extraordinary authority.
(c) Certain kinds of relief previously
available only under the Act; e.g.,
recission or reformation for mutual
mistake, are now available under the
authority of the Contract Disputes Act
of 1978. In accordance with subparagraph (a)(2) above, part 33 must be followed in preference to part 50 for such
relief. In case of doubt as to whether
part 33 applies, the contracting officer
should seek legal advice.
[Reserved]
Records.
Agencies shall maintain complete
records of all actions taken under this
part 50. For each request for relief
processed, these records shall include,
as a minimum—
(a) The contractor’s request;
(b) All relevant memorandums, correspondence, affidavits, and other pertinent documents;
(c) The Memorandum of Decision (see
50.306 and 50.402); and
(d) A copy of the contractual document implementing an approved request.
Subpart 50.2—Delegation of and
Limitations on Exercise of Authority
50.201
Delegation of authority.
An agency head may delegate in
writing authority under the Act and
Executive Order, subject to the following limitations:
(a) Authority delegated shall be to a
level high enough to ensure uniformity
of action.
(b) Authority to approve requests to
obligate the Government in excess of
$50,000 may not be delegated below the
secretarial level.
(c) Regardless of dollar amount, authority to approve any amendment
without consideration that increases
the contract price or unit price may
not be delegated below the secretarial
level, except in extraordinary cases or
classes of cases when the agency head
finds that special circumstances clearly justify such delegation.
(d) Regardless of dollar amount, authority to indemnify against unusually
hazardous or nuclear risks, including
extension of such indemnification to
subcontracts, shall be exercised only
by the Secretary or Administrator of
the agency concerned, the Public
Printer, or the Chairman of the Board
of Directors of the Tennessee Valley
Authority (see 50.403).
50.202
Contract adjustment boards.
An agency head may establish a contract adjustment board with authority
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Federal Acquisition Regulation
50.301
to approve, authorize, and direct appropriate action under this part 50 and to
make all appropriate determinations
and findings. The decisions of the board
shall not be subject to appeal; however,
the board may reconsider and modify,
correct, or reverse its previous decisions. The board shall determine its
own procedures and have authority to
take all action necessary or appropriate to conduct its functions.
50.203 Limitations on exercise of authority.
(a) The Act is not authority for—
(1) Using a cost-plus-a-percentage-ofcost system of contracting;
(2) Making any contract that violates
existing law limiting profit or fees;
(3) Providing for other than full and
open competition for award of contracts for supplies or services; or
(4) Waiving any bid bond, payment
bond, performance bond, or other bond
required by law.
(b) No contract, amendment, or
modification shall be made under the
Act’s authority—
(1) Unless the approving authority
finds that the action will facilitate the
national defense;
(2) Unless other legal authority within the agency concerned is deemed to
be lacking or inadequate;
(3) Except within the limits of the
amounts appropriated and the statutory contract authorization (however,
indemnification agreements authorized
by an agency head (50.403) are not limited to amounts appropriated or to contract authorization); and
(4) That will obligate the Government for any amount over $25 million,
unless the Senate and the House Committees on Armed Services are notified
in writing of the proposed obligation
and 60 days of continuous session of
Congress have passed since the transmittal of such notification. However,
this paragraph (b)(4) does not apply to
indemnification agreements authorized
under 50.403.
(c) No contract shall be amended or
modified unless the contractor submits
a request before all obligations (including final payment) under the contract
have been discharged. No amendment
or modification shall increase the contract price to an amount higher than
the lowest rejected bid of any responsible bidder, if the contract was negotiated under 10 U.S.C. 2304(a)(15) or 41
U.S.C. 252(c)(14), or FAR 14.404–1(f).
(d) No informal commitment shall be
formalized unless—
(1) The contractor submits a written
request for payment within 6 months
after furnishing, or arranging to furnish, supplies or services in reliance
upon the commitment; and
(2) The approving authority finds
that, at the time the commitment was
made, it was impracticable to use normal contracting procedures.
(e) The exercise of authority by officials below the secretarial level is subject to the following additional limitations:
(1) The action shall not—
(i) Release a contractor from performance of an obligation over $50,000;
(ii) Result in an increase in cost to
the Government over $50,000;
(iii) Deal with, or directly affect, any
matter that has been submitted to the
General Accounting Office; or
(iv) Involve disposal of Government
surplus property.
(2) Mistakes shall not be corrected by
an action obligating the Government
for over $1,000, unless the contracting
officer receives notice of the mistake
before final payment.
(3) The correction of a contract because of a mistake in its making shall
not increase the original contract price
to an amount higher than the next lowest responsive offer of a responsible offeror.
[48 FR 42471, Sept. 19, 1983, as amended at 50
FR 1746, Jan. 1, 1985; 50 FR 52429, Dec. 23,
1985; 56 FR 67135, Dec. 27, 1991; 62 FR 51271,
Sept. 30, 1997]
Subpart 50.3—Contract
Adjustments
50.300 Scope of subpart.
This subpart prescribes standards
and procedures for processing contractors’ requests for contract adjustment
under the Act and Executive Order.
50.301 General.
The fact that losses occur under a
contract is not sufficient basis for exercising the authority conferred by the
Act. Whether appropriate action will
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50.302
48 CFR Ch. 1 (10–1–03 Edition)
facilitate the national defense is a
judgment to be made on the basis of all
of the facts of the case. Although it is
impossible to predict or enumerate all
the types of cases in which action may
be appropriate, examples are included
in 50.302 below. Even if all of the factors in any of the examples are present,
other considerations may warrant denying a contractor’s request for contract adjustment. The examples are
not intended to exclude other cases in
which the approving authority determines that the circumstances warrant
action.
press clearly, in a written contract, the
agreement as both parties understood
it.
(2) A contractor’s mistake so obvious
that it was or should have been apparent to the contracting officer.
(3) A mutual mistake as to a material fact.
(b) Amending contracts to correct
mistakes with the least possible delay
normally will facilitate the national
defense by expediting the contracting
program and assuring contractors that
mistakes will be corrected expeditiously and fairly.
50.302
50.302–3 Formalizing informal commitments.
Types of contract adjustment.
50.302–1 Amendments without consideration.
(a) When an actual or threatened loss
under a defense contract, however
caused, will impair the productive ability of a contractor whose continued
performance on any defense contract or
whose continued operation as a source
of supply is found to be essential to the
national defense, the contract may be
amended without consideration, but
only to the extent necessary to avoid
such impairment to the contractor’s
productive ability.
(b) When a contractor suffers a loss
(not merely a decrease in anticipated
profits) under a defense contract because of Government action, the character of the action will generally determine whether any adjustment in the
contract will be made, and its extent.
When the Government directs its action primarily at the contractor and
acts in its capacity as the other contracting party, the contract may be adjusted in the interest of fairness. Thus,
when Government action, while not
creating any liability on the Government’s part, increases performance
cost and results in a loss to the contractor, fairness may make some adjustment appropriate.
50.302–2
Correcting mistakes.
(a) A contract may be amended or
modified to correct or mitigate the effect of a mistake. The following are examples of mistakes that may make
such action appropriate:
(1) A mistake or ambiguity consisting of the failure to express, or ex-
Under certain circumstances, informal commitments may be formalized
to permit payment to persons who have
taken action without a formal contract; for example, when a person, responding to an agency official’s written
or oral instructions and relying in good
faith upon the official’s apparent authority to issue them, has furnished or
arranged to furnish supplies or services
to the agency, or to a defense contractor or subcontractor, without formal contractual coverage. Formalizing
commitments
under
such
circumstances normally will facilitate
the national defense by assuring such
persons that they will be treated fairly
and paid expeditiously.
50.303
Contract adjustment.
50.303–1
Contractor requests.
A contractor seeking a contract adjustment shall submit a request in duplicate to the contracting officer or an
authorized representative. The request,
normally a letter, shall state as a minimum—
(a) The precise adjustment requested;
(b) The essential facts, summarized
chronologically in narrative form;
(c) The contractor’s conclusions
based on these facts, showing, in terms
of the considerations set forth in 50.301
and 50.302 above, when the contractor
considers itself entitled to the adjustment; and
(d) Whether or not—
(1) All obligations under the contracts involved have been discharged;
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Federal Acquisition Regulation
50.304
(2) Final payment under the contracts involved has been made;
(3) Any proceeds from the request
will be subject to assignment or other
transfer, and to whom; and
(4) The contractor has sought the
same, or a similar or related, adjustment from the General Accounting Office or any other part of the Government, or anticipates doing so.
[48 FR 42471, Sept. 19, 1983. Redesignated at
60 FR 48230, Sept. 18, 1995]
50.303–2 Contractor certification.
A contractor seeking a contract adjustment that exceeds the simplified
acquisition threshold shall, at the time
the request is submitted, submit a certification by a person authorized to
certify the request on behalf of the
contractor that (a) the request is made
in good faith and (b) the supporting
data are accurate and complete to the
best of that person’s knowledge and belief.
[60 FR 48230, Sept. 18, 1995]
50.304 Facts and evidence.
(a) General. When it is appropriate,
the contracting officer or other agency
official shall request the contractor to
support any request made under 50.303–
1 with any of the following information:
(1) A brief description of the contracts involved, the dates of execution
and amendments, the items being acquired, the price or prices, the delivery
schedules, and any special contract
provisions relevant to the request.
(2) A history of performance indicating when work under the contracts
or commitments began, the progress
made to date, an exact statement of
the contractor’s remaining obligations,
and the contractor’s expectations regarding completion.
(3) A statement of payments received, due, and yet to be received or to
become due, including advance and
progress payments; amounts withheld
by the Government; and information as
to any obligations of the Government
yet to be performed under the contracts.
(4) A detailed analysis of the request’s monetary elements, including
precisely how the actual or estimated
dollar amount was determined and the
effect of approval or denial on the contractor’s profits before Federal income
taxes.
(5) A statement of the contractor’s
understanding of why the request’s
subject matter cannot now, and could
not at the time it arose, be disposed of
under the contract terms.
(6) The best supporting evidence
available to the contractor, including
contemporaneous memorandums, correspondence, and affidavits.
(7) Relevant financial statements,
cost analyses, or other such data, preferably certified by a certified public
accountant, as necessary to support
the request’s monetary elements.
(8) A list of persons connected with
the contracts who have factual knowledge of the subject matter, including,
when possible, their names, offices or
titles, addresses, and telephone numbers.
(9) A statement and evidence of steps
taken to reduce losses and claims to a
minimum.
(10) Any other relevant statements or
evidence that may be required.
(b) Amendments without consideration—essentiality a factor. When a request involves possible amendment
without consideration, and essentiality
to the national defense is a factor
(50.302–1(a)), the contractor may be
asked to furnish, in addition to the
facts and evidence listed in paragraph
(a) of this section, any of the following
information:
(1) A statement and evidence of the
contractor’s original breakdown of estimated costs, including contingency
allowances, and profit.
(2) A statement and evidence of the
contractor’s present estimate of total
costs under the contracts involved if it
is enabled to complete them, broken
down between costs accrued to date
and completion costs, and between
costs paid and those owed.
(3) A statement and evidence of the
contractor’s estimate of the final price
of the contracts, taking into account
all known or contemplated escalation,
changes, extras, and the like.
(4) A statement of any claims known
or contemplated by the contractor
against the Government involving the
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50.304
48 CFR Ch. 1 (10–1–03 Edition)
contracts, other than those stated in
response to subparagraph (3) above.
(5) An estimate of the contractor’s
total profit or loss under the contracts
if it is enabled to complete them at the
estimated final contract price, broken
down between profit or loss to date and
completion profit or loss.
(6) An estimate of the contractor’s
total profit or loss from other Government business and all other sources,
from the date of the first contract involved to the estimated completion
date of the last contract involved.
(7) A statement of the amount of any
tax refunds to date, and an estimate of
those anticipated, for the period from
the date of the first contract involved
to the estimated completion date of
the last contract involved.
(8) A detailed statement of efforts the
contractor has made to obtain funds
from commercial sources to enable
contract completion.
(9) A statement of the minimum
amount the contractor needs as an
amendment without consideration to
enable contract completion, and the
detailed basis for that amount.
(10) An estimate of the time required
to complete each contract if the request is granted.
(11) A statement of the factors causing the loss under the contracts involved.
(12) A statement of the course of
events anticipated if the request is denied.
(13) Balance sheets, preferably certified by a certified public accountant,
(i) for the contractor’s fiscal year immediately preceding the date of the
first contract, (ii) for each subsequent
fiscal year, (iii) as of the request date,
and (iv) projected as of the completion
date of all the contracts involved (assuming the contractor is enabled to
complete them at the estimated final
prices), together with income statements for annual periods subsequent to
the date of the first balance sheet. Balance sheets and income statements
should be both consolidated and broken
down by affiliates. They should show
all transactions between the contractor and its affiliates, stockholders,
and partners, including loans to the
contractor guaranteed by any stockholder or partner.
(14) A list of all salaries, bonuses, and
other compensation paid or furnished
to the principal officers or partners,
and of all dividends and other withdrawals, and of all payments to stockholders in any form since the date of
the first contract involved.
(c) Amendments without consideration—essentiality not a factor. When a
request involves possible amendment
without consideration because of Government action, and essentiality to the
national defense is not a factor (50.302–
1(b)), the contractor may be asked to
furnish, in addition to the facts and
evidence listed in paragraph (a) of this
section, any of the following information:
(1) A clear statement of the precise
Government action that the contractor
considers to have caused a loss under
the contract, with evidence to support
each essential fact.
(2) A statement and evidence of the
contractor’s original breakdown of estimated costs, including contingency
allowances, and profit.
(3) The estimated total loss under the
contract, with detailed supporting
analysis.
(4) The estimated loss resulting specifically from the Government action,
with detailed supporting analysis.
(d) Correcting mistakes. When a request involves possible correction of a
mistake (50.302–2), the contractor may
be asked to furnish, in addition to the
facts and evidence listed in paragraph
(a) of this section, any of the following
information:
(1) A statement and evidence of the
precise error made, ambiguity existing,
or misunderstanding arising, showing
what it consists of, how it occurred,
and the intention of the parties.
(2) A statement explaining when the
mistake was discovered, when the contracting officer was given notice of it,
and whether this notice was given before completion of work under, or the
effective termination date of, the contract.
(3) An estimate of profit or loss under
the contract, with detailed supporting
analysis.
(4) An estimate of the increase in
cost to the Government resulting from
the adjustment requested, with detailed supporting analysis.
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(e) Formalizing informal commitments.
When a request involves possible formalizing of an informal commitment
(50.302–3), the contractor may be asked
to furnish, in addition to the facts and
evidence listed in paragraph (a) of this
section, any of the following information:
(1) Copies of any written instructions
or assurances (or a sworn statement of
any oral instructions or assurances)
given the contractor, and identification of the Government official who
gave them.
(2) A statement as to when the contractor furnished or arranged to furnish the supplies or services involved,
and to whom.
(3) Evidence that the contractor relied upon the instructions or assurances, with a full description of the circumstances that led to this reliance.
(4) Evidence that, when performing
the work, the contractor expected to be
compensated directly for it by the Government and did not anticipate recovering the costs in some other way.
(5) A cost breakdown supporting the
amount claimed as fair compensation
for the work performed.
(6) A statement and evidence of the
impracticability of providing, in an appropriate contractual instrument, for
the work performed.
[48 FR 42471, Sept. 19, 1983, as amended at 60
FR 48230, Sept. 18, 1995]
50.305
Processing cases.
(a) In response to a contractor request made in accordance with 50.303–1,
the contracting officer or an authorized representative shall make a thorough investigation to establish the
facts necessary to decide a given case.
Facts and evidence, including signed
statements of material facts within the
knowledge of individuals when documentary evidence is lacking, and audits if considered necessary to establish financial or cost facts, shall be obtained from contractor and Government personnel.
(b) When a case involves matters of
interest to more than one Government
agency, the interested agencies should
maintain liaison with each other to determine whether joint action should be
taken.
(c) When additional funds are required from another agency, the contracting agency may not approve adjustment requests before receiving advice that the funds will be available.
The request for this advice shall give
the contractor’s name, the contract
number, the amount of proposed relief,
a brief description of the contract, and
the accounting classification or fund
citation. If the other agency makes additional funds available, the agency
considering the adjustment request
shall be solely responsible for any action taken on the request.
(d) When essentiality to the national
defense is an issue (50.302–1(a)), agencies considering requests for amendment without consideration involving
another agency shall obtain advice on
the issue from the other agency before
making the final decision. When this
advice is received, the agency considering the request for amendment without consideration shall be responsible
for taking whatever action is appropriate.
[48 FR 42471, Sept. 19, 1983, as amended at 60
FR 48230, Sept. 18, 1995]
50.306 Disposition.
When approving or denying a contractor’s request made in accordance
with 50.303–1, the approving authority
shall sign and date a Memorandum of
Decision containing—
(a) The contractor’s name and address, the contract identification, and
the nature of the request;
(b) A concise description of the supplies or services involved;
(c) The decision reached and the actual cost or estimated potential cost
involved, if any;
(d) A statement of the circumstances
justifying the decision;
(e) Identification of any of the foregoing information classified Confidential or higher (instead of being included
in the memorandum, such information
may be set forth in a separate classified document referenced in the memorandum); and
(f) If some adjustment is approved, a
statement in substantially the following form: ‘‘I find that the action authorized herein will facilitate the national defense.’’ The case files supporting this statement will show the
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50.307
48 CFR Ch. 1 (10–1–03 Edition)
derivation and rationale for the dollar
amount of the award. When the dollar
amount exceeds the amounts supported
by audit or other independent reviews,
the approving authority will further
document the rationale for deviating
the recommendation.
[48 FR 42471, Sept. 19, 1983, as amended at 51
FR 31426, Sept. 3, 1986; 60 FR 48230, Sept. 18,
1995]
50.307 Contract requirements.
(a) The Act and Executive Order require that every contract entered into,
amended, or modified under this part 50
shall contain—
(1) A citation of the Act and Executive Order;
(2) A brief statement of the circumstances justifying the action; and
(3) A recital of the finding that the
action will facilitate the national defense.
(b) The authority in 50.101(a) shall
not be used to omit from contracts,
when otherwise required, the clauses at
52.203–5, Covenant Against Contingent
Fees; 52.215–2, Audit and Records—Negotiation; 52.222–4, Contract Work
Hours and Safety Standards Act—Overtime Compensation; 52.222–6, DavisBacon Act; 52.222–10, Compliance With
Copeland Act Requirements; 52.222–20,
Walsh-Healey Public Contracts Act;
52.222–26,
Equal
Opportunity;
and
52.232–23, Assignment of Claims.
[48 FR 42471, Sept. 19, 1983, as amended at 51
FR 31426, Sept. 3, 1986; 53 FR 4945, Feb. 18,
1988; 60 FR 42651, Aug. 16, 1995]
Subpart 50.4—Residual Powers
50.400 Scope of subpart.
This subpart prescribes standards
and procedures for exercising residual
powers under the Act. The term residual powers includes all authority under
the Act except (a) that covered by subpart 50.3 and (b) the authority to make
advance payments (see subpart 32.4).
50.401 Standards for use.
Subject to the limitations in 50.203,
residual powers may be used in accordance with the policies in 50.102 when
necessary and appropriate, all circumstances considered. In authorizing
the inclusion of the clause at 52.250–1,
Indemnification Under Pub. L. 85–804,
in a contract or subcontract, an agency
head may require the indemnified contractor to provide and maintain financial protection of the type and amount
determined appropriate. In deciding
whether to approve use of the indemnification clause, and in determining
the type and amount of financial protection the indemnified contractor is
to provide and maintain, an agency
head shall consider such factors as selfinsurance, other proof of financial responsibility, workers’ compensation insurance, and the availability, cost, and
terms of private insurance. The approval and determination shall be
final.
50.402
General.
(a) When approving or denying a proposal for the exercise of residual powers, the approving authority shall sign
and date a Memorandum of Decision
containing substantially the same information called for by 50.306.
(b) Every contract entered into,
amended, or modified under residual
powers shall comply with the requirements of 50.307.
50.403 Special procedures for unusually hazardous or nuclear risks.
50.403–1
Indemnification requests.
(a) Contractor requests for the indemnification clause to cover unusually hazardous or nuclear risks should
be submitted to the contracting officer
and shall include the following information:
(1) Identification of the contract for
which the indemnification clause is requested.
(2) Identification and definition of
the unusually hazardous or nuclear
risks for which indemnification is requested, with a statement indicating
how the contractor would be exposed to
them.
(3) A statement, executed by a corporate official with binding contractual authority, of all insurance coverage applicable to the risks to be defined in the contract as unusually hazardous or nuclear, including—
(i) Names of insurance companies,
policy numbers, and expiration dates;
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Federal Acquisition Regulation
50.403–2
(ii) A description of the types of insurance provided (including the extent
to which the contractor is self-insured
or intends to self-insure), with emphasis on identifying the risks insured
against and the coverage extended to
persons or property, or both;
(iii) Dollar limits per occurrence and
annually, and any other limitation, for
relevant segments of the total insurance coverage;
(iv) Deductibles, if any, applicable to
losses under the policies;
(v) Any exclusions from coverage
under such policies for unusually hazardous or nuclear risks; and
(vi) Applicable workers’ compensation insurance coverage.
(4) The controlling or limiting factors for determining the amount of financial protection the contractor is to
provide and maintain, with information regarding the availability, cost,
and terms of additional insurance or
other forms of financial protection.
(5) Whether the contractor’s insurance program has been approved or accepted by any Government agency; and
whether the contractor has an indemnification agreement covering similar
risks under any other Government program, and, if so, a brief description of
any limitations.
(6) If the contractor is a division or
subsidiary of a parent corporation, (i) a
statement of any insurance coverage of
the parent corporation that bears on
the risks for which the contractor
seeks indemnification and (ii) a description of the precise legal relationship between parent and subsidiary or
division.
(b) If the dollar value of the contractor’s insurance coverage varies by 10
percent or more from that stated in an
indemnification request submitted in
accordance with paragraph (a) above,
or if other significant changes in insurance coverage occur after submission
and before approval, the contractor
shall immediately submit to the contracting officer a brief description of
the changes.
50.403–2 Action on indemnification requests.
(a) The contracting officer, with assistance from legal counsel and cognizant program office personnel, shall
review the indemnification request and
ascertain whether it contains all required information. If the contracting
officer, after considering the facts and
evidence, denies the request, the contracting officer shall notify the contractor promptly of the denial and of
the reasons for it. If recommending approval, the contracting officer shall
forward the request (as modified, if
necessary, by negotiation) through
channels to the appropriate official
specified in 50.201(d). The contracting
officer’s submission shall include all
information submitted by the contractor and—
(1) All pertinent information regarding the proposed contract or program,
including the period of performance,
locations, and facilities involved;
(2) A definition of the unusually hazardous or nuclear risks involved in the
proposed contract or program, with a
statement that the parties have agreed
to it;
(3) A statement by responsible authority that the indemnification action
would facilitate the national defense;
(4) A statement that the contract
will involve unusually hazardous or nuclear risks that could impose liability
upon the contractor in excess of financial protection reasonably available;
(5) A statement that the contractor
is complying with applicable Government safety requirements;
(6) A statement of whether the indemnification should be extended to
subcontractors; and
(7) A description of any significant
changes in the contractor’s insurance
coverage (see 50.403–1(b)) occurring
since submission of the indemnification request.
(b) Approval of a request to include
the indemnification clause in a contract shall be by a Memorandum of Decision executed by the appropriate official specified in 50.201(d).
(c) When use of the indemnification
clause is approved under paragraph (b)
above, the definition of unusually hazardous or nuclear risks (see subparagraph (a)(2) above) shall be incorporated into the contract, along with
the clause.
(d) When approval is (1) authorized in
the Memorandum of Decision and (2)
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50.403–3
48 CFR Ch. 1 (10–1–03 Edition)
justified by the circumstances, the contracting officer may approve the contractor’s written request to provide for
indemnification
of
subcontractors,
using the same procedures as those required for contractors.
50.403–3 Contract clause.
The contracting officer shall insert
the clause at 52.250–1, Indemnification
Under Public Law 85–804, in contracts
whenever the approving official determines that the contractor shall be indemnified against unusually hazardous
or nuclear risks (also see 50.403–2(c)). In
cost-reimbursement contracts, the contracting officer shall use the clause
with its Alternate I.
PART 51—USE OF GOVERNMENT
SOURCES BY CONTRACTORS
Sec.
51.000
Scope of part.
Subpart 51.1—Contractor Use of
Government Supply Sources
51.100 Scope of subpart.
51.101 Policy.
51.102 Authorization to use Government
supply sources.
51.103 Ordering from Government supply
sources.
51.104 Furnishing assistance to contractors.
51.105 Payment for shipments.
51.106 Title.
51.107 Contract clause.
Subpart 51.2—Contractor Use of Interagency Fleet Management System
(IFMS)
51.200 Scope of subpart.
51.201 Policy.
51.202 Authorization.
51.203 Means of obtaining service.
51.204 Use of interagency fleet management
system (IFMS) vehicles and related services.
51.205 Contract clause.
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137; and 42 U.S.C. 2473(c).
SOURCE: 48 FR 42476, Sept. 19, 1983, unless
otherwise noted.
51.000 Scope of part.
This part prescribes policies and procedures for the use by contractors of
Government supply sources and interagency motor pool vehicles and related
services.
Subpart 51.1—Contractor Use of
Government Supply Sources
51.100 Scope of subpart.
This subpart prescribes policies and
procedures for the use of Government
supply sources (see 51.102(c)) by contractors. In this subpart, the terms
contractors and contracts include subcontractors and subcontracts.
51.101 Policy.
(a) If it is in the Government’s interest, and if supplies or services required
in the performance of a Government
contract are available from Government supply sources, contracting officers may authorize contractors to use
these sources in performing—
(1) Government cost-reimbursement
contracts;
(2) Other types of negotiated contracts when the agency determines
that a substantial dollar portion of the
contractor’s contracts are of a Government cost-reimbursement nature; or
(3) A contract under the Javits-Wagner-O’Day Act (41 U.S.C. 46, et seq.) if:
(i) The nonprofit agency requesting
use of the supplies and services is providing a commodity or service to the
Federal Government, and
(ii) The supplies or services received
are directly used in making or providing a commodity or service, approved by the Committee for Purchase
From People Who Are Blind or Severely Disabled, to the Federal Government (See Subpart 8.7).
(b) Contractors with fixed-price Government contracts that require protection of security classified information
may
acquire
security
equipment
through GSA sources (see 41 CFR 101–
26.507).
(c) Contracting officers shall authorize contractors purchasing supply
items for Government use that are
available from the Committee for Purchase from People Who Are Blind or
Severely Disabled (see subpart 8.7) to
purchase such items from the Defense
Logistics Agency (DLA), the General
Services Administration (GSA), and
the Department of Veterans Affairs
(VA) if they are available from these
agencies through their distribution facilities. Mandatory supplies that are
not available from DLA/GSA/VA shall
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51.102
be ordered through the appropriate
central nonprofit agency (see 52.208–
9(c)).
[48 FR 42476, Sept. 19, 1983, as amended at 60
FR 42657, Aug. 16, 1995; 61 FR 2631, Jan. 26,
1996; 67 FR 6121, Feb. 8, 2002]
51.102 Authorization to use Government supply sources.
(a) Before issuing an authorization to
a contractor to use Government supply
sources in accordance with 51.101 (a) or
(b), the contracting officer shall place
in the contract file a written finding
supporting issuance of the authorization. A written finding is not required
when authorizing use of the Government supply sources in accordance
with 51.101(c). Except for findings under
51.101(a)(3), the determination shall be
based on, but not limited to, consideration of the following factors:
(1) The administrative cost of placing
orders with Government supply sources
and the program impact of delay factors, if any.
(2) The lower cost of items available
through Government supply sources.
(3) Suitability of items available
through Government supply sources.
(4) Delivery factors such as cost and
time.
(5) Recommendations of the contractor.
(b) Authorizations to subcontractors
shall be issued through, and with the
approval of, the contractor.
(c) Upon deciding to authorize a contractor to use Government supply
sources, the contracting officer shall
request, in writing, as applicable—
(1) A FEDSTRIP activity address
code, through the agency’s central contact point for matters involving activity address codes, from the General
Services Administration (GSA), FCSI,
Washington, DC 20406;
(2) A MILSTRIP activity address
code from the appropriate Department
of Defense (DOD) service point listed in
Section 1 of the Introduction to the
DOD Activity Address Directory;
(3) Approval for the contractor to use
Department of Veterans Affairs (VA)
supply sources from the Deputy Assistant Secretary for Acquisition and Materiel Management (Code 90), Office of
Acquisition and Materiel Management,
Department of Veterans Affairs, 810
Vermont Avenue, NW., Washington, DC
20420;
(4) Approval for the contractor to acquire helium from the Department of
the Interior, Bureau of Land Management, Helium Field Operations, 801 S.
Fillmore Street, Amarillo, TX 79101–
3545 or
(5) Approval from the appropriate
agency for the contractor to use a Government supply source other than
those identified in (1) through (4)
above.
(d) Each request made under paragraph (c) above shall contain—
(1) The complete address(es) to which
the contractor’s mail, freight, and billing documents are to be directed;
(2) A copy of the contracting officer’s
letter of authorization to the contractor;
(3) The prime contract number(s);
and
(4) The effective date and duration of
each contract.
(e) In each authorization to the contractor, the contracting officer—
(1) Shall cite the contract number(s)
involved;
(2) Shall, when practicable, limit the
period of the authorization;
(3) Shall specify, as appropriate,
that—
(i) When requisitioning from GSA or
DOD,
the
contractor
shall
use
FEDSTRIP or MILSTRIP, as appropriate, and include the activity address
code assigned by GSA or DOD;
(ii) When requisitioning from the VA,
the contractor should use FEDSTRIP
or MILSTRIP, as appropriate, Optional
Form 347, Order for Supplies or Services (see 53.302–347), or an agency-approved form; and
(iii) When placing orders for helium
with the Bureau of Land Management,
the contractor shall reference the Federal contract number on the purchase
order;
(4) May include any other limitations
or conditions deemed necessary. For
example, the contracting officer may—
(i) Authorize purchases from Government supply sources of any overhead
supplies, but no production supplies;
(ii) Limit any authorization requirement to use Government sources to a
specific dollar amount, thereby leaving
the contractor free to make smaller
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51.103
48 CFR Ch. 1 (10–1–03 Edition)
purchases from other sources if so desired;
(iii) Restrict the authorization to
certain facilities or to specific contracts; or
(iv) Provide specifically if vesting of
title is to differ from other property
acquired or otherwise furnished by the
contractor for use under the contract;
and
(5) Shall instruct the contractor to
comply with the applicable policies and
procedures prescribed in this subpart.
(f) After issuing the authorization,
the authorizing agency shall be responsible for—
(1) Ensuring that contractors comply
with the terms of their authorizations
and that supplies and services obtained
from Government supply sources are
properly accounted for and properly
used;
(2) Any indebtedness incurred for
supplies or services and not satisfied by
the contractor; and
(3) Submitting, in writing, to the appropriate Government sources, address
changes of the contractor and deletions
when contracts are completed or terminated.
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989; 60 FR 42657, Aug. 16,
1995; 61 FR 2631, Jan. 26, 1996; 62 FR 40237,
July 25, 1997]
51.103 Ordering
from
supply sources.
Government
(a) Contractors placing orders under
Federal Supply Schedules shall follow
the terms of the applicable schedule
and authorization and include with
each order—
(1) A copy of the authorization (unless a copy was previously furnished to
the Federal Supply Schedule contractor); and
(2) The following statement:
This order is placed under written
authorization
from.......................dated............. In the
event of any inconsistency between the
terms and conditions of this order and
those of your Federal Supply Schedule
contract, the latter will govern.
(b) Contractors placing orders for
Government stock shall—
(1) Comply with the requirements of
the contracting officer’s authorization,
using FEDSTRIP or MILSTRIP procedures, as appropriate;
(2) Use only the Government activity
address code obtained by the contracting officer in accordance with
51.102(e) along with the contractor’s assigned access code, when ordering from
GSA Customer Supply Centers.
(3) Order only those items required in
the performance of their contracts.
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989; 55 FR 52797, Dec. 21,
1990; 56 FR 55372, Oct. 25, 1991; 61 FR 41471,
Aug. 8, 1996; 62 FR 44819, Aug. 22, 1997; 67 FR
43516, June 27, 2002]
51.104 Furnishing assistance to contractors.
After receiving an activity address
code, the contracting officer will notify
the appropriate GSA regional office or
military activity, which will contact
the contractor and—
(a) Provide initial copies of ordering
information and instructions; and
(b) When necessary, assist the contractor in preparing and submitting, as
appropriate—
(1)
The
initial
FEDSTRIP
or
MILSTRIP requisitions, the Optional
Form 347, or the agency-approved
forms;
(2) A completed GSA Form 457, FSS
Publications Mailing List Application,
so that the contractor will automatically receive current copies of required
publications; or
(3) A completed GSA Form 3525, Application for Customer Supply Center
Services and (Address Change).
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989]
51.105 Payment for shipments.
GSA, DOD, and VA will not forward
bills to contractors for supplies ordered
from Government stock until after the
supplies have been shipped. Receipt of
billing is sufficient evidence to establish contractor liability and to provide
a basis for payment. Contracting officers should direct their contractors to
make payment promptly upon receipt
of billings.
51.106 Title.
(a) Title to all property acquired by
the contractor under the contracting
officer’s authorization shall vest in the
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Federal Acquisition Regulation
51.202
parties as provided in the contract, unless specifically provided for otherwise.
(b) If contracts are with educational
institutions and the Government Property clause at 52.245–2, Alternate II, or
52.245–5, Alternate I, is used, title to
property having an acquisition cost of
less than $5,000 shall vest in the contractor as provided in the clause. Agencies may provide higher thresholds, if
appropriate.
[48 FR 42476, Sept. 19, 1983, as amended at 57
FR 60590, Dec. 21, 1992]
51.107
Contract clause.
The contracting officer shall insert
the clause at 52.251–1, Government Supply Sources, in solicitations and contracts when the contracting officer
may authorize the contractor to acquire supplies or services from a Government supply source. If a facilities
contract is contemplated, the contracting officer shall use the clause
with its Alternate I.
Subpart 51.2—Contractor Use of
Interagency Fleet Management System (IFMS)
51.200
Scope of subpart.
This subpart prescribes policies and
procedures for the use by contractors
of interagency fleet management system (IFMS) vehicles and related services. In this subpart, the terms contractors and contracts include subcontractors
and subcontracts (see 45.304).
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989; 55 FR 52797, Dec. 21,
1990]
51.201
Policy.
(a) If it is in the Government’s interest, the contracting officer may authorize cost-reimbursement contractors to obtain, for official purposes
only, interagency fleet management
system (IFMS) vehicles and related
services, including (1) fuel and lubricants, (2) vehicle inspection, maintenance, and repair, (3) vehicle storage,
and (4) commercially rented vehicles
for short-term use.
(b) Complete rebuilding of major
components of contractor-owned or
-leased equipment requires the ap-
proval of the contracting officer in
each instance.
(c) Government contractors shall not
be authorized to obtain interagency
fleet management system (IFMS) vehicles and related services for use in performance of any contract other than a
cost-reimbursement contract, except
as otherwise specifically approved by
the Administrator of the General Services Administration at the request of
the agency involved.
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989]
51.202 Authorization.
(a) The contracting officer may authorize a cost-reimbursement contractor to obtain interagency fleet
management system (IFMS) vehicles
and related services, if the contracting
officer has—
(1) Determined that the authorization will accomplish the agency’s contractual objectives and effect demonstrable economies;
(2) Received evidence that the contractor has obtained motor vehicle liability insurance covering bodily injury and property damage, with limits
of liability as required or approved by
the agency, protecting the contractor
and the Government against thirdparty claims arising from the ownership, maintenance, or use of an interagency fleet management system
(IFMS) vehicle;
(3) Arranged for periodic checks to
ensure that authorized contractors are
using vehicles and related services exclusively under cost-reimbursement
contracts;
(4) Ensured that contractors shall establish and enforce suitable penalties
for their employees who use or authorize the use of Government vehicles for
other than performance of Government
contracts (see 41 CFR 101–38.301–1);
(5) Received a written statement that
the contractor will assume, without
the right of reimbursement from the
Government, the cost or expense of any
use of interagency fleet management
system (IFMS) vehicles and services
not related to the performance of the
contract; and
(6) Considered any recommendations
of the contractor.
(b) The authorization shall—
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51.203
48 CFR Ch. 1 (10–1–03 Edition)
(1) Be in writing;
(2) Cite the contract number;
(3) Specify any limitations on the authority, including its duration, and any
other pertinent information; and
(4) Instruct the contractor to comply
with the applicable policies and procedures provided in this subpart.
(c) Authorizations to subcontractors
shall be issued through, and with the
approval of, the contractor.
(d) Contracting officers authorizing
contractor use of interagency fleet
management system (IFMS) vehicles
and related services subject their agencies to the responsibilities and liabilities provided in 41 CFR 101–39.4 regarding accidents and claims.
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989]
51.203
Means of obtaining service.
(a) Authorized contractors shall submit requests for interagency fleet management system (IFMS) vehicles and
related services in writing to the appropriate GSA regional Federal Supply
Service Bureau, Attention: Regional
fleet manager, except that requests for
more than five vehicles shall be submitted to General Services Administration, FBF, Washington, DC 20406,
and not to the regions. Each request
shall include the following:
(1) Two copies of the agency authorization to obtain vehicles and related
services from GSA.
(2) The number of vehicles and related services required and period of
use.
(3) A list of the contractor’s employees who are authorized to request vehicles and related services.
(4) A listing of the make, model, and
serial numbers of contractor-owned or
-leased equipment authorized to be
serviced.
(5) Billing instructions and address.
(b) Contractors requesting unusual
quantities of vehicles should do so as
far in advance as possible to facilitate
availability.
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, 29283, July 11, 1989]
51.204 Use of interagency fleet management system (IFMS) vehicles
and related services.
Contractors authorized to use interagency fleet management system
(IFMS) vehicles and related services
shall comply with the requirements of
41 CFR 101–39 and 41 CFR 101–38.301–1
and the operator’s packet furnished
with each vehicle. See 41 CFR 101–6.4
for additional guidance for home-towork use of Government vehicles.
[55 FR 52797, Dec. 21, 1990]
51.205 Contract clause.
The contracting officer shall insert
the clause at 52.251–2, Interagency
Fleet Management System (IFMS) Vehicles and Related Services, in solicitations and contracts when a cost-reimbursement contract is contemplated
and the contracting officer may authorize the contractor to use interagency fleet management system
(IFMS) vehicles and related services.
[48 FR 42476, Sept. 19, 1983, as amended at 54
FR 29282, July 11, 1989]
EDITORIAL NOTE: This listing is provided
for information purposes only. It is compiled
and kept up-to-date by the General Services
Administration.
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| File Type | application/pdf |
| File Modified | 2014-11-25 |
| File Created | 2014-11-25 |